EXECUTIVE SUMMARY

A. Introduction

The Anti-Money Laundering Council (AMLC) created under Republic Act (RA) No.
9160, otherwise known as the Anti-Money Laundering Act of 2001 (AMLA) as
amended by RA No. 9194 is mandated to investigate money laundering and other
violations of the AMLA in order to (a) protect the integrity and confidentiality of
bank accounts; (b) ensure that the Philippines shall not be used as money laundering
site for the proceeds of any unlawful activity; and (c) extend cooperation in
transnational investigation and prosecution of persons involved in money laundering
activities wherever committed. Also, under RA No.10168, otherwise known as the
Terrorism Financing Prevention and Suppression Act of 2012 (TFPSA), AMLC is
mandated to investigate financing of terrorism and other violations of the TFPSA.

The AMLC is composed of the Governor of the Bangko Sentral ng Pilipinas (BSP)
as Chairman and the Commissioner of the Insurance Commission (IC) and the
Chairperson of the Securities and Exchange Commission (SEC) as Members. It is
assisted by a Secretariat headed by an Executive Director. The AMLC which has five
divisions is composed of 92 personnel, 91of them are permanent and are organic
employees from BSP while one is a contractual employee. The personnel
complement is as follows:

Office of the Executive Director 8

Technical Services Group 4
Administration and Financial Services Division 16
Compliance and Investigation Group I & II 23
Legal Services Group I & II 16
Information Management and Analysis Group 25
Total 92

B. Financial Highlights

The financial position, financial performance, and the sources and application of
funds for CY 2017, with corresponding figures for CY 2016 are summarized below:

2016 Increase/
Particulars 2017
(As Restated) (Decrease)
Financial Position
Assets P 51,801,850 P 53,807,156 (P2,005,306)
Liabilities 3,148,702 2,021,681 1,127,021
Net Assets/Equity 48,653,148 51,785,475 (3,132,327)

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 2016 Increase/
Particulars 2017
(As Restated) (Decrease)
Financial Performance
Revenue P 190,315 4,986,192 (P4,795,877)
Net Financial
Assistance/Subsidy 29,910,881 24,035,657 5,875,224
Expenses 32,510,829 31,533,961 976,868
Net Surplus/(Deficit) (2,409,633) (2,512,112) 102,479

For CY 2017, the agency has a total appropriation of P124.963 million under RA No.
10924. The agency received total allotments of P119.963 million, of which total
obligations incurred amounted to P105.017 million, thereby leaving a balance of
P14.946 million.

Allotments, Obligations, and Balances

Obligations Unobligated
Sources of Funds Allotments
Incurred Balance
Regular
Appropriation P 29,410,000 P 19,522,280 P 9,887,720
Continuing
Appropriation 90,553,196 85,494,651 5,058,545
Total P 119,963,196 P 105,016,931 P 14,946,265

C. Operational Highlights

For CY 2017, the AMLC reported the following accomplishments which were
evaluated by the Audit Team on a test basis:

1. Legislative and regulatory framework developments

 Passage of Republic Act No. 10927, otherwise known as ‘An Act Designating
Casinos as Covered Persons under Republic Act No. 9160, otherwise known
as the Anti-Money Laundering Act of 2001, signed by the President of the
Philippines on 14 July 2017
 Casino Implementing Rules and Regulations was signed on 25 October2017
 The 2016 Revised Implementing Rules and Regulations of RA No.9160, as
amended, took effect on9 August 2017.
 Issuance of Rules on the Imposition of Administrative Sanctions under RA
No. 9160, which took effect on 9 August 2017.
 AMLC Resolution No. 107, series of 2017, approving the AMLC Registration
and Reporting Guidelines.
 Key AMLF/CFT regulations on customer due diligence: (a) Comprehensive
know-your-customer (KYC) regulations;(b) Reporting of suspicious
transactions; (c) Customer due diligence on politically exposed persons
(PEPs)

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  Targeted financial sanctions related to the proliferation of weapons of mass
destruction and its financing

2. Approval of the Second National Risk Assessment Report on Money Laundering

and Terrorism Financing and Mutual Evaluation

3. Issuance of AMLC Resolution Nos. TF-09 and TF-10 (Maute Case 2017)- freeze
order on all the bank accounts and other assets owned and controlled by the Maute
Group including P52 million in funds recovered by Philippine troops from a
Maute/Abu Sayyaf-controlled area. Bank inquiry on the bank accounts is
ongoing.

4. Since 2001, the AMLC has been filing cases for the freeze and forfeiture of
criminal proceeds, the total of which increases from P7,263.452 million in CY
2016 to P8,165.268 million in CY 2017, as summarized below.

