Philippines Central Bank Reminds Reporting Entities to Conduct Strict Due Diligence on DNFBPs

On May 30, 2023, the Bangko Sentral ng Pilipinas (BSP) issued a memo to remind supervised financial institutions (FIs) of their regulatory obligations to perform strong due diligence measures on designated non-financial business and profession (DNFBP) customers. According to the Philippines’ Anti-Money Laundering Council (AMLC), DNFBP sectors subject to the Anti-Money Laundering Act (AMLA) include:

• Dealers in precious metals and stones.
• Lawyers and accountants.
• Real estate brokers and developers.
• Offshore gaming operators.
• Company service providers.

DNFBP Due Diligence

In the memo, supervised FIs are reminded to do the following when conducting customer due diligence (CDD) on DNFPBs: 

• Identify and verify customer identities.
• Establish and confirm beneficial ownership structures based on official documents or other reliable information.
• Review the customer’s Provisional Certificate of Registration (PCOR) and/or the Certificate of Registration (COR) with the AMLC.
• Understand and obtain information related to the purpose and intended nature of the business relationship.
• Conduct ongoing due diligence throughout the business relationship and scrutinize transactions undertaken throughout the business relationship.

The Philippines and the FATF

The Philippines is currently subject to increased monitoring by the Financial Action Task Force (FATF) after several deficiencies were identified in the country’s anti-money laundering (AML) efforts. The country was re-added to the so-called “grey list” in July 2021 after previously being on the black list from 2000 to 2005. 

Among the deficiencies identified by the FATF was the Philippines’ regulation of DNFBPs. Since 2021, the country has been in enhanced follow-up with the global watchdog. In its latest mutual evaluation report (MER) dated July 2022, the FATF noted that while the risk-based supervision of DNFBP sectors was underway, it had yet to be implemented and did not account for casinos, lawyers, and accountants.  

DNFBP Compliance Framework

To underscore the country’s progress toward implementing risk-based supervision of DNFBPs, in 2021, the AMLC published a regulatory issuance outlining anti-money laundering and counter-terrorism financing (AML/CTF) guidelines for the sector. The paper noted general principles and policies, the scope of covered persons, and core responsibilities. 

When building and implementing a compliance framework, the AMLC expects DNFBPs to devise and implement risk-based policies, procedures, processes, and controls designed to prevent and detect potential money laundering and terrorist financing activities. 

Additionally, DNFBPs are expected to:

• Ensure relevant policies, procedures, processes, and controls are communicated to all relevant employees.
• Establish an ongoing employee training program to keep those employees informed of new developments.
• Regularly conduct independent reviews of the firm’s Money Laundering and Terrorism Financing Prevention Program (MTPP).
• Document risk assessments and findings.
• Designate a compliance officer of senior management status with the authority and mandate to ensure day-to-day compliance with its AML/CTF obligations.
• Create a system that will first establish and then record the full identity of their customers and risk assessment results.
• Perform risk-based CDD, requiring enhanced due diligence (EDD) for customers posing a high risk of ML/TF and permitting reduced due diligence for customers posing a low risk.
• Identify and verify the identity of the beneficial owners.
• Establish and record the identities of the immediate family members and entities if publicly known to be related to a politically exposed person (PEP). 

Key Takeaways

The BSP’s memo demonstrates the progress made regarding the country’s effective risk-based supervision of DNFBPs. While the Philippines’ next MER has yet to be announced, firms can keep up-to-date by reviewing the FATF’s global assessment calendar.

For firms looking to enhance their DNFBP due diligence measures, a robust customer screening and monitoring tool can help compliance staff obtain a true picture of who their doing business. By prioritizing a solution that screens against a real-time database of people and companies, firms can streamline their onboarding process and reduce the time and cost spent on alert remediation by up to 80 percent.