Remittance firms, money changers face stricter BSP rules

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Remittance firms and money changers are now facing stricter rules as the central bank adopted an updated comprehensive framework to promote more effective compliance with the implementing rules and regulation of the Anti-Money Laundering Act.

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In a statement on Friday, the Bangko Sentral ng Pilipinas (BSP) said the new rules approved by the Monetary Board aim to enhance its oversight over these MSBs.

One of the most controversial cases of money laundering in Philippine history involved $81 million of stolen funds from the Bangladesh Bank account at the Federal Reserve Bank of New York last year.

Officials of remittance firm Philrem Service Corp.’s were among those charged by the Anti-Money Laundering Council for their supposed role in laundering the $81 million. The money was transferred to the country, by still unknown perpetrators, and deposited in fictitious accounts opened at the Jupiter Street branch of Rizal Commercial Banking Corp. (RCBC).

For failing to comply with anti-money laundering rules, the BSP canceled Philrem’s certificate of registration and fined RCBC a record P1 billion.

Under the new rules approved by the Monetary Board, the BSP said it will regulate all Remittance and Transfer Companies (RTCs) such as Remittance Agents, Remittance Platform Providers and E-money Issuers.

“RTCs and other MSBs are now required to notify the BSP in cases of: commencement of operations, new accreditation of Remittance Sub-agents (RSAs), change of tie-up partner/s, transfer of location, and closure of business,” it said.

The central bank added that MSBs shall be further required to obtain prior regulatory approval in the event of change in ownership or control.

“They shall also submit activity level reports to the BSP. Finally, the new rules require MSBs to register with the Anti-Money Laundering Council Secretariat for purposes of covered and suspicious transactions reporting,” it said.

The regulator said it will adopt a network-based regulatory approach for MSBs since they are numerous but generally interconnected.

As of June 2016, there were more than 18,000 BSP-registered MSBs (5,300 head offices and 12,700 branches), 6,700 of which are also BSP-authoriz ed pawnshops, it noted.

“The MSB in the Philippines is continuously growing and evolving to support the expanding needs of its customers. It now includes, among others, the electronic money business subsidiaries of telecommunication companies,” it added.

Under a network-based regulatory approach, the BSP said an entity that operates an MSB especially a remittance business shall be held responsible for monitoring the operations of its remittance network for compliance with rules and regulations as well as for their accreditation and training.

“The new framework also introduces different classifications of MSBs depending on their average monthly network volume of transactions. There will be corresponding minimum capital requirement for each type. Registration fees and annual service fees shall also be based on the said classification scheme,” it stated.

MSBs are required as part of the registration process, to execute a Deed of Undertaking, which includes, among others, compliance with all the provisions of the Anti-Money Laundering Act of 2001 and its revised implementing rules and regulations as well as the implementing rules issued by the BSP, and adoption of the minimum standards of consumer protection in the areas of disclosure and transparency, protection of client information, fair treatment, effective recourse, and financial education.

Existing MSB operators are given six months from the date of the effectivity of the new regulations to secure BSP registration.

Upon the expiration of the transitory period, the BSP said, all Certificates of Registration (COR) previously issued by the BSP shall be considered automatically canceled. Banks are prohibited from doing business with unregistered MSBs.

The regulator is also limiting the ability of MSBs to transact in cash. Large value pay-outs of more than P500,000 or its foreign currency equivalent, in any single transaction with customers or counterparties, shall only be made via check payment or direct credit to deposit accounts.

Foreign Exchange Dealers (FXDs)/Money Changers (MCs) shall be allowed to sell foreign currencies in the amount not exceeding $10,000 or its equivalent and not to exceed $50,000, or its equivalent per month per customer, it added.

“However, exemption or higher limits may be granted by the BSP upon application if justified by the business model of the FXDs/MCs,” it said.

The BSP noted that major violation/s of specific provisions of the new regulation and non-compliance with the Deed of Undertaking may result in cancellation of the BSP COR or other sanctions depending on the gravity.

“The recently approved MSB oversight framework is part of the package of reforms being instituted by the BSP to promote a more responsive regulatory environment for non-bank financial institutions under the BSP’s jurisdiction,” it said.

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