SEC flags P11.5 billion suspicious deals

MANILA, Philippines — The Philippine securities sector is at medium risk for money laundering and terrorist financing, the Securities and Exchange Commission (SEC) said following an assessment of investment companies, brokers, dealers and other capital market participants in the country.

According to the SEC, there were 774 suspicious transactions totaling P11.5 billion from 2017 to 2019 that were flagged, some of which were found linked to illegal activities.

“Of the total, 4.9 percent was linked to the predicate crime of plunder, 2.5 percent to graft and corrupt practices, 0.9 percent to drug trafficking and related offenses, and 0.6 percent to fraudulent practices and other violations of Republic Act 8799, or the Securities Regulation Code (SRC),” the SEC said.

A majority of the transactions were suspected to have been facilitated for the commission of the predicate crimes within the Philippines, while five transactions were suspected to have been committed in China.

The securities sector attracts various criminal threats, with moderate level of sophisticated tactics and methods to commit offenses, the SEC said.

The sector’s vulnerability comes from cheap availability of internet access, increasing functionality of mobile phones, and technological advancements that speed up transactions, the regulator said.

The rating is based on the 2021 Sectoral Risk Assessment for the Securities Sector, conducted by the SEC with technical assistance from the Asian Development Bank.

The end goal was to identify the main criminal offenses and related threats currently being faced by the securities sector, the sector’s vulnerabilities most likely to be exploited for money laundering purposes, and the potential impact or harm that such activities may cause.

The assessment covered all 304 brokers, dealers, investment houses, underwriters of securities, government securities eligible dealers or GESDs, investment company advisers, mutual fund distributors and investment companies under the supervision of the SEC.

“The securities sector’s risk exposure is likewise medium in terms of vulnerabilities, or characteristics that make it susceptible to criminal exploitation such as nature, size and complexity of business, as well as products and services, among others,” the SEC added.

The SEC said this is because brokers and dealers have to deal with high liquidity and speed at which trades can be made without suspicion, making the sub-sector vulnerable to money laundering.

As a consequence, the sector’s vulnerability to terrorist financing could lead to a diminished level of market integrity and general loss of public trust and confidence, the SEC said.

To address the risks, the SEC will develop regular reporting mechanisms and processes to collect adequate, accurate and up-to-date information and data from the covered persons within the securities sector.

There will also be regular off-site and on-site inspections to take steps to effectively implement the anti-money laundering/combating the financing of terrorism risk-based supervisory model.