BSP orders banks to enhance reports on suspicious deals

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has ordered banks and financial institutions to further enhance the filing of suspicious transaction reports (STRs) with the Anti-Money Laundering Council (AMLC) as the Philippines ramps up its fight against money laundering and terrorist financing.

BSP Deputy Governor Chuchi Fonacier said there has been continuous misreporting of fraud schemes and activities by BSP-supervised financial institutions (BSFIs), based on the 2021 STR Quality Review conducted by the AMLC on reports filed from 2017 to 2020.

“In view of the foregoing, BSFIs are reminded to further enhance their suspicious transaction reporting process and ensure proper filing of STRs using the appropriate suspicious indicator or predicate crimes,” Fonacier said.

Based on the review, the AMLC discovered that some covered persons are still misreporting swindling and fraud cases under the predicate offenses under PC16 or fraud and illegal exaction and transactions as well as PC18 or forgeries and counterfeiting.

The financial intelligence unit said these should instead be reported under PC9 or swindling and PC33 or fraudulent practices and other violations under the Securities Regulations Code of 2000.

“The study presents the trend analysis for the covered periods, assesses the technical compliance and investigative value of the STRs, and identifies the reporting gaps and challenges of covered persons, with the overall objective of providing guidance on how to further improve the quality of STRs,” she said.

According to Fonacier, the study also cited certain data quality and system issues including potential over-usage of Suspicious Indicator (SI) 6 or transactions that are similar, analogous or identical to any of the foregoing for defensive reporting, wherein 96 percent pertained to only 11 covered persons.

She added SI6 serves as a catch-all category that covered persons could use if none of the listed predicate crimes or suspicious indicators are applicable.

However, Fonacier said the category has been misused and abused by covered persons as random sampling of STRs showed various misuses of SI6 that are not in accordance with the AMLC Registration and Reporting Guidelines (ARRG).

“(The) use of SI6 could downplay the risk and prioritization of the STRs,” she warned.

She explained covered persons using SI6 with high-risk crimes as additional reason would circumvent the ARRG requirements of mandatory uploading of know-your-customer documents for PC1 or kidnapping for ransom, PC2 or drug trafficking and other related offenses, PC12 or hijacking, destructive arson, and murder, including those perpetrated by terrorists against non-combatant persons and similar targets, PC13 or terrorism and conspiracy to commit terrorism as well as PC14 or financing of terrorism.

The AMLC said STR submissions are expected to growth by approximately 26 percent to 1.2 million in 2021 and by 44 percent to 1.8 million in 2022. Latest data showed STR submissions surged by 63 percent to a record 1.02 million in end-2020 from 622,864 in end-2019 amid the COVID-19 pandemic.

This was faster than the 27 percent increase recorded in 2019 and 2020.

The Philippines is in danger of being included in the gray list of Paris-based Financial Action Task Force (FATF). It was blacklisted in 2000 for failing to address “dirty” money issues paving the way for the enactment of AMLA in 2001.

The country narrowly avoided being placed on blacklist in 2012 as it criminalized terrorist financing and pursued quicker freezing of suspect accounts after being subsequently removed from the blacklist in February 2005.