The Bangko Sentral ng Pilipinas (BSP) said it is addressing the adverse impact of foreign banks’ de-risking activities to remittance costs, while conducting its own evaluation of the Philippines’ money laundering and terrorist financing vulnerabilities and weaknesses.
This was the message of BSP Governor Amando Tetangco Jr. on Thursday during the Financial Inclusion Summit 2016 organized by the BPI Foundation, the corporate social responsibility arm of the Bank of the Philippine Islands (BPI).
In his speech, Tetangco said there are many challenges and opportunities in providing access to financial services to migrant workers and their families.
However, he said, the foremost challenge is the adverse impact on remittance costs and flows from the closure of accounts of several money transfer operators (MTOs) by correspondent banks, who are seeking to limit their exposure to possible channels for money laundering and other financial crimes.
“This is a de-risking strategy largely driven by the business decisions of foreign banks, weighing the risks and benefits of dealing with remittance companies. This has been going on in recent years, and has not been helped by the present money laundering case here,” the BSP chief explained.
He pointed out that the perception that MTOs or MSBs can be possible channels for money laundering needs to be addressed, requiring the authorities to strengthen the anti-money laundering and anti-terrorist financing regime in the Philippines.
Tetangco stressed that the BSP as early as 2014 started raising concerns on the adverse impact of de-risking with relevant international institutions, including the Financial Action Task Force, Alliance for Financial Inclusion, the Global Partnership for Financial Inclusion of the G20, the US Department of Treasury, the Financial Stability Board, and the World Bank.
“We are talking with international standard setters… to explain to them what the impact of de-risking can potentially be as far as remittances in general, as well as the individual interest of overseas workers,” he said.
In addition, the BSP governor said the central bank is gathering data and closely coordinating with concerned stakeholders for a more evidence-based response.
Among others, he said there is an ongoing National Risk Assessment (NRA), which is an inter-agency effort to evaluate the country’s money laundering and terrorist financing vulnerabilities and weaknesses.
This will enable the government to sharpen its focus in ensuring effective enforcement of international standards against money laundering and terrorist financing, Tetangco said.
“This is to determine where improvements in our money laundering and terrorist financing system can be introduced to strengthen the framework,” he added.
Nevertheless, the BSP chief believes that remittances will continue to be a significant source of funding for economic activities.
He said remittances have been a dependable source of strength for the Philippine economy, noting that in the last 10 years, from 2005 to 2015, overseas Filipino workers have sent over $228 billion in remittances (personal and cash) to the country.