Financial Crime World

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Customer Due Diligence: A Must for Financial Institutions in the Philippines

As part of the country’s efforts to combat money laundering and terrorist financing, the Anti-Money Laundering Council (AMLC) has implemented strict regulations for financial institutions. In this article, we will delve into the importance of Customer Due Diligence (CDD) and Know Your Customer (KYC) in the Philippines.

Reporting Suspicious Transactions

Financial institutions are required to report suspicious transactions to the AMLC. It is essential to have a comprehensive understanding of Anti-Money Laundering (AML) regulations and suspicious transactions to ensure compliance with these requirements.

Training and Record Keeping

  • Financial institutions must train their staff on AML regulations and suspicious transactions.
  • Accurate records of all customer transactions are also required.

Cooperation with Authorities

It is crucial for financial institutions to cooperate fully with authorities in investigations and provide necessary information to support these efforts.

Transaction Monitoring

Implementing transaction monitoring systems is essential for detecting and preventing money laundering activities. This includes:

  • Monitoring cash transactions
  • Electronic funds transfers
  • Other types of transactions that may be suspicious

Regular Audits

Financial institutions must conduct regular audits to ensure compliance with AML regulations and detect any potential money laundering activities.

Risk-Based Approach

Financial institutions should adopt a risk-based approach when it comes to customer due diligence. This involves:

  • Categorizing customers based on their level of risk
  • Implementing measures accordingly

Who’s Affected?

The following entities are required to register in the AMLC reporting procedure:

  • Banks
  • Offshore banking units
  • Quasi-banks
  • Trust entities
  • Non-stock savings and loan associations
  • Pawnshops
  • Foreign exchange dealers
  • Money changers
  • Money remittance or transfer companies
  • Electronic money issuers
  • All other persons and their subsidiaries and affiliates supervised or regulated by the Bangko Sentral ng Pilipinas (BSP)

What are “Covered Transactions”?

A covered transaction refers to a financial transaction that meets certain criteria set by AML regulations. These transactions require financial institutions to submit reports to relevant authorities, in efforts to monitor and prevent money laundering activities.

Penalty for Money Laundering

The crime of money laundering is punishable by imprisonment ranging from seven (7) to fourteen (14) years and a fine of not less than PHP 3,000,000.00 but not more than twice the value of the monetary instrument or property involved in the offense.

FATF “Grey List” Implications

The Philippines’ inclusion on the FATF “grey list” has significant implications for the country’s financial and economic standing. These include:

  • Increased scrutiny from international financial institutions and regulatory bodies
  • Stricter due diligence from financial institutions dealing with entities from grey-listed countries
  • Challenges in accessing international financial markets
  • An overall negative impact on the economy

Solutions

To ensure compliance with AML regulations, it is essential for financial institutions to adopt a comprehensive approach that includes:

  • Customer identification
  • Verification
  • Due diligence measures

The Sumsub team has compiled all the essential tools, checks, data, and documents required for the Philippines, providing links to pertinent laws for reference.

FAQs

  • Is the Philippines a high-risk country for money laundering?
    • Yes.
  • What is the AMLA in the Philippines?
    • The Anti-Money Laundering Act (AMLA) of 2001 is the key country’s AML regulation.
  • What are “covered transactions” in the Anti-Money Laundering Act?
    • A “covered transaction” under the AMLA is any transaction involving funds exceeding PHP 500,000.00 within a single banking day.
  • What is the penalty for money laundering in the Philippines?
    • According to the AMLA, the crime of money laundering is punishable by imprisonment ranging from seven (7) to fourteen (14) years and a fine of not less than PHP 3,000,000.00 but not more than twice the value of the monetary instrument or property involved in the offense.