International Journal of Advanced Science and Technology

Vol. 29, No. 8s, (2020), pp. 4636-4645

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Cognızance of foreıgn currency changıng ınstıtutıons ın cauayan cıty on r.a.
9160/ antı-money launderıng act of 2001
Ronald B. Isidro Jr
MBA, faculty of College of Business and Management Isabela State University Cauayan
Campus, Cauayan City, Isabela, Philippines

Abstract
Plotting of crimes and terrorism, fraudulent practices, felonies. They may differ as to the degree of crime,
but they all share the same starting point, which is money laundering. This study examines the money
laundering practices within the Cauayan City, Isabela, Philippines to determine whether or not money
changing institutions in the city are cooperating fully with regulatory authorities such as the Banco
Sentral ng Pilipinas. The vulnerability of a financial institution to such a policy may ignite unlawful
activities that would threaten the well-being of its residents in the city. The researcher made use of
quantitative research using descriptive method. The respondents of the study are the six money changing
institutions verified by the Office of the Mayor of Cauayan City. Since the total population of the
institution in which line of business is purely or mostly to convert currencies in Cauayan City, Isabela is
small, those said institutions were all selected to conduct the study. A survey was conducted by using a
questionnaire for information gathering about the cognizance of money changing institutions on R.A.
9160 or the Anti-Money Laundering Act of 2001 (AMLA).Weighted mean, frequency, percentage, and
Likert scale were used. The result of the investigation based on the questionnaire was recorded, tallied,
and presented. Findings reveal that the respondents know the operations or processes to follow the
policies concerning money laundering. The respondents are well trained in providing employees’
activities. The respondents properly check the client’s information. And lastly, the respondents have the
experience that there were problems encountered suspicious transactions. The researcher, therefore
concludes that the knowledge of money changing institutions in Cauayan City, Isabela, Philippines
understands and able to resolve doubtful cases. It is recommended that financial currency changing
institutions must give attention to transactions that can’t easily be suspected especially to small amounts.
Employees should be in high alert especially seasons like elections and holidays. The crime rate in these
periods are generally high, and an avenue to plotting crimes are financial institutions.
Index Terms: money laundering, anti-money laundering act, cognizance, money changing institutions,
foreign currency trading

1 Background, Motivations, Objectives:

Cauayan City, Isabela is a reflection of a developing country in the Philippines. As Cauayan City progress
in economic stability, many start-up business ventures, and consumers harbour in this locality to invest,
trade and transact their commercial activities. Consumers and budding small enterprises engage in foreign
currency changing institutions as financial resource to kindle their business activities. One of the sources
of finances is foreign currency changing institutions. However, as the city advance in economic stature, it
is but essential to understand the level of weakness of the city and one aspect is understanding its
awareness to anti money laundering act.

Cauayan City is a prime city in the Philippines and lies in the center of Cagayan Valley, It is an
independent city in the province of region two wherein bamboo or “kawayan” in the local dialect is
abundant.

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Copyright ⓒ 2020 SERSC
 International Journal of Advanced Science and Technology
Vol. 29, No. 8s, (2020), pp. 4636-4645

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This research aims to alert its constituents by instigating the importance of anti-money laundering
practices. This research will also provide information as to the degree of consciousness of currency
changing institutions to Anti Money Laundering Act which will benefit law enforcers as it could be a
basis of policy making, finance industry workers to create standardization on their customer service,
customers will also benefit from the research as the organization purposes to make its clients feel safe and
secure in their transactions and investors as they can be oriented on investment opportunities that can
thrive in the city.

Satisfying customers providing a better quality is the ultimate objective of any organization. There are
different types of ways and means of satisfying customers and providing quality service that meets
customer’s perception [1], the researcher also goals to determine how money changing institutions treat
suspicious accounts while giving valuable service to customers. Determining the most successful way of
forecasting consumer loyalty is focused largely on the utilization of client preferences or impressions of
results with various standards with service qualities or both when delivering service through money-
changing organizations.

