Manila: Philippine monetary authorities are considering the proposal to demonetize the PHP500 and PHP1,000 bills as a measure to prevent these denominations from being used for illegal activities. In a recent briefing, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona discussed the suggestion made by former Finance Chief Cesar Purisima, describing it as a 'tantalizing proposal.'
According to Philippines News Agency, Purisima's suggestion came to light following a series of Senate hearings, which revealed that approximately a billion worth of BSP-issued higher denomination bills were allegedly delivered in suitcases to Ako Bicol Partylist Rep. Zaldy Co, in connection with ghost flood control projects under the Department of Public Works and Highways. While acknowledging that other countries have implemented similar measures, Remolona, who has experience at the New York Federal Reserve, cautioned about the negative consequences of such a move.
Remolona explained that during his tenure at the New York Fed, a similar situation arose with the USD100 note being used in the illegal drugs trade. However, the decision was made not to demonetize the note as it was widely used by regular individuals, and such a measure would have caused significant inconvenience to many Americans. Similarly, Remolona believes the proposal to demonetize the PHP500 and PHP1,000 bills is complex and could result in more harm than benefits.
Currently, the BSP requires banks to report any transaction involving PHP500,000 or more to the central bank under the covered transaction report (CTR). Additionally, banks are tasked with submitting suspicious transaction reports (STR), which include detailed information about the transaction, fund sources, and whether these align with the earnings of those involved.
To further strengthen these measures, the BSP is looking to enhance its systems to better connect transactional data across accounts. On September 18, the BSP issued Circular No. 1218, mandating regulated institutions to ensure that transactions amounting to PHP500,000 or their equivalent in other currencies are conducted through traceable methods like checks, online fund transfers, direct credit to deposit accounts, or digital payments to minimize money laundering risks.
Remolona noted that banks favor the policy as it provides a basis to challenge suspicious transactions. He also mentioned that the BSP is exploring digital solutions to improve their monitoring capabilities, as the Anti-Money Laundering Council, which he chairs, receives numerous STRs but struggles to prioritize which ones warrant immediate investigation.
