Financial Crime World

FINANCING COMPANIES AND LENDING COMPANIES: A SURVEY OF NET WORTH

A recent survey conducted by the Securities and Exchange Commission (SEC) has revealed some interesting insights into the net worth of financing companies in the Philippines.

Net Worth of Financing Companies

The survey found that a significant proportion of financing companies have a net worth of less than PhP 10 million. In fact, only 53 out of 165 covered persons (lending companies) have a paid-up capital of more than PhP 10 million.

Characteristics of Lending Companies

The survey also revealed that most financing companies are small to medium-sized enterprises with a limited number of employees. Only 15 out of 18 covered persons surveyed indicated that their transactions are complex, while the majority of non-covered persons responded that they were involved in simple transactions.

Size and Complexity of Business

The survey found that there is a significant gap in terms of the size and complexity of business between covered persons (lending companies) and non-covered persons. Covered persons have an average value of assets per entity of PhP 9.9 million, while non-covered persons have an average value of assets per entity of PhP 4.1 million.

Products and Services Offered

In terms of products and services offered by lending companies, the survey found that they primarily offer:

  • Personal loans
  • Business loans
  • Financial leasing of movable property
  • Financial leasing of immovable property

Vulnerability to Money Laundering and Terrorist Financing (ML/TF)

The overall vulnerability of financing companies for ML/TF is assessed as MEDIUM. The SEC has identified several vulnerabilities in the sector, including:

  • Inadequate Know Your Client and Customer Due Diligence
  • No institutional risk assessment conducted by lending companies
  • No procedures and policies for suspicious transaction reporting

Measures Implemented to Address Vulnerabilities

To address these vulnerabilities, the SEC has implemented several measures, including:

  • Supervision of 165 covered persons (lending companies) as “covered persons” for AML/CTF purposes
  • Extension of deadlines for submission of General Information Sheet (GIS) in 2020 due to the COVID-19 pandemic

Conclusion

The survey is part of the SEC’s effort to assess the risks and vulnerabilities in the financing sector and to ensure that they are properly regulated and supervised to prevent money laundering and terrorist financing.