As officials around the world search for the money and place blame, the caper is highlighting what looks like a weak point in the global financial system that allowed the money to get by regulators: the murky banking system of the Philippines.
The country’s investigators are now looking into how the money came to be transferred to that Pacific nation — and what happened to it afterward. The trip, which appears to jump from Philippine banks to the country’s lightly regulated casinos and then to points unknown, touches on a number of pressure points where United States officials and experts say the country is vulnerable to potential corruption and money-laundering.//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js
Specifically, they point to the country’s increasingly flush casino industry, which is exempt from many of the anti-money-laundering requirements in the Philippines. The Philippines also retains what one United States official once called some of the world’s toughest bank secrecy laws, recalling a time before the rise of concerns about terrorism financing and tax evasion, when countries promised privacy in the hopes of becoming financial hubs.
“They picked us to launder this money because our system is full of loopholes,” Sergio R. Osmeña III, a Philippine senator who leads a committee on banks and financial institutions, said in an interview on Wednesday. “We have been trying to amend these laws for decades, but we can’t get it through congress.”
Already the theft — one of the largest digital heists in history — has caused ripples round the globe. On Tuesday, Bangladesh’s top central banker resigned. Bangladeshi officials have blamed their counterparts at the New York Fed.
The New York Fed has said that the transfer requests came through official channels and that any security breach most likely came from Bangladesh. Officials who run the global money transfer system known as Swift said its systems had not been breached and said the matter was an internal issue at Bangladesh’s central bank.
In the Philippines, lawmakers this week questioned employees of local banks that had processed the transfers. They expressed frustration during that hearing at bank employees who declined to answer questions and cited their rights against self-incrimination.
At this point, it is unclear exactly what went wrong and where the system broke down. But the people behind the theft made mistakes and tripped alarms.
In early February, they requested that more than $100 million in money that Bangladesh keeps at the New York Fed be transferred out. On one transfer request, they misspelled the word “foundation,” as “fandation,” putting a halt to about $20 million they tried to move to Sri Lanka.
It is not clear whether the New York Fed spotted the typos, or failed to spot them.
The culprits appear to have made off with about $81 million transferred to the Philippines, raising broader concerns about the country’s financial controls.
The Philippines — a close American ally and a crucial part of Washington’s efforts to counter China’s growing regional might — has moved in recent years to bring its disclosure requirements around the movement of large funds into line with international standards. It has enacted legislation against money laundering and set up a dedicated regulatory body to handle violations. But experts and American officials say it remains a difficult place to catch money launderers.
In a report a year ago on financial crimes, the United States Department of State cited the country’s tight bank secrecy laws, a lack of regulation around casinos and difficulties faced by local regulators in watching transactions involving real estate, jewels and nonprofit groups. It said that in the first 10 months of 2014, the Philippines had one conviction and no prosecutions begun on money-laundering charges.
Several United States diplomatic cables published by the group WikiLeaks also showed frustration with the laws. “The bank secrecy laws in the Philippines are among the strictest in the world,” Francis J. Ricciardone, then the United States ambassador, wrote in a 2005 cable. A successor, Kristie Kenney, said in a 2008 cable that the bank secrecy laws and poor whistle-blower protections hindered corruption and graft investigations.
Photo: Bullit Marquez/Associated Press Money from the Bangladesh central bank ended up being transferred to accounts at the Solaire casino in the Philippines, lawmakers learned on Tuesday Credit Bullit Marquez/Associated Press
The bank secrecy laws are a legacy of Ferdinand Marcos, the country’s former dictator, who hoped they would help turn the Philippines into a financial hub. Though they were weakened in 2001 as part of an effort to fight terrorism funding, the laws still limit access by authorities without permission from the depositor.
The bank secrecy laws have become sticking points in corruption trials there. During his 2012 impeachment trial, Renato C. Corona, the chief justice of the country’s supreme court, said he would not hand over a waiver of his bank privacy rights unless the lawmakers accusing him did the same for their own accounts. He was impeached, but he has denied the accusations of corruption.//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js
More recent concern has focused on the Philippines’ casinos. They are exempt from the anti-money-laundering law, meaning they are not required to report suspicious transactions.
“A good reason for targeting the Philippines could be the unusual situation where casinos have not been required to comply with the same anti-money-laundering regime that governs the banking system,” said Paul Bromberg, the chief executive of Spectrum Asia, an investigative and gambling industry consultancy. “Omitting the gaming industry from the formal compliance regime has been quite controversial.”
Built to rival Macau and other Asian gambling hubs, the Philippines’ casino sector has had some success in attracting large-scale foreign investment. Three huge casino hotels have opened on the outskirts of Manila in recent years. With a required minimum investment of $1 billion each, they are the first such properties in the country to approach the size and scope of Las Vegas-style resorts.
<img alt=”” class=”media-viewer-candidate” data-mediaviewer-caption=”Atiur Rahman, governor of the central bank of Bangladesh, resigned on Tuesday.
” data-mediaviewer-credit=”A.M. Ahad/Associated Press” data-mediaviewer-src=”http://static01.nyt.com/images/2016/03/17/business/17db-philmoney3/17philmoney3-superJumbo.jpg” src=”http://static01.nyt.com/images/2016/03/17/business/17db-philmoney3/17philmoney3-articleLarge.jpg” itemid=”http://static01.nyt.com/images/2016/03/17/business/17db-philmoney3/17philmoney3-articleLarge.jpg” itemprop=”url” /> Photo: Credit A.M. Ahad/AP Atiur Rahman, governor of the central bank of Bangladesh, resigned on Tuesday.
The new casinos have helped to lure some high rollers, known as V.I.P. gamblers, from mainland China to the Philippines, increasing total gambling revenue to nearly $3 billion last year. That compares with about $30 billion in Macau and $5 billion in Singapore last year.
In response to questioning, Silverio Benny Tan, the corporate secretary of Bloomberry Resorts, the parent company of Solaire, said the equivalent of about $29 million was transferred in February to accounts at the casino controlled by a junket operator named Weikang Xu, according to video record of the proceedings. Junket operators are middlemen who bring high-rolling players to casinos and, especially in the case of gamblers from China, lend them money for gambling.
Mr. Xu’s nationality was not clear, and he couldn’t be reached for comment.
Mr. Osmeña, the senator, said the operators of the casinos involved are being invited to testify at a Senate hearing on Thursday to try to trace the money.
“The casinos here in the Philippines are a black hole,” he said. “Once the money goes in there, it is gone.”
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