Forex deals, remittances face BSP scrutiny

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) said yesterday it won’t tolerate banks violating the rules on transactions with foreign exchange dealers, money changers, and remittances companies amid the ongoing investigation on the involvement of one of the country’s largest banks in the $81 million bank heist.

BSP deputy governor Nestor Espenilla Jr. has issued a memorandum reminding all banks on sound risk management practices when dealing with foreign exchange dealers, money changers, and remittance agents.

Espenilla said violations of the rules provided under Part 8 or the Anti-Money Laundering Regulations of the Manual of Regulations for Banks should be subject to applicable sanctions and penalties.

Enforcement actions against the board of directors, senior management, and line officers include written reprimand, suspension or removal from office, and disqualification from holding any position in any covered institution by the BSP.

In addition, the BSP may also impose monetary penalties computed in accordance with the existing regulations and in coordination with the Anti Money Laundering Council (AMLC).

The BSP, AMLC, and the Senate Blue Ribbon Committee are conducting separate investigations on the laundering of the $81 million stolen by hackers from the account of the Bangladesh Bank at the Federal Reserve Bank of New York in February that found its way into the country via the Rizal Commercial Banking Corp. (RCBC).

Espenilla reiterated banks should take extra caution and vigilance in dealing with foreign exchange dealers, money changers, and remittance agents.

Espenilla said banks should perform enhanced due diligence upon onboarding and during transaction monitoring, consistent with the Manual of Regulations for Banks (MORB) and the banks’ procedures as provided under its Money Laundering and Terrorist Financing Prevention Program (MLPP).

The BSP official explained the MLPP of banks should contain appropriate risk management practices to ensure that money laundering and terrorist financing risks arising from dealings with foreign exchange dealers, money changers and remittance agents are effectively identified, assessed, monitored, mitigated, and controlled.

When dealing with remittance agents as remittance partners or tie up or if the accounts are being used to facilitate their business, the BSP said banks have the ultimate responsibility for conducting appropriate due diligence necessary to the relationship to ensure that it will not be used as channel for money laundering or terrorist financing activities.

Espenilla added banks should conduct risk assessment of the customers of BSP-registered foreign exchange dealers, money changers, and remittance agents considering relevant factors such as business operations, types of customers, product or service availed, distribution channel, jurisdictions they are exposed to and expected account activity.

In performing enhanced due diligence, he reiterated banks should evaluate and understand the business operations and customer profile of foreign exchange dealers, money changers, and remittance agents and at the same time obtain the purpose of the bank account and anticipated account activity.

Espenilla said banks should also review the anti-money laundering and combating the financing of terrorism program as well as the measures adopted by the foreign exchange dealers, money changers, and remittance agents to assess whether they have appropriate processes to identify, measure, manage and control money laundering or terrorist financing risks.

“Unsatisfactory result of the due diligence process shall be a ground for denying the business relationship,” Espenilla said.

Espenilla said, banks should perform continuing account and transaction monitoring.

He said banks should proactively monitor transactions of foreign exchange dealers, money changers and remittance agents, based on appropriate parameters or alerts scenarios that capture their financial profile and behavioral account activities.

Similarly, he added, there should be transaction monitoring system for personal accounts of the owners or proprietors.

Earlier, BSP Governor Amando Tetangco Jr.  vowed to take appropriate enforcement actions against erring individual banks and their personnel that could affect the operationally sound and fundamentally strong Philippine banking system.

 “The BSP’s track record demonstrates the will to decisively act by meting sanctions on erring bank directors and officers, restricting imprudent activities, prohibiting unsafe or unsound practices, and even shutting down banks,” he said.

Tetangco said the strength and soundness of the banking system is underpinned by the efforts of the BSP and other government agencies to pursue financial stability as a prudential objective focusing specifically on the potential build up of systemic risks.

“The issues that we have been assessing covers quite a bit of ground, but they are inter-related by the common strand that they can create comingled risks that can be systemic in nature,” he said.