• Nichel Gaba, CEO of Philippine Digital Asset Exchange (PDAX), discussed the country’s regulations under the Anti-Money Laundering Act (AMLA) and the role of cryptocurrency within these rules during the BitPinas Webcast.
• Holding, buying, and selling crypto is legal, and trading crypto is not considered money laundering, Gaba emphasized.
• Banks may close accounts if there are sudden significant inflows of funds, but customers have the right to transact with their accounts. To avoid suspicion, investors should update their KYC information and use banks with more open policies regarding crypto transactions, the CEO said.

Nichel Gaba, the CEO of homegrown Philippine Digital Asset Exchange (PDAX), discussed the country’s regulations under the Anti-Money Laundering Act (AMLA) and where the cryptocurrency space lies within these rules. He mentioned these during the BitPinas Webcast, “AML 101 and Crypto Regulations in the Philippines.”

Unpacking AMLA and Its Impact on Banks

AMLA 101: 

“Simply put, money laundering is when a criminal tries to use the banking system para ipasok ‘yung proceeds ng criminal activity n’ya,” Gaba started. As an illustrative example, he cited a bank robber who attempted to deposit the money he had just robbed from another bank into his bank account. 

The Anti-Money Laundering Act (AMLA) of 2001, meanwhile, also known as RA 9160, criminalizes unlawful activities including graft and corrupt practices, fraudulent activities, robbery and extortion, swindling, plunder, and other similar offenses.

AMLA in the Philippines mandates certain entities to adhere to anti-money laundering regulations. These include banks, trust entities, and institutions regulated by the Bangko Sentral ng Pilipinas (BSP), insurance companies, brokers, salespeople, and investment agents. Additionally, closed-end investment and pre-need companies, money changers, payment, remittance, and transfer companies, as well as financing and lending companies, are also required to comply with the regulations.

Moreover, as part of the law, AMLA initiated the creation of Anti-Money Laundering Council (AMLC); it is a government agency responsible for enforcing anti-money laundering laws and countering terrorism financing in the country. It analyzes suspicious transactions, freezes related assets, and collaborates internationally to combat financial crimes and safeguard the integrity of the financial system. 

The council requires all entities registered under the Bangko Sentral ng Pilipinas (BSP) and Securities and Exchange Commission (SEC) to comply with its obligations.

As per the rules of the ALMC, all financial institutions are required to report to the council all transactions above ₱500,000.

PDAX CEO Weighs in on Crypto and Banking

Crypto in AMLA

When inquired as to why banks appear to close accounts of their users trading or suspected of trading crypto, the PDAX CEO emphasized: 

“Just to be very clear, holding, buying, (and) selling crypto is not illegal. Trading crypto is not money laundering,” Gaba said.

When questioned about the occurrences of account closures related to cryptocurrency holdings, Gaba explained that financial institutions adhere to their know-your-customer (KYC) policies, relying on the initial information provided by the account holders during the account creation process. If significant amounts of money suddenly flow into the account as a result of cryptocurrency activities, this influx of funds may be perceived as suspicious by the bank, leading to the closure of the account, he said.

Banks, Gaba said, usually conduct further KYC to confirm the sudden influx of funds; whether the account owner invested or won the lottery, “all of these are fine.”

“The problem is, banks aren’t always able to do further KYC, sometimes it is cheaper for them to just (close accounts). (Banks) do not have the manpower to do that, so isasara ko na lang ‘yung account mo. Sadly that happens all the time,” Gaba stated. 

He even added that most of the time, account closures do not come with explanations or just citing crypto are not allowed; “that’s actually wrong. There’s nothing wrong with trading crypto.”

Challenges Crypto Investors Face with Banks

When asked if banks close accounts if a transaction is from an unlicensed exchange, Gaba replied that this depends on the risk appetite of the bank that the individual is using.

“Banks generally follow guidelines from the BSP and the AMLC. There was a memo before from the BSP that instructed BSP-supervised institutions to not deal with unlicensed exchanges. So, I will not be surprised if a lot of banks take that as their cue (where) they should start closing down bank accounts of those who transact with unlicensed exchanges,” he explained.

Gaba also remarked that banks are now becoming much more serious about the activities on licensed exchanges. Last year, even the SEC warned the public against using unregistered cryptocurrency exchanges.

In 2022, Coins.ph CEO Wei Zhou, in a panel where Gaba is also a speaker, highlighted what will happen if licensed exchanges do not follow the regulators—they will go to jail. 

Accordingly, BSP encourages Filipinos to report VASP problems to the central bank directly. Customers can contact BSP Online Buddy through BSP website, Facebook Messenger, or Globe text message 21582277 if VASPs don’t address issues.

(Read: What are the Seven Notable Crypto-Related Regulations in PH & Their Impact on the Community?)

Navigating Bank Account Closures in the Crypto Space

Can crypto investors still use banks without having their accounts closed?

Addressing concerns about crypto investors using multiple bank accounts to withdraw funds and avoid suspicion from large transactions in a single account, Gaba noted that customers a user have every right to transact with their accounts.

“First of all, there is nothing wrong with crypto trading so I’ll object to the word suspicion right away. I think if you transact, if you have unusual transactions with many banks–unusual not being illegal, it’s just that it is not (a user’s) common activity–you will just raise risk flags in all of those banks. Not to say they will close you but they have to investigate or they have to be satisfied na hindi s’ya proceeds ng crime,” he clarified.

Gaba recommended that investors regularly update their KYC information with their banks to avoid raising red flags on their transactions. He suggested that if their current banks are not open to transactions involving crypto, they should open another bank account with more open policies. If an investor is converting large amounts of crypto to fiat, he noted that it is best to do it in licensed exchanges. 

Reframing Banks’ Approach to Crypto Service

“Should you hide the fact that you trade in crypto? I don’t think so. That’s a part of your wealth. There is really nothing wrong with owning crypto, banks should not deny you their service just because you’re in crypto.”

Further, Gaba shared that in the case that a bank closed an investors account despite providing the necessary information, the account holder can complain directly to the BSP by emailing [email protected]. The CEO said, once the account holder emails the BSP, it goes directly to a senior bank personnel who is required by law and the BSP to address the account holder’s issues.

This article is published on BitPinas: Bitpinas Webcast: PDAX CEO Tackles Anti-Money Laundering Act

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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• Source: https://bitpinas.com/feature/interview-amla-crypto-pdax/