One of the most profound effects of the discovery of Ferdinand Marcos’
bank accounts in Switzerland in the 1980s was a sweeping review of that
financial center’s banking practices that later led to tough regulations
on “politically exposed persons” (PEPs) and the huge amounts of cash
stuffed in suitcases that they brought into Swiss bank offices.
A feeling of shame and embarrassment in Switzerland, according to official pronouncements, drove banking authorities and the public in general to recognize the fallacy of accepting deposits that represented illegally earned funds from countries whose people suffer in the hands of governments led by these same deposit holders.
The “People Power revolt” in the Philippines in 1986, and later similar political upheavals that led to the ouster of other dictators in other developing nations, sparked a review of Switzerland’s banking practices—known universally to favor strict secrecy.
Switzerland realized it would gain nothing if it continued to keep “money of despots” in secret bank accounts maintained by its banking system.
After the PEPs policy and “know your customer” rules were laid down, Switzerland’s authorities pried open more bank accounts held by ousted dictators and corrupt officials of certain other developing countries, and paved the way for the return of over $1.6 billion so far to the public coffers of those countries, including around $650 million of Marcos deposits to the Philippines, according to official Swiss estimates.
The biggest amount so far returned to a fallen dictator’s home country was the $700 million linked to deposed strongman Sani Abacha of Nigeria in the 1990s. Also returned was some $92 million deposits that were identified as embezzled funds from former Peru spy chief Vladimir Montesinos.
The government has also frozen deposits of former leaders of Zaire and Haiti, and barred PEPs from the Ivory Coast, Egypt, Tunisia, Libya and Syria.
As a result of its new policy, particularly in introducing safeguards against “plundering dictators” and other corrupt public figures, Switzerland’s banking regulatory practices are now used as models by many other countries across the globe.
The Philippines, after enacting a law against money laundering, has also maintained a list of PEPs with suspicious bank deposits. However, while Switzerland’s policy is to cooperate with governments tracking down ill-gotten wealth, the Philippines seems to be doing the opposite—imposing tighter secrecy on dubious deposits.
Who are considered as PEPs in the first place? In the Philippines, the term “politically exposed persons” was not mentioned in the original Anti-Money Laundering Act of 2001, nor was it in the subsequent amendment.
The term surfaced in a Bangko Sentral ng Pilipinas circular in 2011 that updated anti-money laundering rules and regulations. The circular stated that a PEP is “an individual who is or has been entrusted with prominent public positions in the Philippines or in a foreign state, including heads of state or of government, senior politicians, senior national or local government, judicial or military officials, senior executives of government or state owned or controlled corporations and important party officials.”
The circular requires a bank to “establish and record the true and full identity of PEPs as well as their immediate family members and the entities related to them and establish a policy on what standard of due diligence will apply to them taking into consideration their position and the risks attendant thereto.”
“Due diligence” can be “reduced, average, or enhanced,” depending on how a specific customer is profiled.
In Switzerland, the government recognizes that a “plundering dictator” or high official never opens an account in his own name—“they use their relatives, lawyers or other middlemen and even their bodyguards and mistresses.”
Banks in Switzerland keep “very detailed and sophisticated” databases about prominent individuals from around the globe that bank staff can use to verify identities of persons seeking to open deposits. The lists include not only heads of state, wives, children and government ministers, but also senior officials in the countries.
Swiss authorities say a PEP “in itself is not bad” but problems arise when he or she “starts to take bribes or steals from the central bank.”
Also, Switzerland takes appropriate measures “if political events lead to a PEP becoming persona non grata in the eyes of the Swiss government, and sometimes in the eyes of international bodies and organizations as well,” officials explain.
If a country starts criminal proceedings against a PEP, it can ask Switzerland for international judicial assistance and the Swiss will freeze the assets if the requesting country can show why this is necessary, an official statement from the Swiss government says.
On the 20th day of the Senate’s impeachment trial on Supreme Court Chief Justice Renato Corona, the term PEP surfaced during a bank officer’s testimony on certain bank accounts that were cited as evidence by the prosecution panel.
Unlike in Switzerland where the government allows deeper probes into PEP accounts once formal charges are filed in the proper court, the reaction from the Philippine Senate tended to tighten security on the bank accounts of the accused leader of the judiciary and prevented a scrutiny of the deposits.
If Switzerland had followed the Philippine Senate’s move, there would have been no hidden Marcos deposits that were unearthed in Swiss banks and returned to the Filipino people.
