Whatever one would say of the $81-million electronic heist called “hacking,” many of us now tend to blame ourselves as if to admit responsibility, ignoring that the crime could not have happened had the Federal Bank of New York not been negligent in safeguarding the deposits of its client, the Central Bank of Bangladesh. Its finance minister, AMA Muhith, is right that the Federal Bank of New York can not just avoid responsibility much that it allowed the delivery of the funds to the hackers through three other correspondent banks namely, Wells Fargo, Bank of New York Mellon and City Bank of New York. According to Muhith, it has hired a lawyer, Ajmahal Hossain QC, to determine if standard practices were followed to prevent the siphoning of the funds from its account to Sri Lankan and Philippine Banks.
Deputy Governor SK Sur Chowdhury said that Hossain will try to find out if the three banks carried out their “responsibility properly.” But the NY Federal Bank has claimed their system was not breached and had taken “proper measures” upon Bangladesh Bank’s request. The heist took place at the beginning of February, but became public when a Philippine newspaper first reported the theft at the end of that month. The hackers directed the US Fedbank of New York to transfer $81 million to accounts in the Philippines and $20 million to accounts in Sri Lanka. The SWIFT (Society for Worldwide Interbank Financial Communications), a global bank messaging system, received their advices sent using Bangladesh Bank credentials.
The illegal transfer of the $81 million to Rizal Commercial Banking Corp. is not a case of money-laundering because the money that was stolen through electronic transfer came not from an illegal source or “dirty money,” but legitimate funds deposited by a government that sought to entrust its funds to a foreign bank with the thought of securing them, help it in facilitating its financial obligations, and most important, allow its deposits to earn interest through the facilities of banking. As defined, “money laundering is the process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source.” Investopedia dictionary explains that, “There are three steps involved in the process of laundering money: placement, layering, and integration. Placement refers to the act of introducing “dirty money” (money obtained through illegitimate, criminal means) into the financial system in some way; “layering” is the act of concealing the source of that money by way of a series of complex transactions and bookkeeping gymnastics; and integration refers to the act of acquiring that money in purportedly legitimate means.”
The money obtained by the hackers was not dirty money, but clean money. What they committed was an act of electronic heist, or a modern crime of pilferage brought about by the advent of computerized banking. The liability of RCBC began when it allowed its facilities to be used in the transfer of funds. Whether RCBC has knowledge about that transaction, which is much doubtful considering the huge amount, now makes it liable as an accomplice. When RCBC proceeded to allow the funds to be transferred to Philrem Services Corp., whose treasurer Michael Bautista, a yachting buddy of the late Jerome Tan, then president of RCBC Securities, and brother of RCBC president & CEO Lorenzo Tan, and to Philippine National Bank to be deposited to specified accounts/beneficiaries, it committed a separate act of money laundering or the act of scrubbing clean the dirty money to erase possibility of tracing and retrieving the fund by the depositor/owner.
Incidentally, the record of the late Jerome Tan was as colorful as what is happening today to RCBC. When he was president of RCBC Securities, the company lost to the tune of P1 billion in investment funds from its clients through a carefully manipulated rogue trading made by Mary Grace Valbuena. Valbuena was simply dismissed on December 2011 by Tan. This is mentioned because during the investigation, Philrem president Salud Bautista, the wife of Michael, admitted to have received from RCBC the $81 million to be converted to pesos, and delivered the P600 million and $18 million to casino junket operator Weikang Xu. It was also RCBC that induced the Arroyo administration to issue the highly anomalous CODE-NGO Peace Bonds amounting to P10 billion which the government paid a total of P34 billion, including interest.
A rundown on how the $81-million stolen money was chopped to pieces for purposes of laundering and distributing them to the beneficiaries like Weikang Xu, Kim Wong or to his front gaming firm known as Eastern Hawaii Leisure Co., Ltd which is the operator of a hotel-casino in Cagayan; to Bloombery which is the operator of Solaire and act as sub-agent of Midas and Casino’s gaming tables, or to people, whether fictitious or otherwise, like Michael Francisco Cruz, Jessie Christopher Lagrosas, Alfred Santos Vergara Enrico Teodoro Vasquez, four “John Does,” William Go, and the fee given to Maria Santos Deguito, the RCBC Jupiter Branch manager, have yet to be determined. But the fact remains that the stolen money first entered the country’s jurisdictional responsibility through RCBC, and all the succeeding events to launder it was committed in active connivance with Philrem Service Corp., together with the recipients to whom it was distributed.
We can equally make liable the officers of Amla like executive director Julia Bacay-Abad and Emmanuel F. Dooc for allowing that bank transfer to happen right at their very noses when it was their duty to monitor every unusual transaction or secure a reconfirmation of the payee bank for any questionable transfer. In fact, the Sri Lankan Pan Asia Banking Corp. was most diligent to request stop payment when it noticed there was a spelling error in the name of the NGO which account was be funded. According to Atty. Dulay Dodo, “…money laundering was consummated as soon as the ‘dirty money’ was taken out of RCBC and into the hands of Philrem. It did not have to pass through a casino for it to be laundered.”
The cash delivery by Philrem to Wei Kang Xu, for instance, effectively severed the link with the original crime because the money could then be easily converted to legitimate assets … This is why we find it quite alarming that, like Pontius Pilate, Amla is now washing its hands of the debacle.”
We have to resolve this for ultimately, as taxpayers, we will ultimately bear the brunt of paying whatever is charged from us by the negligent FedBank of New York, including the damages it will have to pay because the hackers originated in this country. The Fedbank of New York is under obligation to pay because the issue filed by Bangladesh has nothing to do with money laundering, but on sheer negligence. Our liability is of the fact that the heist was operated here through electronic money transfer, and by the subsequent attempt to launder the money which our investigative agencies should identify and secure their arrest. The burden now rest on the shoulders of this incompetent and good-for-nothing Aquino administration.