Wednesday, January 04, 2006

Is the overseas remittance business being used to launder money?

I do not have the slightest idea, but the largely unregulated “padala” system is the perfect scheme for laundering illegal money, and this could all be done with the convenience of a telephone. A money launderer, for example, who wants to bring his money to Italy, can set up an office in Italy to receive remittances from Filipinos there. His Italian office will receive money from workers and then convey the message to the Manila office, which holds the hot cash. Then, the Manila office will deliver the amount equivalent to the one delivered to the Italian office to the family of the overseas worker for a fee. And presto! The money delivered in the Italian office is clean and ready to be deposited in a European bank. If the money launderer wants to spread his hot cash abroad, all he has to do is set up another office in another country, and he will have his hot money wherever he wants. Is this how easy it is? Unless the government regulates remittance companies, especially those operated outside the banking system, it’s as simple as calling on the phone.


LAWSTUDE said...

Wow, reminiscent of the various securities scam you have lectured on us.

marvin said...


Really this profession brings you close to first rate criminals you never thought walk the earth.

Good luck for the bar. I'll tell your school to give you a bonus if you hit the Top Ten.

cathcath said...

I almost got into this business here in the US when a friend offered me a franchise for a song.

Since I do not want to give up my day job which gives me regular income and health insurance coverage, I had to forego the opportunity.

One; I had to have a trusted staff who is going to go to the bank and deposit the receipts as much as x times a day. Cash is preferred than check because of the business risk of bouncing check from new clients.

Second; I have to be relying on the fee per remittance as my sole income i.e. 6 dollars a pop or 50 per cent of the regular fee.(50 per cent goes to the main office).

The business in the remittance is in the foreign exchange. The remittance fee is just a bonus.

Somehow the regulation of the host country like the States is the bond and the license that has to be secured by the remittance companies.
Anything that goes higher than 10,000 dollars going out of the country is flagged up.

It is not true that money that changed hands between the remitters and the recipients do not go thru the financial systems of the two countries. They do.

The meat of the remittance business is in the foreign exchange trading.

My thought is more on the tycoons putting up their banks in other countries and those whose proceeds from export business go as far as HK banks only.

marvin said...


That's how legitimate businessmen do it. But for somebody who wants to launder money from Point A to Point B, it would be unnecessary to go thru the banks. Point B is where he receives the money for remittance and Point A is where he disburses using his hot money. His operations in Point B doesn't even have to be above-ground. It could just be a young man in puruntong shorts with a bayong, who doubles as a jueteng bookie.

cathcath said...

If Point B is where the remittance is coming from, you are referring to the foreign country e.g. US. Here even the
unregistered businesses can be monitored by the government thru IRS income taxes filed and the deposits in the banks.

Unlike in the Phils. when the government can not just freeze your bank account, here, they can question the depositor's unexplainable deposit accumulation without corresponding income.

Called up my friend in the remittance business and he said that the government requires the remittance company to submit supporting papers for a remittance
amounting to several thousands.

I am curious however of that laundering business that you mentioned.

Our rich businessmen can always get away with bringing out dollars by investing in other countries like China, Indonesia, Papua New Guinea
and see to it that dollar cash flows from these businesses do not get to our banking systems.

marvin said...


Oh yes, the last sentence on my last comment should read " His operations in Point A doesn't even have to be above-ground. It could just be a young man in puruntong shorts with a bayong, who doubles as a jueteng bookie. "

But for the operation in Point A (the point where they get the remittance) they could be above-board. They could be a legal entity
which makes it all the more perfect for laundering. If they question the income, the business supports it perfectly.

The thing is the governments where the remittance business are being undertaken should have an agreement on how they monitor this remittance business, for as shown earlier, it's a great set up for laundering money

Anonymous said...

That's already happening.

Why do you think Filipino shops can afford to pay 55 pesos to the dollar with no transfer fee when bank will give you only 50 pesos to one dollar plus 10 dollar wire transfer fee?

Anonymous said...

I don't want this to be regulated because I send money over to the Philippines and want to maximize the pesos that I will get to my dollar earnings.