Services of money changing institutions are becoming high in demand in Cauayan City Isabela, because
of its creation to help tourists that want to convert their currencies, students that depend on their overseas
Filipino workers (OFW) relatives to sustain their education, foreign investors that entrust their money to
Cauayan based businesses. Money changing institutions are useful for the economic and social structure
of the province to generate resources for their clients. They are also expected to be well-equipped to
create income and contribute to taxes in the City.

The growth of money changing institutions in European countries is viewed as a sign of economic
progress. Most developed countries in the world are financial industry-based economy and money
changers are key players in the productiveness of an economy. Money changers address economic, social,
and individual necessities. These financial institutions has also the ability to alert law enforcers when
there is a suspicious transaction. Money changers by nature receive foreign currency and converts it to
local currency.

Illegal money will safely and efficiently be transported everywhere in the world. At the same time, the
continuous escalation of the drug syndicate in the market and the globalization of organized crime have
led to a progressive increased in international awareness of the problem of money laundering.

Republic Act No. 9160, better recognized as the 2001 Anti-Money Laundering Act, as modified by
Republic Act No. 9194, 10167, and 10365 (AMLA), describes and punishes money laundering in the
Philippines, which include, the implementation of necessary measures to counteract money laundering
and investigation of suspicious transactions.[2] A substantial foreign exchange transaction is said to be
shifting from banks to these small enterprises. Money laundering is perpetuated by hard-core criminals, it
could be aided along by others motivated by profits in the financial system and that those closes to the
process and in particular workers when encountering such activities should be encouraged to report these
via appropriate channels [3].

One of the best examples of money laundering in the Philippines through foreign exchange brokers is the
2016 Bangladesh bank heist. The Philippines is now the third-largest user of bitcoin, fuelled largely by
remittances by overseas Filipinos. In February this year, a cyber-attack launched on a Bangladesh Central
Bank account at the US Federal Reserve saw $81 million routed to accounts at Manila-based Rizal
Commercial Banking Corp (RCBC) before being transferred to casinos in Manila by a remittance
company [4]. The funds were then transferred to a foreign exchange broker to be converted to Philippine
pesos, returned to the RCBC and consolidated in an account of a Chinese-Filipino businessman.

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 International Journal of Advanced Science and Technology
Vol. 29, No. 8s, (2020), pp. 4636-4645

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The Philippines is confident that its anti-money laundering measures fully meet internationally accepted
standards and that AMLC and other key constituencies in government and in the private sector will
continue to work together in effectively implementing our anti-money laundering legislation. Indeed, the
Philippines' anti-money laundering regime, with the AMLC at the helm, has hit the ground running- not
running away from, but running after money launderers and perpetrators of predicate offenses.

Clearly, laundering through an exchange institution poses a number of regulatory and enforcement
challenges. At the same time, it's been noted that there is a low identification of money laundering as
relative to the volume of the whole industry. The absence of lax implementation of anti-money laundering
standards and adequate related policies provide opportunities which are being exploited by money
launderers and other criminals.

Currently, money laundering has been recognized as a major problem requiring a great response, and has
consequently, all financial services industries and authorities in most developed countries become a top
priority. The impact of money laundering on economic development is highly difficult to calculate.
Unless adequately reviewed, this may damage financial-sector entities that are vital to economic
development, contributing to a decline in competitiveness in the actual sector of an economy.

The main purpose of the study is to evaluate the awareness of foreign currency changing institutions in
Cauayan City to Anti Money Laundering Standards. The researcher aims to give the customer confidence
in the City to facilitate their money changing transactions as well as attract investors to establish
economic growth.
2 Statement Of Contrıbutıon/ Methods
The researcher made use of quantitative research using descriptive method. The respondents of the study
are the six money changing institutions verified by the Office of the Mayor of Cauayan City, Isabela
Philippines. Since the total population of the institution in which line of business is purely or mostly to
convert currencies in Cauayan City Isabela is small, those said institutions were all selected to conduct the
study. A an investigation was conducted by using a questionnaire for information gathering about the
cognizance of money changing institutions on R.A. 9160 or the Anti-Money Laundering Act of 2001.
Weighted mean was utilized to gauge the level of awareness. The result of the analysis based on the
questionnaire was recorded, tallied, and presented to determine the awareness of money changing
institutions to R. A. No. 9160 also known as Anti- Money Laundering Act.

