Monetary authorities have urged banks to take ‘extra caution’ and practice sound risk management when dealing with foreign exchange dealers, money changers and remittance agents to prevent money laundering and terrorist financing activities.
In a circular released Wednesday, the Bangko Sentral ng Pilipinas (BSP) said “banks dealing with foreign exchange dealers, money changers, and remittance agents should take extra caution and vigilance and shall perform enhanced due diligence, upon onboarding and during transaction monitoring, consistent with regulations and the banks’ procedures as provided under its Monetary Laundering and Terrorist Financing Prevention Program (MLPP).”
The BSP issued the circular amid ongoing investigations into a money laundering scandal involving $81 million stolen from Bangladesh Bank by hackers, all reported to have been channeled through the Rizal Commercial Banking Corp. (RCBC), remittance firm PhilRem, and several casinos.
The central bank said the money laundering and terrorist financing prevention should contain appropriate risk management practices to ensure that money laundering (ML) and terrorist financing (TF) risks arising from dealing with forex dealers (FXDs), money changers (MCs) and remmitance agents (RAs) are effectively identified, assessed, monitored, mitigated and controlled.
The BSP said specific policies and procedures the banks should follow include, among others: Banks shall only deal with FXDs, MCs and RAs registered with the BSP; when dealing with RAs as remittance partners or tie up or if the accounts are being used to facilitate their business, banks have the ultimate responsibility for conducting appropriate due diligence necessary to the relationship to ensure that it will not be used as channel for ML/TF activities; and banks shall conduct risk assessments of their FXD, MC, and RA customers.
Lenders were also reminded to practice enhanced due diligence by obtaining proof of registration with the BSP from their FXD, MC, and RA customers and periodically updating registration status; evaluate and understand the business operations and customer profile of the FXDs, MCs and RAs; review the anti-money laundering and combating the financing of terrorism (AML/CFT) program and measures adopted by the FXDs, MCs and RAs; require submission of proof of registration with the Anti-Money Laundering Council to comply with the reporting requirements; obtain additional information and conduct validation procedures; and obtain senior management approval for establishing business relationships in accordance with the bank’s risk management policy.
“Unsatisfactory result of the due diligence process shall be a ground for denying the business relationship,” the BSP stated.
In addition, the central bank said banks must perform continuing account and transaction monitoring, which includes but is not limited to proactively monitor FXDs, MCs and RAs transactions based on appropriate parameters or alert scenarios; implement robust system to identify unusual movements of funds of transactions of the FXDs, MCs and RAs; periodically update the counterparty risk assessment; and establish policies and guidelines that define criteria and grounds, such as violation of AML/CFT procedures, for terminating the business relationship.
In addition, the BSP reminded banks that violation of the rules shall be subject to applicable sanctions and penalties under the Manual of Regulations for Banks.