Financial Crime World

Philippines Tightens Noose on Digital Currencies to Prevent Money Laundering Risks

In an effort to prevent money laundering and ensure financial stability in the country, the Bangko Sentral ng Pilipinas (BSP), the Philippines’ central bank, has released new guidelines for virtual asset service providers (VASPs).

New Requirements for VASPs

Under the framework, VASPs will be required to apply for a license, known as a “certificate of authority,” before operating as a money sending business. The BSP has also outlined strict requirements for VASPs, including:

  • Aligning with existing rules for financial service providers in areas such as:
    • Liquidity and operational risk
    • IT risk
    • Internal controls
    • Consumer protection
    • Anti-money laundering
  • Minimum capital requirement of 50 million Philippine pesos (approximately $1 million) for VASPs that provide custody services
  • A lesser amount of 10 million pesos (around $208,000) for those that do not provide custody services

Balancing Financial Innovation with Safeguards

The BSP’s governor emphasized the importance of balancing financial innovation with safeguards against money laundering risks. While virtual assets have the potential to revolutionize the delivery of financial services, any benefits must be weighed against the potential for use in illegal activities.

New Guidelines for VASPs

Under the new guidelines, VASPs will also be responsible for:

  • Conducting their own customer due diligence
  • Treating cryptocurrency transactions as cross-border wire transfers
  • Keeping participant data for transactions exceeding 50,000 pesos (approximately $1,000)

Additionally, suspicious activity or single transactions of 50,000 pesos (around $10,000) will require extra due diligence and payout restrictions.

International Standards

The guidelines are based on international standards issued by the Financial Action Task Force (FATF), a global authority on anti-money laundering and combating the financing of terrorism. The BSP aims to ensure that the country’s financial system is protected from money laundering risks while still allowing for innovation and growth in the digital currency space.