The Monetary Board recently approved the amendments to BSP’s AML/CFT (Anti-Money Laundering-Combating the Financing of Terrorism) regulations. This is part of the BSP’s ongoing efforts to strengthen the financial system’s safeguards against money laundering (ML) and terrorist financing (TF) balanced against the objective of also promoting financial inclusion of the unbanked.
Primary considerations in effecting the amendments were the latest Revised Implementing Rules and Regulations of the Anti-Money Laundering Act, as amended, which took effect on 7 January 2017; lessons learned from recent ML/TF cases; and the latest Financial Action Task Force (FATF) Recommendations and Guidance Papers, particularly on applying a risk-based approach to AML/CFT standards and striking balance between financial integrity and financial inclusion.
The revised regulations emphasize the importance of a sound ML/TF risk assessment, the foundation of a proportionate, risk-based approach, to appropriately focus greater efforts and resources on areas posing higher risks, while reducing these for low-risk transactions. Requirements for group-wide AML compliance function and monitoring systems are incorporated for a holistic management and prevention of ML/TF risks.
The amendments feature refinements in the conduct of customer due diligence, more pragmatic definition of “official document” and the use of other reliable, independent source documents, data or information for customer identification and verification. The new rules likewise introduced the concept of a “restricted account” to cater to targeted unbanked sector, wherein minimal customer information are required subject to certain conditions, such as constraints in terms of activity. These will provide much greater flexibility in on-boarding unbanked customers, especially in rural areas where official IDs are not prevalent.
With the advent of new technologies in the financial system, the new rules recognize and allow the use of information and communication technology in the conduct of customer identification subject to implementation of appropriate measures to manage attendant risks.
Finally, to realize desired change towards effective implementation, escalation of supervisory enforcement action is introduced in cases of heightened AML/CFT supervisory concerns as reflected in the overall AML risk rating of the covered person.
To facilitate transition, covered persons are allowed six months from effectivity of the revised regulations to update their AML/CFT policies.