Keeping mum may lead to bank runs
The Philippine Star
09/08/2003

In the wake of the Jose Pidal controversy, what is now being noticed is the deafening silence from banks tagged as allegedly holding deposits of the questioned account holder.

Bank of the Philippine Islands (BPI) released a press statement saying it had no existing Jose Pidal account. BPI did not say it never had one. Many are saying this is typical of the bank’s smugness: keeps you guessing whether it is morally upright or a party to fraud.

But other banks mentioned like Philam Savings bank where Pidal supposedly had two accounts, Banco de Oro, Banco Filipino, Union Bank of the Philippines, Allied Banking Corp., International Exchange Bank, and Metropolitan Bank and Trust Co. are worse. These banks never even bothered to utter a word. Who says there is transparency in the corporate governance of banks?

At least the Philippine Charity Sweepstakes Office, whether or not it had an accurate alibi, came out immediately to refute Lacson’s accusations.

Tight-lipped banks fan speculations

A categorical denial from these banks, even simply saying that they do not have a Jose Pidal account, would have right away concluded the controversy and dismissed allegations by Lacson linking not only the First Gentleman to the secret accounts but also his wife, the country’s highest official.

Even the BSP – that would often use its moral suasion to cajole banks to desist from speculating against the local currency – did not order the named banks to be forthright and clear the air by telling the public their involvement or non-involvement in any of the alleged Pidal accounts.

A toothless BSP circular?

Bangko Sentral ng Pilipinas (BSP) Circular 251 issued in July 2000 requires banks and other financial institutions "to take reasonable measures to establish the true identity of individual client."

In other words, the BSP order requires banks to practice the so-called KYC or the prudent habit of "knowing your customers".

The circular also noted "Special attention should be given to complex, unusual large transactions and unusual patterns of transaction which have no apparent or visible lawful purpose." In the same circular, the BSP ordered banks to immediately report if there is reasonable ground to believe that funds are from criminal proceeds or illegal activity.

Several weeks after the Lacson allegations saturated the air, Ignacio Arroyo issued the statement that he is Jose Pidal and admitted that he opened two accounts, one with BPI Family Bank and another with Unionbank, using an alias to avoid being kidnapped.

It is argued by Ignacio Arroyo’s statement that the use of aliases was perfectly allowed at the time the accounts were opened, with the banks fully aware of the details involving the true ownership of the new bank deposits.

One account was opened in 1997 and another a year later. One account was closed in October 2000 and another in August 2001. While the first was almost immediately closed after the BSP circular was issued, the second was closed more than a year after.

Would it not have been much easier and comforting for everyone concerned if the banks and BSP simply cleared the air and confirmed the admission of Ignacio Arroyo? There would have been no need for the contentious signature comparisons, Lacson’s allegations against the First Couple.

We could have just all move on without too much fuss and attended to the more pressing problems of the country.

Rife for speculations

With no one from the banking sector taking the initiative to be transparent, the air becomes more thickened with malicious speculations.

For instance, some are speculating that despite the existence of the circular, the banks would not have reported the transactions even if there were suspicions of irregularity because of the personalities involved. Is this true?

Without this first step, the Anti Money Laundering Act or even the AMLC is powerless in tracking down suspicious accounts.

Some wags are saying that that BSP Governor Rafael Buenaventura who also chairs the AMLC would be reluctant to pursue the Pidal case especially since he is being threatened by a one-year suspension and all those little plots to oust him from the BSP. Are they being perceptive or just plain malicious?

Amidst the increasing noise level, the silence of BSP and the banks is indeed deafening.

Public and bank clients‚ backlash

At the moment, what the public just wants is the simple truth. With all the prevarications and evasions from the very banking institutions that hold the key to some very crucial hard facts, the economy and the country is prey to speculation.

The point here is that the banking system, with BSP leadership, could have immediately stopped all these speculations. Had they been forthright and exercised the initiative to be transparent within the purview of existing regulations, all of us would have been spared of the drama, antics and mudslinging that have been polluting our airwaves.

No wonder, a fed-up public is re-assessing their views of the integrity and morality standards of some banks. And runs on these banks are not remote possibilities. And it is no surprise, too, that the peso is sinking deeper.

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