Philippines: BSP tightens guard vs dirty money, terrorist financing

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has adopted a new money laundering and terrorist risk assessment framework for banks and other supervised financial institutions as part of efforts to avert the inclusion of the Philippines in the list of countries with massive sums of alleged dirty money by the Paris-based Financial Action Task Force (FATF).

BSP Deputy Governor Chuchi Fonacier said the Monetary Board issued Resolution 1461 on Nov. 13 approving the adoption of the money laundering/terrorist financing risk assessment system (MRAS), which replaces the existing anti-money laundering risk rating system or ARRS for BSP-supervised financial institutions (BSFIs).

“The MRAS is a tool to assess the inherent money laundering or terrorist financing and proliferation financing risk and the quality of risk management system to determine the net money laundering/terrorist financing/proliferation financing risk of BSFIs, taking into account their risk and context, business models and operations, among others,” Fonacier said.

She also said the new system would be implemented along with the supervisory assessment framework (SAFr).

According to Fonacier, the MRAS will use a four-point rating scale such as high or those with excessive level of inherent risk related to identified factors, above average for those with substantial level of inherent risk related to identified factors, moderate for those with manageable level of inherent risk related to identified factors, and low for those with marginal level of inherent risk related to identified factors.

Under the framework, the assessment will begin with understanding the level of the risks of BSFIs or the extent of its vulnerabilities to money laundering/terrorist financing/proliferation financing activities, arising from its business and relationships.

The factors to be considered in the assessment include the total size and value of the relevant products or services, nature of products or services, client base profile, delivery channels, as well as geographical location of its offices, customers and counterparties.

The MRAS evaluates the inherent risk or intrinsic money laundering/terrorist financing/proliferation financing risks arising from BSFIs business and relationship, as well as quality of risk management, self-assessment system and net risks.

A four-point rating scale will be used to assess the risk management of BSFIs such as: strong or highly effective and needs minor improvements, acceptable or substantial level of effectiveness, inadequate or needs major improvements, and weak or needs fundamental improvements.

Factors to be considered in the quality of risk management include the effectiveness of board and senior management oversight and effectiveness of internal controls on key anti-money laundering/terror financing processes.

The BSP has vowed to deploy appropriate enforcement actions to promote compliance with AML/CFT laws and regulations, and bring about timely corrective actions.

“Enforcement actions shall be implemented as warranted, such as in cases of excessive risks that are not adequately managed, presence of serious weaknesses in the BSFI’s risk management system and violations of AML/CFT laws or BSP regulations,” it said.

BSP Governor and AMLC chairman Benjamin Diokno earlier said the gray listing of the country could still be averted as President Duterte certified Senate Bill 1412 and House Bill 6174, pushing amendments to Republic Act 9160 or the Anti-Money Laundering Act (AMLA) as urgent.

“If any of the proposed amendments are not passed and implemented before February, the Philippines will be included in the FATF gray list. We remain optimistic that gray listing can be averted as no less than the President himself has certified the bills as priority over other bills,” Diokno said.

The FATF would decide in June whether or not the Philippines would be included in the watchdog’s gray list.