The caper that siphoned about $80 million of Bangladesh’s money out of an account at the Federal Reserve Bank of New York is highlighting what looks like a weak point in the global financial network: the murky banking system of the Philippines.
MANILA, Philippines — It is a financial whodunit for the digital era: More than $80 million of Bangladesh’s money vanished last month after it was electronically transferred out of that country’s account at the Federal Reserve Bank of New York.
As officials around the world search for the money and place blame, the caper is highlighting what looks like a weak point in the global financial system that allowed the money to get by regulators: the murky banking system of the Philippines.
The country’s investigators are looking into how the money came to be transferred to that nation — and what happened to it afterward. It appears to jump from Philippine banks to the country’s lightly regulated casinos, then to points unknown, touching a number of pressure points where the U.S. and experts say the country is vulnerable to potential corruption and money laundering.
Specifically, they point to the country’s flush casino industry, which is exempt from many of the anti-money-laundering requirements. The Philippines also retains what one U.S. official once called some of the world’s toughest bank secrecy laws.
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“They picked us to launder this money because our system is full of loopholes,” Sergio R. Osmeña III, a Philippine senator who leads a committee on banks and financial institutions, said Wednesday. “We have been trying to amend these laws for decades, but we can’t get it through Congress.”
Already the theft — one of the largest digital heists in history — has caused ripples round the globe. On Tuesday, Bangladesh’s top central banker resigned. Bangladeshi officials have blamed the New York Fed.
The New York Fed has said the transfer requests came through official channels and that any security breach most likely came from Bangladesh.
Officials who run the global money transfer system known as Swift said its systems had not been breached and said the matter was an internal issue at Bangladesh’s central bank.
At this point, it is unclear exactly what went wrong and where the system broke down. But the people behind the theft made mistakes and tripped alarms.
In early February, they requested that more than $100 million in money Bangladesh keeps at the New York Fed be transferred out. On one transfer request, they misspelled the word “foundation,” as “fandation,” putting a halt to about $20 million they tried to move to Sri Lanka. It is not clear whether the New York Fed spotted the typos.
The culprits appear to have made off with about $81 million transferred to the Philippines, raising broader concerns about the country’s financial controls.
The Philippines has moved in recent years to bring its disclosure requirements around the movement of large funds into line with international standards. But experts say it remains a difficult place to catch money launderers.
In a report a year ago on financial crimes, the State Department cited the country’s tight bank secrecy laws, a lack of regulation around casinos and difficulties faced by local regulators in watching transactions involving real estate, jewels and nonprofit groups. It said that in the first 10 months of 2014, the Philippines had one conviction and no prosecutions begun on money-laundering charges.
Several U.S. diplomatic cables published by the group WikiLeaks also showed frustration with the laws. “The bank secrecy laws in the Philippines are among the strictest in the world,” Francis J. Ricciardone, then the U.S. ambassador, wrote in a 2005 cable. A successor, Kristie Kenney, said in a 2008 cable that the bank secrecy laws and poor whistle-blower protections hindered corruption investigations.
The secrecy laws are a legacy of former dictator Ferdinand Marcos, who hoped they would help turn the Philippines into a financial hub. Though they were weakened in 2001 an effort to fight terrorism funding, the laws still limit access by authorities without permission from the depositor.
Philippine casinos are exempt from the anti-money-laundering law, meaning they are not required to report suspicious transactions.
Money from the Bangladesh central bank ended up being transferred to one of the Philippines’ newer casinos, Solaire, lawmakers learned Tuesday.
In response to questioning, Silverio Benny Tan, the corporate secretary of Bloomberry Resorts, parent company of Solaire, said the equivalent of about $29 million was transferred in February to accounts at the casino controlled by a junket operator named Weikang Xu, according to video record of the proceedings.
Junket operators are middlemen who bring high-rolling players to casinos and, especially in the case of gamblers from China, lend them money for gambling.
Xu’s nationality was not clear, and he could not be reached for comment.
Osmeña, the senator, said the operators of the casinos involved were invited to testify at a Senate hearing Thursday to try to trace the money.
“The casinos here in the Philippines are a black hole,” he said. “Once the money goes in there, it is gone.”