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Copyright ⓒ 2020 SERSC
 International Journal of Advanced Science and Technology
Vol. 29, No. 8s, (2020), pp. 4636-4645

3 Results Dıscussıon And Conclusıon

Table 1.Respondent’s Awareness of Foreign Currency Changing Institutions in Cauayan City in the
Category - Assessment to Anti-Money Laundering Act

STATEMENTS WEIGHT DESCRIPTIO

ED N
MEAN
1 There is review of 5 Extremely
processes in your Aware
business to identify
where money laundering
is most likely to occur.
2 The review of the 5 Extremely
processes in your Aware
business regarding
money laundering is
regularly updated.
3 There are established 5 Extremely
procedures and controls Aware
to prevent or detect
money laundering.
4 The effectiveness of such 4.7 Extremely
procedures and controls Aware
are tested.
5 Your internal operation 4.6 Extremely
is capable of highlighting Aware
suspicious transactions
Weighted Mean 4.86 Extremely
Aware

The table above shows the rated percentage of the awareness of foreign currency changing institution to
R.A. No. 9160 in the category – assessment to anti-money laundering act. The respondents are extremely
aware that their institution has a review of processes to identify where money laundering is most likely to
occur. The respondents also express their extreme awareness that the review of their processes in their
business regarding money laundering is regularly updated. The respondents likewise are extremely aware
that their establishment established procedures and controls to prevent or detect money laundering. The
respondents are also extremely aware that the effectiveness of such procedures and controls are tested.
They are also extremely aware that their internal operation is capable of highlighting suspicious
transactions.

To sum up the category - assessment to anti-money laundering act, the respondents are extremely aware
having an overall mean of 4.86 which can be interpreted as “Extremely Aware” through the Likert Scale.
The table manifested that the residents, prospective investors and transactions involving currency
changing to the locality’s financial institution can bestow certainty, that the city’s financial establishments

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Copyright ⓒ 2020 SERSC
 International Journal of Advanced Science and Technology
Vol. 29, No. 8s, (2020), pp. 4636-4645

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is complying distinctively to AMLA provisions. As Lemmon, M., & Portniaguina, E. (2006). Consumer
confidence and asset prices: Some empirical evidence. The Review of Financial Studies, 19(4), 1499-1529
implied [5], factors to consumer optimism is the confidence the institutions exhibited. With this data,
Cauayan City proves to be the “Ideal City of the North” as its economic institution personnel have firm
assimilation over Anti Money Lauundering Act or RA 9160.

Table 2.Respondent’s Awareness of Foreign Currency Changing Institutions in Cauayan City in the
Category - Company Policy

STATEMENTS WEIGHTED DESCRIPTION

MEAN
1 Your company has a 4.9 Extremely Aware
comprehensive written
policy on money
laundering.
2 Staffs are aware of the 5 Extremely Aware
money laundering
policies.
3 The money laundering 4.1 Very
company policies include Aware
clear guidelines on
treatment on accepting for
any corporate hospitality
and gifts.
4 The staffs are aware of 5 Extremely Aware
their responsibilities with
regard to money
laundering.
5 The written policies on 5 Extremely Aware
money laundering are
strictly followed by your
institution.
Weighted Mean 4.8 Extremely Aware

The table above shows the rated percentage of the awareness of foreign currency changing institutions to
R.A. No. 9160 in the category – company policy. The respondents are extremely aware that their
institution has a comprehensive written policy on money laundering. The staff also express their extreme
awareness of those comprehensive policies of their institution. The respondents likewise are very aware
that their company policies include clear guidelines on treatment on accepting any corporate hospitality
and gifts. The respondents are also extremely aware of their responsibilities on money laundering. They
are also extremely aware that their written policies on money laundering are strictly followed by their
institution.

