State of Financial Crime 2023 Report

Philippines Central Bank Proposes New Rules for Reporting Financial Crime Risk Events

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The Bangko Sentral ng Pilipinas (BSP) has released a draft circular outlining proposed amendments to the country’s money laundering (ML), terrorist financing (TF), and proliferation financing (PF) risk reporting and notification requirements for banks and non-bank financial institutions. 

The BSP is proposing that supervised financial institutions (BSFIs) must notify the central bank within 24 hours from the “date of knowledge of any significant ML/TF/PF risk event.” BSFIs include:

  • Banks
  • Quasi banks including their affiliates and subsidiaries
  • Offshore banking units
  • Stand-alone trust corporations
  • Non-stock savings and loan associations
  • Money service businesses 
  • Electronic money issuers
  • Non-bank electronic money issuers
  • Virtual asset service providers
  • Stand-alone credit card issuers

Another notable amendment requires covered entities to submit an annual anti-money laundering/countering terrorism and proliferation financing reporting package (ARP). According to the circular, the ARP reporting requirement must be submitted to the BSP within 30 banking days after the end of the reference year.

The draft circular is currently open for stakeholders’ comments until January 31. 

ML/TF/PF Risk Event Report

Under section 911/911Q of the Manual of Regulations for Banks

(MORB)/Manual of Regulations for Non-Bank Financial Institutions (MORNBFI), BSFIs are currently required to develop sound risk management policies and practices to ensure ML/TF risks are identified, assessed, monitored, mitigated, and controlled. According to the circular, the BSP is seeking to amend section 911/911Q to include further details related to risk assessments, specifically looking at the timely collection and analysis of relevant data.

The central bank outlines that to ensure the integrity of the financial system and the soundness of BSFIs, covered entities should “submit regular, and event-driven ML/TF/PF-related reports” to the central bank.

According to the BSP, an ML/TF/PF risk event is reportable if the BSFI’s risk assessment highlights a material impact on the firm and/or the financial system. This could include affecting many customers or counterparties with a cross-border element or those covered in adverse media reports.

To ensure compliance with these new requirements, the circular notes that the BSP will impose “high penalty level monetary sanctions” on entities that fail to adhere to their obligations.  

The Philippines and the FATF

In June 2021, the Financial Action Task Force (FATF) placed the Philippines under increased monitoring for strategic deficiencies in their anti-money laundering efforts. Among the areas identified by the FATF in need of improvement included:

  • Demonstrating an increase in the use of financial intelligence and an increase in ML investigations and prosecutions in line with risk
  • Showing an increase in the identification, investigation, and prosecution of TF cases

In a statement issued on June 26, the Anti-Money Laundering Council (AMLC) responded to FATF’s announcement, saying, “Given the recent identification of the Philippines as Jurisdiction under Increased Monitoring with serious AML deficiencies, the relevant government and law enforcement agencies’ sustained pledge to implement the 18 action plans within the prescribed timelines will be essential to the country’s removal from such list.”

The BSP’s January circular points to action being taken to address these deficiencies ahead of the FATF’s deadline for the Philippines’ next progress report due on February 1.  

Key Takeaways

While the circular is not dated, compliance staff should ensure they understand the BSP’s proposed requirements and consider what processes may need to be implemented to meet their updated obligations. 

Under the section “Procedures for reporting to Bangko Sentral” of the circular, the BSP notes that it may require BSFIs to provide additional information, documents, and/or updates as necessary until the reported risk event is resolved. To ensure any overseeing examination goes smoothly, compliance teams should also ensure their record-keeping practices and policies meet legal requirements.

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Originally published January 12, 2023, updated January 13, 2023

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