NONPROFIT OUTFITS in the Philippines have become channels for funds from illegal activities, the Anti-Money Laundering Council (AMLC) said in a report, citing over P600 billion worth of transactions involving corruption and fraud over the past five years.
There is a “medium” threat for non-profit organizations (NPO) in being used for money laundering (ML) and terrorist financing activities, the AMLC said in its risk assessment done last year.
“The assessment showed that the sub-set of NPOs exploited for ML are service type NPOs particularly those involved in charitable, agricultural, educational and livelihood activities largely located in the NCR (National Capital Region),” the report read, as published on the AMLC website over the weekend.
The “medium” classification means that there are “moderate controls in place” and regulation and supervision are generally effective, although there remains “some degree of abuse” in the sector.
The AMLC looked into suspicious transaction reports (STRs) submitted by banks involving NPOs, charities, schools and foundations from 2012 to 2017, which yielded 7,518 reports on transactions worth P625.68 billion.
The bulk of these funds went through banks, which filed the corresponding reports to the AMLC to alert the regulator about unusual or unjustified sums of cash that are channelled to or through non-profit groups.
“Majority of the identified NPOs are involved in agricultural (36%), charitable (19%), livelihood (19%) and educational (18%) activities/programs, accounting for 92%,” the AMLC noted.
Bulk of the amounts in question came from the pork barrel scam unearthed in 2013, which reportedly saw lawmakers transfer government funds to bogus nongovernment organizations to implement ghost projects for farming and livelihood to obtain kickbacks in the process.
“It is estimated that 21 nongovernment organizations, which were incorporated by JLN, were used as dummies to funnel about P420 million government funds in favor of JLN and the legislators,” the report read, referring to businesswoman Janet Lim-Napoles who is currently detained for multiple counts of plunder and graft.
Investment scams were the second major source of illicit funds for NPOs, particularly a large-scale Ponzi scheme in southern Philippines back in 2013. Other crimes said to use these entities included swindling and qualified theft, the AMLC said, noting that members of boards of trustees used or transferred NPO funds to their personal accounts.
Nine STRs worth P50.25 million were filed involving NPO accounts possibly used for terrorist financing arrangements, although their participation was largely “unconfirmed” as these reports were filed on the basis of intelligence information alone, the AMLC clarified. Threat for terrorist financing through these groups was rated as “high low.”
One confirmed incident was in 2006, when a group tied to Osama Bin Laden used the International Islamic Relief Organization based in Saudi Arabia to extend funding to terrorist groups in the Philippines.
Overall, the AMLC said that many groups remain compliant with standards set by authorities. “Various control mechanisms are present in 58-92% of the surveyed NPOs, with 69% having know-your-donor procedures, and 83% having know-your-beneficiaries procedure.”
The AMLC added that while safeguards and controls are in place, there is a need to get unregistered organizations covered by such regulations in order to tighten the watch on this sector.
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