Combating Financial Terrorism in the Philippines: SEC Warns of Medium-Risk Threat
The Securities and Exchange Commission (SEC) has issued a warning about a medium-risk threat of financial terrorism in the country, citing vulnerabilities in the securities sector.
Vulnerabilities in the Securities Sector
According to a recent report, the SEC assessed the risk of money laundering and terrorist financing in the securities sector, giving it an overall “medium” rating. The assessment covered 304 brokers, dealers, investment houses, underwriters of securities, government securities eligible dealers (GESDs), investment company advisers, mutual fund distributors, and investment companies under the supervision of the SEC.
High-Risk Transactions
The report revealed that the securities sector faces a medium threat of criminal exploitation, with 774 suspicious transaction reports (STRs) submitted to the Anti-Money Laundering Council (AMLC) from 2017 to 2019. The transactions were worth PHP11.5 billion, with majority suspected to have been facilitated for the commission of predicate crimes within the Philippines.
Criminal Tactics and Methods
The SEC noted that the sector attracts various criminal threats, including sophisticated tactics and methods, and is vulnerable to exploitation due to its nature, size, and complexity. The report highlighted the use of internet access, mobile phones, and technological advancements as tools for criminals to escape detection or hide illegal activities.
Measures to Address Risks
To address these risks, the SEC will:
- Develop regular reporting mechanisms and processes to collect accurate information and data from covered persons in the securities sector.
- Implement an anti-money laundering/combating the financing of terrorism (AML/CFT) risk-based supervisory model through regular off-site and on-site inspections.
- Issue specific AML/CFT guidance to the securities sector and conduct regular outreach activities, including seminars, workshops, conferences, and coordination meetings with the AMLC and Bangko Sentral ng Pilipinas (BSP).
Consequences of Terrorist Financing
The national and international security consequences of terrorist financing in the securities sector are low due to the relatively low level of activity. However, the SEC warned that should financial crimes occur, it could attract criminals seeking a safe haven for their illegal activities.
Urging Immediate Action
In light of these findings, the SEC is urging covered persons in the securities sector to take immediate action to mitigate risks and ensure compliance with anti-money laundering and combating the financing of terrorism regulations.