MIRIAM URGES BANKS TO EXPOSE DUMMIES

Amidst the corruption scandal involving Vice President Jejomar Binay and his alleged dummies, Sen. Miriam Defensor Santiago today said that banks should be required to undertake measures to prevent money laundering of ill-gotten wealth by corrupt government officials and their dummies.

"To conceal and prevent recovery of assets illegally obtained, corrupt government officials use their relatives and close associates to act as nominees, dummies, or fronts. These dummies then form corporate entities and open bank accounts in their own name. However, the corporations and the bank accounts are actually beneficially held or controlled by the corrupt official," the senator said.

Santiago said that under this arrangement, the government official is the "beneficial owner" of the assets. The beneficial owner is the real person who ultimately owns, controls, or benefits from a corporation, trust fund, or bank account, and the income they generate. The term "beneficial owner" is used to contrast with the nominee or "dummy," who might be the registered legal owner of an asset without actually possessing the right to enjoy its benefits.

Nominees act as the legal manager, owner, or shareholder of corporations or assets. They act on behalf of the real manager, owner, or shareholder of these entities. Nominees are often used when the beneficial owners do not wish to disclose their identity or role in the company, or their ownership of an asset. Professional nominees are paid a fee for their services, but have no interest in the transactions. Nominees could also be family members or friends of the beneficial owner. Often, nominees pre-sign documents, such as letters of resignation, which the beneficial owner can choose to use at any time. Santiago has filed Senate Bill No. 2438, mandating banks to practice enhanced due diligence and stricter monitoring of accounts beneficially owned by politically exposed persons.

"Politically exposed persons" or PEPs, in banking parlance, refer to individuals who are, or have been, entrusted with prominent public functions and their family members and close associates.

Under Santiago's bill, PEPs refer to (1) current or former senior official in the executive, Congress, the judiciary, or the military; (2) a senior official of a major political party; (3) a senior executive of a corporation, foundation, or entity formed by or for the benefit of any such individual; (4) the spouse, parents, siblings, and children of such individual, or the spouse's parents or siblings; and (5) any individual publicly known, or actually known by the relevant financial institution, to be a close personal or professional associate of a PEP.

Santiago's bill provides that at account opening, banks should require customers to complete a written and signed declaration identifying themselves, the legal entity for which the person is opening the account, and any beneficial owners associated with the legal entity.

Banks are also required to maintain a system of verifying the true identity of their clients. In case of corporate clients, banks should have a system to verify their legal existence and organizational structure, as well as the authority and identity of all persons purporting to act on their behalf.

"While some criminals are unlikely to be deterred by the written declaration on beneficial ownership, their family members and close associates will be less inclined to lie to banks if they face individual criminal liability for issuing false statements," Santiago said.

Under Santiago's bill, once the beneficial owners of a bank account are identified as politically exposed persons, the bank must continually monitor transactions of the client. The bank must combine knowledge of the customer profile, source of wealth and source of funds, and all applicable risk factors and evaluate whether the account activity is consistent with these factors.

Santiago filed the bill as the Senate continues to probe claims that Binay is using businessman Antonio Tiu as a dummy to conceal his ownership of a 150-hectare property in Batangas worth close to P450 million. Facing the Senate blue ribbon subcommittee, Tiu has insisted that he owns the property through Sunchamp Real Estate Development Corp.

Santiago has repeatedly urged Binay to defend himself before the Senate, noting that although the hearing will not declare whether the vice president is guilty or not guilty, "the case is being tried before the bar of public opinion."

Aside from the bill to prevent money laundering by PEPs, Santiago has also co-authored an anti-dummy bill with Sen. Jinggoy Ejercito Estrada. If approved, the bill will amend Republic Act No. 6713 to prevent public officials from placing assets in the name of dummies.

Under the bill, violators will be removed from public office and will forfeit ownership of such assets in favor of dummies. The bill will also bar public officials from acquiring property from their relatives within 20 years from the time they left civil service.

Santiago said the proposed laws are "defense measures against the far-reaching effects of corruption."