(Ping Galang is a veteran business and finance journalist who in 2004 was in a group of senior journalists from Southeast Asia that visited a number of government agencies and private institutions in Switzerland, including the offices of the Swiss Bankers Association and Union Bank of Switzerland.)
A feeling of shame and embarrassment in Switzerland, according to official pronouncements, drove banking authorities and the public in general to recognize the fallacy of accepting deposits that represented illegally earned funds from countries whose people suffer in the hands of governments led by these same deposit holders.
The “People Power revolt” in the Philippines in 1986, and later similar political upheavals that led to the ouster of other dictators in other developing nations, sparked a review of Switzerland’s banking practices—known universally to favor strict secrecy.
Switzerland realized it would gain nothing if it continued to keep “money of despots” in secret bank accounts maintained by its banking system.
After the PEPs policy and “know your customer” rules were laid down, Switzerland’s authorities pried open more bank accounts held by ousted dictators and corrupt officials of certain other developing countries, and paved the way for the return of over $1.6 billion so far to the public coffers of those countries, including around $650 million of Marcos deposits to the Philippines, according to official Swiss estimates.
The biggest amount so far returned to a fallen dictator’s home country was the $700 million linked to deposed strongman Sani Abacha of Nigeria in the 1990s. Also returned was some $92 million deposits that were identified as embezzled funds from former Peru spy chief Vladimir Montesinos.
The government has also frozen deposits of former leaders of Zaire and Haiti, and barred PEPs from the Ivory Coast, Egypt, Tunisia, Libya and Syria.
As a result of its new policy, particularly in introducing safeguards against “plundering dictators” and other corrupt public figures, Switzerland’s banking regulatory practices are now used as models by many other countries across the globe.
The Philippines, after enacting a law against money laundering, has also maintained a list of PEPs with suspicious bank deposits. However, while Switzerland’s policy is to cooperate with governments tracking down ill-gotten wealth, the Philippines seems to be doing the opposite—imposing tighter secrecy on dubious deposits.
Who are considered as PEPs in the first place? In the Philippines, the term “politically exposed persons” was not mentioned in the original Anti-Money Laundering Act of 2001, nor was it in the subsequent amendment.
The term surfaced in a Bangko Sentral ng Pilipinas circular in 2011 that updated anti-money laundering rules and regulations. The circular stated that a PEP is “an individual who is or has been entrusted with prominent public positions in the Philippines or in a foreign state, including heads of state or of government, senior politicians, senior national or local government, judicial or military officials, senior executives of government or state owned or controlled corporations and important party officials.”
The circular requires a bank to “establish and record the true and full identity of PEPs as well as their immediate family members and the entities related to them and establish a policy on what standard of due diligence will apply to them taking into consideration their position and the risks attendant thereto.”
“Due diligence” can be “reduced, average, or enhanced,” depending on how a specific customer is profiled.
In Switzerland, the government recognizes that a “plundering dictator” or high official never opens an account in his own name—“they use their relatives, lawyers or other middlemen and even their bodyguards and mistresses.”
Banks in Switzerland keep “very detailed and sophisticated” databases about prominent individuals from around the globe that bank staff can use to verify identities of persons seeking to open deposits. The lists include not only heads of state, wives, children and government ministers, but also senior officials in the countries.
Swiss authorities say a PEP “in itself is not bad” but problems arise when he or she “starts to take bribes or steals from the central bank.”
Also, Switzerland takes appropriate measures “if political events lead to a PEP becoming persona non grata in the eyes of the Swiss government, and sometimes in the eyes of international bodies and organizations as well,” officials explain.
If a country starts criminal proceedings against a PEP, it can ask Switzerland for international judicial assistance and the Swiss will freeze the assets if the requesting country can show why this is necessary, an official statement from the Swiss government says.
On the 20th day of the Senate’s impeachment trial on Supreme Court Chief Justice Renato Corona, the term PEP surfaced during a bank officer’s testimony on certain bank accounts that were cited as evidence by the prosecution panel.
Unlike in Switzerland where the government allows deeper probes into PEP accounts once formal charges are filed in the proper court, the reaction from the Philippine Senate tended to tighten security on the bank accounts of the accused leader of the judiciary and prevented a scrutiny of the deposits.
If Switzerland had followed the Philippine Senate’s move, there would have been no hidden Marcos deposits that were unearthed in Swiss banks and returned to the Filipino people.
(Ping Galang is a veteran business and finance journalist who in 2004 was in a group of senior journalists from Southeast Asia that visited a number of government agencies and private institutions in Switzerland, including the offices of the Swiss Bankers Association and Union Bank of Switzerland.)
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