To sum up the category – company policy, the respondents are extremely aware of having an overall
mean of 4.8 which can be interpreted as “Extremely Aware” through the Likert Scale.

If provisions to Anti Money Laundering Act are followed, it is correspondingly contributing to further
cognizance of such institutions to this policy. As they perform AMLA instructions, they most likely

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 International Journal of Advanced Science and Technology
Vol. 29, No. 8s, (2020), pp. 4636-4645

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understand its content, skills, ability to think dynamically across levels of the organization. capacity to
draw selectively on specific information, awareness of word roots are then applied. [6]. It is then innate to
financial institution personnel to accomplish RA 9160 proceedings.

Table 3.Respondent’s Awareness of Foreign Currency Changing Institutions in Cauayan City in the
Category - Employee Trainings

STATEMENTS WEIGHTE DESCRIPTION

D
MEAN
1 There is a regular money 5 Extremely
laundering training taken by Aware
employees.
2 All staffs who undergone 5 Extremely
seminars on money laundering Aware
were sufficiently capable of
identifying suspicious
transactions.
3 The training conducted on 5 Extremely
money laundering is beneficial Aware
to the employees.
4 There is a proper orientation on 4.9 Extremely
dealing with alleged suspicious Aware
transactions.
5 The staffs or employees are 4.8 Extremely
aware of the personnel to Aware
contact with in the case of
suspicious transactions.
Weighted Mean 4.94 Extremely
Aware

The previous table shows the rated percentage of the awareness of foreign currency changing institutions
to R.A. No. 9160 in the category –Employee Training. The respondents are extremely aware of
identifying suspicious transactions as they underwent seminars on money laundering. The staffs are very
aware of the training conducted. The respondents likewise are extremely aware that there is a proper
orientation on dealing with alleged suspicious transactions. They are also extremely aware of the person
to contact within the case of suspicious transactions.

To summarize the category – employee training, the respondents are extremely aware of having an overall
mean of 4.94 which can be interpreted as “Extremely Aware” through the Likert Scale.

The Banco Sentral ng Pilipinas as a regulatory agency to foreign currency changing institutions has the
responsibility to invite its constituents on training and seminars that can give them solidified cognizance
to AMLA. Intellectual capital and knowledge management have become major sources of corporate
competitiveness in most industries. Intellectual capital refers to all types of organizationally relevant
knowledge and its basic elements are human capital, structural capital, and customer capital. Knowledge

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Copyright ⓒ 2020 SERSC
 International Journal of Advanced Science and Technology
Vol. 29, No. 8s, (2020), pp. 4636-4645

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management, on the other hand, refers to the process involving the creation, collection, and application of
knowledge for improving organizational performance. [7] This connotes that continuous training should
be conducted to staff that practice AMLA to maintain industry reputation in Cauayan City.

Table 4.Respondent’s Awareness of Foreign Currency Changing Institutions in Cauayan City in the
Category - Client Background

STATEMENTS WEIGHTE DESCRIPTION

D
MEAN
1 There is thorough 4.9 Extremely Aware
checking and verifying
the identity of all your
clients.
2 There is a place where 4.6 Extremely Aware
you keep the accounts of
clients in the name of
fictitious persons or
entities.
3 The institution has due 5 Extremely
process in dealing with Aware
customers who threatens
employees in an effort
to discourage required
record keeping.
4 The company has 5 Extremely Aware
procedures in
administering client who
hesitate to proceed with
transaction after being
told it must be recorded.
5 There is a facility or 4.7 Extremely Aware
system in your
institution that can store
customer or client’s
profile and transactions
for the period of five
years.
Weighted Mean 4.84 Extremely Aware

The table above shows the rated percentage of the awareness of foreign currency changing institutions to
R.A. No. 9160 in the category – client background. The respondents are extremely aware that their
institution has thorough checking and verifying the identity of all their clients. The respondents also
express their extreme that there is a place where they keep the accounts of clients in the name of fictitious
persons or entities. The respondents likewise are extremely aware that their institution has a due process
in dealing with customers who threaten employees in an effort to discourage required record keeping.

