Needle in a haystack

Is the Anti-Money Laundering Council (AMLC) engaging in a witch hunt?

This is how many domestic corporations registered with the Securities and Exchange Commission (SEC) feel as the latter now requires all corporations, whether stock or non-stock, to disclose their ultimate beneficial owners.

Under SEC Memorandum Circular no. 17, all corporations are now required beginning last Jan. 1, to disclose their beneficial owners in their respective general information sheets (GIS). In revising the GIS form, the SEC is fulfilling its mandate to assist in the implementation of Republic Act no. 9160 or the Anti- Money Laundering Act, specifically three Anti-Money Laundering Council regulatory issuances issued November last year which outlines the guidelines in identifying beneficial ownership.

According to the SEC, effective March 1, it will only accept the new GIS form which includes the beneficial ownership information.

Beneficial owner is defined as any natural person who either ultimately owns or controls the corporation, or has ultimate effective control over the corporation.

Ultimate effective control, meanwhile, is defined under SEC Memorandum Circular no. 17, as any situation in which ownership or control is exercised either through actual or a chain of ownership or by means other than direct control. This may be achieved through any of the following: first: direct or indirect ownership of at least 25 percent of the voting shares or capital of a legal person, arrangement, understanding, relationship or otherwise has or shares voting power which includes the power to vote, and investments returns or power including the right to dispose of such shares; second: the ability to elect a majority of the board of directors; or, third: any situation where a person has the ability to exert dominant influence over the management or policies of the corporation, or over the board of directors to act in accordance with his directions in conducting the affairs of the corporation.

In simpler terms, beneficial ownership means that such owner, even if he does not have the legal title to the shares in a corporation, still exercises attributes of share ownership such as the right to vote, the right to receive dividends, and the power to control and influence how the corporation is supposed to be managed.

Before, only publicly listed companies are required under the Securities Regulation Code to disclose their beneficial ownership according to certain thresholds (of five and 10 percent). Banks are also required to disclose to the Bangko Sentral ng Pilipinas their beneficial owners and related interests.

Now why would any stockholder hold legal title in the shares, but not the beneficial ownership, or to put it another way, why would anyone who is not recorded in the books of the corporation as the owner of the shares be the one to enjoy the benefits of ownership?

According to Dun & Bradstreet, not everybody wants to be identified as the beneficial owner. It noted that many criminals will deliberately use the opacity of a corporate vehicle to hide their identity, the true purpose of the account, and the source or use of funds or property associated with the corporate vehicle. It can be either for tax avoidance purposes, to prevent authorities tracking the proceeds of individual or corporate crime such as money laundering or bribery, or corruption, or it might even pull a cloak over terrorism activities.

Of course, hiding beneficial ownership is also one way of circumventing nationalization laws or laws that limit foreign ownership in certain business activities or industries.

Many corporate secretaries are now concerned about their upcoming GIS submissions, since the SEC requires them to fill out the GIS form to the best of their knowledge, requiring them to go out of their way to find out the true beneficial ownerships of their respective corporations even if their principals refuse to disclose such to them. In the form, these corporate secretaries have to subscribe and swear under penalty of perjury, and of course, possible administrative sanctions, to the truthfulness and correctness of the contents of the GIS.

But then, this requirement is not unique to the Philippines. This is also said to be a requirement for the country to remain in good standing in so far as the bodies like the of the Financial Action Task Force on Money Laundering (FATF), the anti-money laundering watchdog, and the Asia-Pacific Group on Money Laundering are concerned.

Leading fintech grows further

Fexco Easydebit, one of the country’s leading and most innovative fintech solutions, is marking a significant period of growth, having processed over P1 billion in transactions since its launch in 2017.

The growth is further reflected in increases in cash withdrawal amounts, which were up 466 percent in 2018 compared to 2017, and in transaction volume which grew 375 percent last year.

EasyDebit is a unique service that uses a mobile point of sale (or mPOS Pin Entry Device) and a mobile phone allowing customers in the Philippines to withdraw cash using their ATM card at local accredited merchants, including payment and remittance centers, retailers, rural banks and cooperatives instead of having to go to an ATM.

EasyDebit is a ‘plug and play’ solution requiring minimal installation for merchants who simply download the EasyDebit Mobile App. According to company officials, the solution has the capacity to reach over 100 million people, many of whom are disconnected from the limited ATM infrastructure in the Philippines.

Through merchant uptake and participation, they said that EasyDebit promotes financial inclusion by providing more secure access to cash withdrawal for the millions of unbanked Filipinos. Uptake of EasyDebit increased by 100 percent in 2018 and the solution is now live with over 700 merchants across the country.

Fexco Philippines CEO Ann Chan Foley noted that 2018 represents a significant year for the business which has seen hugely positive growth trends across the county in terms of transaction volume, value and merchant growth, demonstrating the robustness of the solution.

Foley said that they are optimistic that this growth will continue this year as they further expand the EasyDebit network to help reach more unbanked and underserved Filipinos.

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