Explainer: What are 'covered' and 'suspicious' transactions under the Anti-Money Laundering Act

“Unusual" transactions were mentioned by a witness during the impeachment trial of Vice President Sara Duterte on Wednesday, involving encashments reportedly made by her office.

Duterte is facing impeachment raps due to alleged misuse, misappropriation, and irregular liquidation of confidential funds from the Office of the Vice President and the Department of Education.

Former LandBank branch managers said Wednesday during the 10th day of the impeachment trial othat the withdrawals of the Office of the Vice President (OVP) and the Department of Education (DepEd) of huge amounts of cash amounting to P612.5 million were "unusual."

Prosecution witness Violeta Constantino was asked by Senator-Judge Bam Aquino if the branch reported such "unusual" transactions to authorities.

"I'm sorry, Your Honor, may we invoke po 'yung AMLC (Anti-Money Laundering Council) rule na hindi po kami pwedeng mag-disclose any information po regarding sa reporting," Constantino said.

(I'm sorry, Your Honor. May we invoke the AMLC rule stating that we cannot disclose any information regarding the reporting.)

AMLC

The Anti-Money Laundering Council (AMLC), the government’s watchdog against dirty money, requires banks and other institutions to report certain transactions in line with efforts to curb money laundering, terrorism financing, and other financial crimes.

These reports, under the Anti-Money Laundering Act (AMLA), generally fall under two categories —covered transactions, and suspicious transactions.

But what are ‘covered’ and ’suspicious’ transactions under AMLA?

Covered transactions

Covered transactions are those that meet the AMLC’s reporting threshold of P500,000 in one banking day, done in cash or other equivalent monetary instruments.

These transactions are reported because they exceed the prescribed threshold, not because they are presumed to be illegal. These are reported even if the source of funds is legitimate.

Suspicious transactions

Banks may submit a Suspicious Transaction Report (STR) to the AMLC if their review raises concerns that cannot be satisfactorily explained.

The AMLA states that transactions may be considered suspicious regardless of the amount involved if any of the following circumstances exist:

• No underlying legal or trade obligation, purpose or economic justification;
• Client is not properly identified;
• Amount involved is not commensurate with the business or financial capacity of the client;
• The transaction is structured to avoid reporting requirements;
• The transaction deviates from the customer’s normal profile or past transactions;
• The transaction is related to an unlawful activity or money laundering offense; or
• Any similar circumstance based on the bank’s assessment.

Unlike covered transactions that are reported because of their value, suspicious transactions are reported because they post red flags that may warrant further investigation.

Are reports indicative of crime?

Filing of covered transaction reports and suspicious transaction reports does not mean a person has violated the law. These are done by banks in compliance with their anti-money laundering obligations. These are then analyzed by the AMLC and evaluated whether further investigation is warranted.

The AMLC uses the reports to detect and investigate possible money laundering, terrorism financing, fraud, corruption, tax crimes, and other unlawful activities.—VAL, GMA News