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The Philippine Star
February 19, 2026 | 12:00am
MANILA, Philippines — The Philippines has poured hundreds of billions of pesos into flood control projects over the years, funding river walls, pumping stations and drainage systems meant to shield communities from increasingly severe storms.
Yet alongside the surge in infrastructure spending, financial intelligence authorities warn that public works projects, by their very structure, present inherent vulnerabilities to misuse and money laundering.
In an interview with The STAR, the Anti-Money Laundering Council (AMLC) said the lifecycle of public infrastructure spending contains inherent pressure points where funds may be misused or laundered.
“Various stages in the lifecycle of public infrastructure spending may present vulnerabilities to misuse or money laundering, depending on the surrounding circumstances and controls in place,” the AMLC said.
From procurement to post-disbursement, the flow of funds can mirror classic money laundering stages – placement, layering and integration.
Procurement: The first pressure point
According to the AMLC, the initial phase of infrastructure spending, which includes procurement and contractor selection, is considered “a high-risk stage.”
“Potential vulnerabilities at this stage may arise from practices such as rigged bidding, the participation of pre?arranged contractors or the use of newly established corporations having limited operating history or minimal capitalization,” the watchdog said.
This stage is critical. Budget releases from the Department of Budget and Management are translated into project allocations implemented by the Department of Public Works and Highways, often through DPWH district engineering offices. The selection of contractors determines where public money first lands.
The risk escalates when winning contractors engage in subcontracting arrangements.
“This practice presents an opportunity for layering through transfers of public funds to multiple related or less transparent entities,” the AMLC noted.
In money laundering parlance, layering refers to the movement of funds across multiple accounts or entities to obscure their origin. In infrastructure projects, subcontracting chains can create multiple transfer points, complicating audit trails.
Based on suspicious transaction reports (STRs) filed by covered institutions, the AMLC said it has identified recurring indicators that may be associated with public works projects.
Among the commonly observed red flags are payments followed by rapid fund movements, which may indicate attempts to obscure audit trails, as well as the use of pass-through accounts where funds are held only briefly before being transferred to other accounts.
The AMLC also flagged transactions involving individuals or entities with volumes inconsistent with their declared business size, capacity or operating history.
Other indicators include repeated remittances to the same individuals or entities that may suggest coordinated activity, multiple large cash withdrawals and transactions coursed through the personal accounts of corporate officers instead of legitimate corporate accounts.
The council emphasized that these indicators are assessed collectively and in context, and do not by themselves establish wrongdoing, but may warrant closer scrutiny.
Still, taken together, the patterns sketch how public funds can move rapidly from government agencies to primary contractors, then to shell or related companies and eventually to private accounts or asset purchases.
Conversion and concealment
The post-disbursement phase carries its own risks. “At this stage, illicit proceeds, if present, may be converted into other assets, such as real property, motor vehicles or casino winnings to obscure their origin and prevent traceability,” the AMLC said.
Based on intelligence gathered so far, the AMLC said a typical corruption-linked scheme begins with government payments going to a primary contractor, which then funnels the funds to shell or related companies sharing common incorporators or beneficial owners.
“These transfers are then followed by rapid withdrawals or further transfers to dissipate the audit trail,” it said.
“In other instances, funds are converted into real estate, motor vehicles, winnings from casinos or other high-value assets and financial instruments, often placed under the names of relatives or associates.”
The AMLC also cited the use of professional intermediaries such as accounting offices or consultancy entities “to legitimize fund movements,” as well as cross-border transfers to foreign or offshore accounts under the guise of equipment procurement or consultancy fees.
“These methods reflect classic layering and integration stages of money laundering,” it added.
To trace suspicious financial flows, the AMLC applies what it described as a “transaction-centric and network-based analytical framework.”
This involves reviewing suspicious and covered transaction reports, bank records and beneficial ownership information to identify linkages such as common signatories, incorporators or authorized representatives across accounts.
“Where appropriate, the AMLC conducts timeline assessments that compare financial movements with annual procurement schedules, as well as geographic clustering to detect repeated patterns or recurring transactional behaviors within particular districts or political jurisdictions,” it said.
The council said the resulting financial nexus reveals potential relationships among agencies, contractors and individuals that may indicate possible irregularities or coordinated misuse of public funds.
Broader financial crime context
The vulnerabilities identified in infrastructure spending sit within a broader landscape of illicit financial flows flagged by the AMLC in an assessment dated December 2025.
The study analyzed 1.3 million suspicious transaction reports valued at P35.49 billion, covering current account and remittance transactions. It included a comprehensive analysis of STRs from January 2021 to June 2024.
While cyber-enabled crimes and swindling accounted for the bulk of suspicious transaction volume, graft and corrupt practices – the category most closely aligned with infrastructure misuse – represented only 0.14 percent of total STR volume but 11.68 percent of aggregate peso value, underscoring the high-value nature of corruption-related cases.
The AMLC noted that STRs “do not constitute direct evidence of wrongdoing; they only highlight transactions with suspicious characteristics.” It also stressed that the data “does not represent a comprehensive assessment of the total volume of criminal proceeds that may have entered, circulated within or exited the Philippines.”
Nonetheless, the patterns reveal how large-value public expenditures can intersect with financial crime risks, particularly when procurement controls are weak, subcontracting chains are opaque and beneficial ownership information is obscured.
When potential indicators of money laundering or misuse of infrastructure funds are detected, the AMLC said it closely coordinates with the appropriate oversight and enforcement agencies.
This may involve coordination with the DPWH for project records and contractor information, the Office of the Ombudsman in matters of administrative or criminal accountability and other law enforcement bodies.
“This inter-agency coordination is undertaken within the bounds of existing laws and established protocols, through financial intelligence sharing, parallel financial investigations and evidence-based referrals,” the council said.
Flood control projects are designed to manage the physical flow of water. But as public funds surge through procurement pipelines and contractor networks, financial intelligence authorities are increasingly focused on managing another kind of flow – the movement of money.
The AMLC’s assessment does not conclude that flood control funds are being systematically laundered. Instead, it underscores that the architecture of large-scale infrastructure spending contains structural pressure points.
Where money moves quickly, through layered entities and opaque ownership structures, the risk of concealment rises. In the end, following the flood money is less about presuming corruption and more about understanding how vulnerabilities emerge – and how institutions can close the gaps before public funds are washed away.