Summary of Amounts/Value of Criminal Proceeds Frozen and Forfeited

As of As of
Particulars
31 December 2017 31 December 2016
Forfeited and remitted to the Philippine
Government P 48,856,022.69 P 44,824,293.58
Forfeited and Turned Over to the Ombudsman 100,879,947.48 100,706,673.99
Forfeited and Returned to the Victims 721,825,058.50 721,315,758.50
Forfeited but Pending Execution 40,308,218.73 21,094,148.28
Total Amount Civilly Forfeited 911,869,247.40 887,940,874.35
Amount subject of Pending Civil Forfeiture Cases 3,524,857,979.88 2,651,401,047.59
Amount Subject of Pending Freeze Orders 1,496,159,975.26 1,590,652,267.97
Total Pending Civil Forfeiture and Freeze Orders 5,021,017,955.14 4,242,053,315.56
Total Amount Subject of Other Forfeiture Actions 26,790,973.20 26,788,726.27
Total Amount Lifted/Returned to the
Victims/Investors 1,684,751,879.63 1,585,786,511.47
Total Amount Involved in Lapsed Freeze Order 520,838,552.63 520,883,420.10
Grand Total P8,165,268,608.00 P7,263,452,847.75

5. AMLC officers and staff attended 15 foreign trainings/workshops/seminars such

as Asia Region Law Enforcement Management Program; Counter Terrorism
Financial Investigators Workshop; Risk Assessment Workshop; AMLC School
for Foreign Bank Supervision; Financial Investigation for Public Corruption
Course; Workshop on Risk Based Approaches; 2017 APG Typologies Workshop,
among others. Seventeen local trainings/workshops were also attended by AMLC
officials and staff, some of which were Intelligence Analysis Workshop; Export
Control and Related Border Security Training Counter Proliferation
Investigations Course Export Control (Weapons Smuggling); Intelligence
Analysis; Operational Workshop on Cross Border Financial Investigation; DOJ-
OOC and UNODC Training on Cryptocurrencies Investigation Countering the
Financing of Terrorism and Proliferation of Weapons of Mass Destruction
through Effective Asset Freezing, Cross-Regional Workshop on the
Investigation, Prosecution and Adjudication of Foreign Terrorist Fighter cases

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 6. Conducted Training and Capacity Buildings to more or less 373 institutions with
1,626 attendees namely: (a) Training to Covered Person; (b) Nationwide
AML/CFT Lecture Caravan for banks and money service business; (c) Training
for MSBs through the Technical Assistance from ADB-Office of Anti-Corruption
and Integrity; and(d) Trainings for Law Enforcement Agencies and Supervising
Authorities

D. Scope of Audit

The audit covered the financial and compliance audits of the accounts of the AMLC
for the year ended 31 December 2017. The audit was conducted to: (a) verify the
level of assurance that may be placed on Management’s assertions on the financial
statements; (b) recommend agency’s improvement opportunities; (c) determine the
propriety of transactions as well as the extent of compliance with pertinent laws, rules
and regulations; and (d) determine the extent of implementation of prior year’s audit
recommendations.

E. Independent Auditor’s Report on the Financial Statements

A qualified opinion was rendered on the fairness of presentation of the financial

statements of the AMLC for CY 2017 due to material accounting error noted in the
audit, as shown in the Analysis of the Effect of Misstatements in Annex A, and which
are stated in the Independent Auditor’s Report and discussed in detail in Part II of
this report.

F. Summary of Significant Audit Observations and Recommendations

Among the audit observations and corresponding recommendations discussed in Part

II of this report, the significant observations are summarized as follows:

1. The Computer Software was provided a residual value of 10 per cent which is not
in accordance with Section 10, Chapter 12 of the GAM Volume I, resulting in the
understatement and overstatement of the Accumulated Amortization and
Accumulated Surplus accounts, respectively.

We recommended and Management agreed to: (a) comply with PPSAS No.
31 and Section 10, Chapter 12 of the GAM Volume I on the provision of
residual value for intangible assets; and (b) make the necessary adjustment
to recognize the correct balances of the Accumulated Amortization –
Computer Software and Accumulated Surplus accounts.

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 2. The acquisition of 16 units of cellular phones did not fully conform with agency’s
APP, contrary to Section 7.2 of the Revised Implementing Rules and Regulations
(IRR) of RA No. 9184.

We recommended that Management require the Procurement Office to: (a)

comply with Section 7.2 of the Revised IRR of RA No. 9184 that all
procurement should be within the approved budget and be carefully planned
to minimize or avoid deviations from the approved APP; and (b) ensure that
the proposed Guidelines in the preparation of PR is approved and
implemented, and will address the delays in the procurement activities.

The aforementioned observations and recommendations were discussed with the

concerned Management officials in an exit conference conducted on 8 March 2018.
Management’s views and comments were also incorporated in the report, where
appropriate.

G. Status of Settlement of Audit Suspensions, Disallowances and Charges

The balances of Notice of Suspensions (NSs), Disallowances (NDs), and Charges

(NCs) as of year end are summarized below:

Balances, Issued in CY Balances, Status/remarks

Nature Settlement
31 Dec 2016 2017 31 Dec 2017
NSs P1,817,521.51 P - - P1,817,521.51 NSs issued by
ICFAU in
September 2012 to
July 2013 on the
audit of
Confidential
Funds on appeal.
NDs - 245,879.28 - P245,879.28 Full settlement in
February and
March 2018
NCs - - - -
Total P1,817,521.51 P245,879.28 - P2,063,400.79

H. Status of Implementation of Prior Years’ Audit Recommendations

Of the six prior years’ audit recommendations, five were fully implemented and one
was not implemented. The details are discussed in Part III of this report.

We enjoin Management to ensure full implementation of all audit

recommendations to improve the financial and operational efficiency of the
agency.