Photo courtesy of Philippine News Agency (PNA).
Reforming bank secrecy laws and tightening safeguards against illicit financial flows would be more effective in curbing corruption than withdrawing large-denomination peso bills, according to a new study by the Bangko Sentral ng Pilipinas (BSP).
In a discussion paper released this month, BSP researchers said addressing corruption requires stronger enforcement of existing anti-money laundering and counterterrorism financing rules, supported by strict sanctions for noncompliant institutions.
The study urged amendments to Republic Act No. 1405 or the Bank Secrecy Law, saying reforms must be matched with adequate safeguards and technological systems to speed up the building of prosecutable cases.
Authored by central bank officials Eloisa Glindro, Mamerto Tangonan and Rodalee Ofiaza, the paper said reforms should focus on removing incentives for rent-seeking while adapting to local conditions.
“Systemic corruption must be framed as a collective action problem,” the authors said, adding that solutions should make honesty feasible and corruption risky for all.
The paper comes as BSP Governor Eli Remolona Jr. said the central bank is still weighing proposals to demonetize the P1,000 and P500 notes, an idea earlier raised by former finance secretary Cesar Purisima.
Central bank analysis warned that replacing the two largest bills would be costly and disruptive, while criminal networks could still shift to other channels such as real estate, high-value goods and digital assets to move illicit funds.