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Copyright ⓒ 2020 SERSC
 International Journal of Advanced Science and Technology
Vol. 29, No. 8s, (2020), pp. 4636-4645

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The respondents are also extremely aware that their company has procedures in administering clients who
hesitate to proceed with the transaction after being told it must be recorded. They are also extremely
aware that there is a facility or system in their institution that can store customers or client’s profiles and
transactions for a period of five years.

To sum up the category – company policy, the respondents are extremely aware of having an overall
mean of 4.84 which can be interpreted as “Extremely Aware” through the Likert Scale.

It is suggested by Beckett, A., Hewer, P., & Howcroft, B. (2000). An exposition of consumer behavior in
the financial services industry. International Journal of Bank Marketing, 18(1), 15-26. [8] Financial
institutions and providers must, therefore, put effort to better understand their customers in an attempt not
only to anticipate but also to influence and determine consumer trading behavior [9]. Internationalization
of banks: The consumer perspective. If foreign currency changing institutions are able to recognize their
customers, then the degree of credibility can be gauged by the facilitator if such money changing
institution may grant or facilitate the transactions.

Table 5.Summary Of Data Frequency And Percentage Of Encountered Cases In Five Years

Year No. of Solved % Unsolved %

Cases
1 2 2 10.53% - -
2 1 1 5.26% - -
3 5 5 26.32% - -
4 3 3 15.79% - -
5 8 6 31.58% 2 10.52%
TOTAL 19 17 89.48% 2 10.52%

The previous table shows the summary of data frequency and percentage of encountered cases for the
year 1-5. Year 5 has the highest number of cases which is 8 and with a number of 6 solved cases or
31.58%. Our local reference reported a statistically significant positive relation is found between foreign
tourism and robbery and theft cases as well as between overseas Filipino tourism and robbery [10]. This
supports the supposition that an increase in foreign tourism in the locality can kindle plotting of unlawful
activity where money changing institutions are utilized to fuel organized crime. This also reveals that the
ability of money changing institutions to forecast an unlawful activity or crime. Year 2 has the lowest
number of cases which is 1 or 5.26% and also solved that year. In research conducted by Klick, J., &
Tabarrok, A. (2005). Using terror alert levels to estimate the effect of police on crime. The Journal of Law
and Economics, 48(1), 267-279. [11] it shows that the level of crime decreases significantly, both
statistically and economically, during high‐alert periods. This considers the aptitude of such institutions to
forecast criminalities and has the ability to declare deem vigilance to the public.

Within five (5) years the money changing institutions in Cauayan City, Isabela 17 out of 19 cases had
been solved with a percentage of 89.47%. Most of the institution had been experienced in doubtful cases.
The result reflects the span of due process in the locality. Unsolved cases must be addressed to further
prove our claim for Cauayan City as an “Ideal City of the North” and a “Smarter City”. As the year
advances, the number of suspicious transactions also increases. This signifies that the dovish movements,
there are attempts to ignite unlawful activities in Cauayan City. We are also expecting an increase in the
number of suspicious transactions in the locality which address the needs of financial changing
institutions.

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Copyright ⓒ 2020 SERSC
 International Journal of Advanced Science and Technology
Vol. 29, No. 8s, (2020), pp. 4636-4645

ACTIVITIES DONE BY Trainings, seminars and orientation are

INSTITUTIONS IN ORDER FOR the activities took by the institutions in
THEIR STAFFS TO HAVE order to familiarize with Anti-Money
COGNIZANCE WITH RA 9160 Laundering Act.

PROCEDURES TAKEN BY FOREIGN Checking and verifying client’s identity,

CURRENCY CHANGING keeping separate account for fictitious
INSTITUTIONS persons and administering client who
hesitate for recording their transaction.

METHODS/ STRATEGIES TAKEN TO The internal operation is capable of

FACILITATE SUSPICIOUS highlighting suspicious transactions,
TRANSACTIONS keeping separate account for fictitious
persons if there are suspicious
transactions or clients and storing
client’s profile and transaction on a
facility or system.

