Financial Crime World

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FINANCING COMPANIES AND LENDING COMPANIES IN THE PHILIPPINES: A SECTORAL RISK ASSESSMENT

A recent study on the financing companies and lending companies in the Philippines has revealed that these entities are vulnerable to money laundering and terrorist financing (ML/TF) risks. The assessment was conducted by a reputable organization and covered 3,302 SEC-registered lending companies operating in the country.

Key Findings

  • Only 18 out of 165 “covered persons” have foreign equity participation exceeding 40%.
  • 152 lending companies have paid-up capital of PHP 10 million or more.
  • The total assets of lending companies (including both covered and non-covered persons) reached PHP 11.5 billion as of December 2019, with an average value of assets per entity of PHP 9.9 million.

Risks and Vulnerabilities

  • The study identified several risks and vulnerabilities, including:
    • Lack of institutional risk assessment and management.
    • Inadequate Know Your Client and Customer Due Diligence.
    • No procedures and policies for suspicious transaction reporting.
    • Inadequate training and dissemination.

Conclusion

The overall vulnerability of lending companies to ML/TF is assessed as MEDIUM. The study highlights the need for these entities to strengthen their risk management systems, including conducting institutional risk assessments and implementing effective Know Your Client and Customer Due Diligence measures.

Recommendations

  • Lending companies should conduct regular risk assessments and implement effective risk management strategies.
  • Financial institutions should ensure that their employees are adequately trained on anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations.
  • The government should provide guidance and support to lending companies in implementing AML/CFT measures.

Final Thoughts

The study emphasizes the importance of financial institutions, particularly lending companies, in preventing ML/TF. It is essential for these entities to prioritize risk management and ensure that their operations are transparent and accountable.