Sept. 19, 2018. — REUTERS/ELOISA LOPEZ
By Katherine K. Chan
THE BANGKO SENTRAL ng Pilipinas’ (BSP) new P500,000 cap on daily cash withdrawal may make money laundering more difficult but unlikely to completely deter it, analysts said.
At the same time, BSP Governor Eli M. Remolona, Jr. on Thursday defended the new policy amid complaints from the public about the smaller daily cash withdrawal limit.
“We want to make it more difficult for the contractors, for the guys involved in the flood control mess, to be able to take money out of the banks. We just realized that all these transactions are done in cash,” he said in an exclusive interview on Thought Leaders with Cathy Yang on One News on Thursday.
The BSP issued a circular which imposes a P500,000 daily limit on cash withdrawals amid an ongoing investigation into anomalous flood control projects involving government employees, contractors and other individuals.
Under the circular, a maximum of P500,000 or its equivalent in foreign currency may be withdrawn at once or via multiple transactions within one banking day.
However, clients may still withdraw cash beyond the limit if they provide evidence of a legitimate business purpose. Such transactions may be approved after the BSP-supervised financial institution (BSFI) conducts enhanced due diligence and files a suspicious transaction report.
Mr. Remolona acknowledged this would be “a bit of a hassle” but hoped that this would prompt a switch to digital transfers.
“We understand there are businesses that are cash-based, and I think the banks know this. The businessman can come to the bank and say, ‘I need cash, more than P500,000 and this is why I need the cash.’ The bank will understand that,” he said. “We want to go digital, so this may encourage that shift.”
Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said money laundering will still be possible using alternative means such as cryptocurrency, shell firms, or trade-based laundering despite the BSP’s new regulations limiting cash withdrawals.
“Cash is the lifeblood of illicit finance, and this limit forces large transactions into traceable, digital channels. But let’s be clear: it’s not foolproof,” he said in a Viber message. “Criminals are adaptive. They find ways. They’ll shift to crypto, shell firms, or trade-based laundering.”
John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message that the BSP circular is a sound anti-money laundering measure that promotes transparency and “reduces risks tied to large cash transactions.”
“It nudges high-value dealings toward traceable channels like fund transfers and digital platforms,” he said.
However, Mr. Rivera said the policy’s effectiveness will depend on strict enforcement, citing potential loopholes such as “smurfing” and use of informal platforms.
“Loopholes such as ‘smurfing’ (structuring under-threshold withdrawals) and shifts to informal or offshore methods must be monitored,” Mr. Rivera added. “Banks should strengthen transaction monitoring and customer profiling, while regulators must remain vigilant.”
Smurfing refers to a money laundering technique where large illicit cash transactions are broken into multiple, smaller amounts to avoid regulatory reporting.
Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said robust monitoring and digital surveillance would allow the withdrawal ceiling to be an effective anti-money laundering measure.
“The P500,000 daily cash withdrawal cap is a strong deterrent against bulk cash movements, but it’s most effective when paired with robust monitoring and digital traceability,” he said in a Viber message. “Criminal networks often adapt, so banks must strengthen analytics to detect unusual patterns beyond cash.”
Reinielle Matt M. Erece, an economist at Oikonomia Advisory & Research, Inc., said the regulation will only pose minimal impact on consumers and the economy in general.
“There will be little impact on households since the bulk of their transactions are done in smaller amounts than the limit,” Mr. Erece said in a Viber message. “Further, even high-value items such as vehicles often are amortized.”
Meanwhile, Mr. Rivera said the withdrawal cap could streamline the financial industry’s shift to digital platforms and strengthen the country’s financial integrity.
“Economic sectors reliant on cash (e.g., retail, transport, construction) may experience short-term friction, but this could accelerate the shift to digital finance and improve financial integrity in the long term,” he said.
Mr. Ravelas also noted that the BSP’s new policy could help promote transparency and inclusion if it motivates clients to adopt digital payments.
“On the economic front, cash-reliant sectors like agriculture, retail, and transport may feel the pinch initially. But if this policy nudges them toward digital payments, it’s a win for transparency and inclusion,” he said.
However, Mr. Ravelas said the transition to digital payments must not exclude the unbanked population.
“The challenge is ensuring the unbanked aren’t left behind. We need digital infrastructure that’s accessible, affordable, and trusted. This isn’t just a regulatory tweak. It’s a push toward a more modern, resilient financial system,” he said.
‘UNLAWFUL’Meanwhile, Russell Stanley Q. Geronimo, founder and managing lawyer of Geronimo Law, flagged the circular as unlawful as it violates a provision of the Foreign Currency Deposit Act of the Philippines.
“With due respect, BSP’s new P500,000 cash withdrawal limit policy violates Section 5 of Republic Act (RA) No. 6426, which guarantees the absolute and free withdrawability of foreign currency deposits,” Mr. Geronimo said in a commentary on Friday.
Section 5 of the law states that withdrawals or transfer of deposits overseas may not be restricted, except for limitations specified in the agreement between the depositor and the bank.
“Section 5’s guarantee of free withdrawal is regarded as absolute,” Mr. Geronimo said. “The phrase ‘no restriction’ encompasses any form of impediment, whether in the amount, timing, or manner of withdrawal, except if the depositor agreed to a limitation in the bank’s terms and conditions.”
“The legislative purpose was to attract and retain foreign exchange in the Philippine banking system by assuring depositors that their funds are fully protected, freely withdrawable, transferable abroad without restriction, and immune from government interference such as disclosure, garnishment, or forfeiture,” he added.
Mr. Geronimo also cited Section 7 of RA 6426 which provides that if new BSP regulations diminish depositors’ rights, the rules that were in place when the deposit was made will apply.
“Under Philippine law, a statute prevails over an administrative issuance. Administrative rules and circulars cannot amend, alter, or contravene the provisions of the law they seek to implement,” he said.
“Notably, the BSP did not seek public comments or issue an exposure draft before promulgating the new circular.”
