Financial Crime World

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Philippine Regulatory Landscape for Fintech

The Bangko Sentral ng Pilipinas (BSP), the country’s central bank, has been actively promoting fintech innovation in the Philippines. The BSP has issued several circulars and regulations to facilitate the growth of fintech, including Circular 1153, which provides a regulatory sandbox framework for innovative technologies.

Virtual Assets Regulation

The BSP regulates activities involving payment instruments and remittance of funds, while virtual assets that exhibit payment utilities may also be subject to BSP regulations. However, outside of these activities, the regulation of cryptoassets falls under the Philippine Securities Law framework, as applicable.

  • The Securities and Exchange Commission (SEC) is expected to release the DAX/DAO Rules, which will broaden the regulated activities involving cryptoassets to include trading, listing of security tokens, and other products and services related thereto.
  • However, these regulations have been delayed due to the COVID-19 pandemic and the SEC’s focus on alleviating economic and financial stress among Philippine businesses.

Fintech Regulation

The BSP has a sandbox-friendly framework for digital financial services relating to payment systems and blockchain-related technologies. The SEC also has a PhiliFinTech Innovation Office that reviews fintech-related products and services of incorporated or existing domestic entities.

  • Philippine regulators have welcomed a fully digital approach in exercising their regulatory powers and allowing regulated entities to take advantage of digital transformation.
  • However, local regulators are also enforcing stricter measures on governance, IT risk management, AML/CTF, and consumer protection.

Regulatory Hurdles for Foreign Fintech Businesses

Non-resident fintech businesses may face regulatory hurdles in the Philippines. The BSP requires foreign companies to obtain a license or registration before operating in the country. Foreign companies must also comply with Philippine laws and regulations on data privacy, cybersecurity, and other financial services.

Data Privacy Laws and Regulations

The Philippines has enacted the Data Privacy Act (DPA) of 2012, which protects the confidentiality, integrity, and availability of personal data. The DPA requires data controllers to implement adequate safeguards for data privacy and security.

  • Foreign fintech businesses operating in the Philippines must comply with the DPA’s requirements on data transfer, including obtaining consent from data subjects and implementing adequate safeguards for data privacy and security.

Cybersecurity Laws and Regulations

The Philippines has enacted several laws and regulations to combat cybercrime, including the Cybercrime Prevention Act of 2012, the Access Device Regulation Act of 1998, and the Electronic Commerce Act of 2000. Fintech businesses operating in the Philippines must comply with these laws and regulations to prevent cyber threats.

Sanctions for Non-Compliance

The DPA provides for separate penalties for various violations, including fines and imprisonment. The BSP and other regulatory bodies may also impose sanctions on fintech businesses that fail to comply with Philippine regulations.

In conclusion, the Philippines has a growing fintech landscape with opportunities for innovation and growth. However, fintech businesses operating in the country must comply with strict regulations on data privacy, cybersecurity, and financial services to avoid sanctions and reputational damage.