Philippines: Short list of top financial scams, central bank cracks the whip on fraud, money laundering

TIGHTENING OVERSIGHT: On Sunday (December 12 2021), Philippine central bank governor Benjamin Diokno (photo above) said they are looking into complaints that some clients of BDO, the country’s biggest lender, lost money to online fraudsters that involved the use of Union Bank of the Philippines (UBP) accounts. “We are in close coordination with BDO as well as UBP on this incident to ensure remedial measures are being undertaken, including reimbursement of affected consumers,” the central bank chief said in a statement. The central monetary authority vowed to “ensure the safety and integrity of the financial system as well as the protection of financial consumers,” he added. Diokno added the regulators are on “top” of the situation.

CRACKDOWN: BSP Governor Diokno said Sunday they have been monitoring a surge in complaints for a week. As a result, UBP froze "several accounts”. UnionBank President Edwin Bautista told Bloomberg: “We will not hesitate to take legal action against individuals who use their accounts to facilitate criminal activities.” One account used 5 million pesos ($99,280) in stolen funds to buy Bitcoin on December 11, according to Philippine media reports.

SPIKE IN ONLINE BANKING TRANSACTIONS: The Philippine central bank has reported a 5,000% jump in digital transactions in the Asian country. Given the huge spike in online banking and other financial transactions, new research from TransUnion found fraudsters are ramping up their activities in the financial services industry. In a blog post earlier this year, the global risk-assessment company analysed transactions originating from the Philippines — and saw that the rate of suspected digital fraud attempts against financial services companies increased 50.39% in the first four months of 2021 compared to the last four months of 2020. Globally, suspected financial services digital fraud attempts increased by 149%.

85 CASES, RAMPING UP MONEY LAUNDERING FIGHT: On November 5, 2021, the Philippines Anti-Money Laundering Council (AMLC) reported that 85 criminal and civil cases involving about P1.31 billion had been filed from January to August 2021 as the country ramped up its fight against money launderers and terror financing. Following are some of leading financial fraud cases in the Philippines:

CYBER BANK HEIST [$81 million in losses]: In February 2016, unknown criminals used fraudulent orders on the SWIFT system to steal the funds from the Bangladesh’s central bank account at the Federal Reserve Bank of New York. In January 2019, a Philippine court held a former bank manager guilty on eight counts of money laundering in which $81 million was stolen from Bangladesh’s central bank. The court sentenced Maia Deguito (photo above), a former branch manager at Manila-based Rizal Commercial Banking Corp (RCBC), to a jail term ranging from 32 to 56 years, with each count carrying four to seven years.

BANK FINED PHP1 BILLION: Maia Deguito, the ex-branch manager of RCBC, was also ordered to pay a total fine of about $109 million. RCBC was fined a record Php1 billion ($19.17 million) by the Philippine central bank in August 2016 for its failure to prevent the movement of the stolen money through the bank. A former treasurer of RCBC and five other workers at the branch where the cash was withdrawn faced money laundering charges.

WATCH LIST: Paris-based global watchdog Financial Action Task Force (FATF) reincluded the Philippines in the gray list of jurisdictions under increased monitoring last June 25 citing technical deficiencies raised by the Asia Pacific Group on Money Laundering (APG) under its October 2019 Mutual Evaluation Report (MER). File photo shows the Manila City Hall in the foreground.

BANCAP SCAM [Php900 million in losses]. This was a well-known Treasury bill scam ran by Marilyn Nite, president of Bank Capital Development Corp. who victimised banks and investors by selling Treasury bills several times over, with different individuals believing they were the owners of the same T-bill. The scam was so well orchestrated that Nite — who was aided in her operations by Nunelon Bradley and Vicky Magalona-Escalambre — got away with P2.5 billion (approximately $200 million). What hooked the victims: the T-bills peddled by Bancap offered 12% higher rates than those brought from other sources. Nite ran off with the money to the US, reportedly using a fake passport under the name of Marilyn Perez. FBI agents caught her in 1997, and was extradited to the Philippines. Residents walk along a pedestrian lane in Manila, Philippines.

FRANKSWISS & DEUTSCHFRANKS SCAM [Php1 billion in losses]: FrancSwiss appeared very promising at the start with its high-yielding investment products producing 4–5% income per day for its investors in early 2007. But just like other investment scams, the program shut down. A month before its closure, media reports were already warning people not to invest and for current investors to pull out their money. However, the scam still led to P1 billion loss. The NBI (National Bureau of Investigation) eventually sued the company’s chief financial adviser with estafa. File photo of Makati, Manila's central financial district.

12DAILYPRO SCAM [$500 million in losses]: 12DP was an “autosurf program", which opened in 2005. It assured members with 12% daily return on their funds for 12 days where they run a program to automatically view certain websites and supposedly create advertising revenue. But in early 2006, the 12DP was failed to settle its maturing investments, eventually leading to its downfall. The owner was said to have taken away $500 million of the investors’ money.

LEGACY INSURANCE SCAM [Php 30 billion/$591 million in losses]: Celso de los Angeles masterminded the Legacy insurance and pension scam. In 2008, it fascinated a lot of Filipinos to invest as legacy banks offered “double your money” schemes. The pyramid then collapsed the same year with P30 billion loss. Angeles was jailed for numerous cases of syndicated estafa. He died of cancer in 2012.

AMAN FUTURES GROUP [Php12 billion/$295 million in estimated losses]: In 2012, Aman Futures Group duped over 15,000 investors across Visayas and Mindanao to invest in a pyramid scheme centered in commodities trading investments with 80% return in just 20 days. Pagadian City Mayor Samuel Co and his wife were charged with syndicated estafa in November 2012 for alleged involvement in the investment scam. Manuel Amalilio, founder of Aman Futures, was caught in Sabah, Malaysia after pleading guilty, where he was also sentenced with two-year imprisonment.

PERFORMANCE INVESTMENT PRODUCTS CORP. SCAM [Php11 billion in losses]: PIPC was an online forex trading service in 2007 that fooled many Filipino investors with its 10–15% return. PIPC did not appear to be a Ponzi or pyramid scam, but the investment program still crumbled, leaving P11 billion loss. Its Singaporean owner went off, allegedly taking most of the company’s funds.

ILLEGAL FUNDS TRANSFER [Php12 million in losses]: On April 18, 2018, a liaison officer and secretary to the president of a chemical trader-distributor was convicted for 55 counts of money laundering based on findings of the Anti-Money Laundering Council (AMLC). A 56-page decision of the Regional Trial Court (RTC) in Quezon City, found Annabella C. Ylagan guilty of 55 counts of money laundering, and sentenced her to seven (7) years’ imprisonment for each count. Ylagan was convicted for transferring funds from her employer’s accounts in 3 banks to an account she opened under a fictitious name “Lourdes R. Liu”. Ylagan’s modus operandi involved routing faxing of forged letters of authority, instructing banks to transfer funds from her employer’s accounts to her own fictitious accounts. Ylagan was found to have amassed Php12 million over a 4-year period.