The respondents that are under the age bracket 20-25 comprises of 50%. The majority of the respondents
are female with a total of 80%. The majority of the respondents are single with a total of 60%. Training,
seminars, and orientation are the activities took by the institution in order to familiarize themselves with
the Anti-Money Laundering Act. The procedures used by the company in order to know its clients were
checking and verifying the client’s identity, keeping a separate accounts for fictitious persons, and
administering clients who hesitates for recording their transactions. The internal operation is capable of
highlighting suspicious transactions, keeping a separate accounts for fictitious persons if there are
suspicious transactions or clients, and storing client’s profiles and transactions on a facility or system. The
researchers gathered the highest weighted mean of 4.94 which is “extremely aware” in the category of
employee training. The researchers gathered the lowest weighted mean 0f 4.8 which is “extremely aware”
in the category of company policy. The total encountered cases of money laundering by the six
institutions in the year 1-5 were 19. A total of 17 (89.48%) cases have been solved and there are only two
(10.52%) cases still on process. Year 2 has the lowest encountered case of money laundering with only 1
case and year 5 has the highest encountered case of money laundering with a total of 8 cases.

The result of the study concludes that most of the respondents are single females. The respondents know
the operations or processes in determining about anti-money laundering act. The respondents agree that
they strictly follow the policies with regard to money laundering. The respondents are well trained in
providing employees’ activities. The respondents properly check the client’s information. And lastly, the
respondents have an experience that there were problems encountered suspicious transactions.

ISSN: 2005-4238 IJAST 4644

Copyright ⓒ 2020 SERSC
 International Journal of Advanced Science and Technology
Vol. 29, No. 8s, (2020), pp. 4636-4645

`
The researchers, therefore conclude that the knowledge of money changing institutions in Cauayan City,
Isabela definitely understands and able to resolve doubtful cases.

The researcher claims that cognizance to Anti Money Laundering Act in Cauayan City is very much
integrated. Based on the findings the researcher affirms that the services provided by foreign currency
changing institutions are efficient and effective, that is why customers maintained goodwill and
confidence over such a money changing platform. Financial institutions that change foreign currencies in
Cauayan City prove their excellent performance in their operations for it had manifested awareness in this
policy. Consumer confidence and investors may perceive Cauayan City as an investment port in financial
logistics.

The following recommendations were proposed, in light of the aforementioned observations and
conclusions. Staff must continue to attend a series of regular program training and seminars in regard to
money laundering for every quarter or at least annually. This would update the staff, administrators, and
facilitating institutions to have a solidified familiarity on Anti Money Laundering Act. The City of
Cauayan must establish only or designate certain number of money changer to minimize or prevent
money laundering or consistently inspect on Anti Money Laundering Act compliance. It is also
recommended that financial currency changing institutions must give attention to transactions that can’t
easily suspect especially to small amounts. They should give actions to transactions in especially seasons
like elections and holidays. The crime rate in these periods are generally high, and an avenue to plotting
crimes are financial institutions such as foreign currency changers. They must be updated with the new
rules and regulations of BSP and AMLC.

References

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5. Lemmon, M., & Portniaguina, E. (2006). Consumer confidence and asset prices: Some empirical
evidence. The Review of Financial Studies, 19(4), 1499-1529
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8. Beckett, A., Hewer, P., & Howcroft, B. (2000). An exposition of consumer behaviour in the
financial services industry. International Journal of Bank Marketing, 18(1), 15-26.
9. Olsson, K., & Gankhuyag, T. (2008). Internationalization of banks: The consumer perspective.
10. Rosalina, L. P. D. M. G. (2015). Tourism and crime: Evidence from the Philippines. Southeast
Asian Studies, 4(3), 565-580.
11. Klick, J., & Tabarrok, A. (2005). Using terror alert levels to estimate the effect of police on
crime. The Journal of Law and Economics, 48(1), 267-279.

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