How the financial sector can make a difference for our children

Our financial institutions play a troubling role in facilitating online sexual abuse and exploitation of children (OSAEC). It is imperative that these institutions recognize their duty to protect vulnerable children and adopt proactive measures to prevent payments that fuel OSAEC. While the problem is severe, it is not insurmountable. The following presents three concrete actions that financial institutions and regulatory agencies can take to stop this exploitation and safeguard Filipino children.

• Change AML regulations to protect against emerging crimes. The traditional approach to anti-money laundering (AML) regulations and their implementation by financial institutions is primarily backward-looking and focused on dealing with the proceeds of crimes. In the traditional AML formulation, the criminal act has occurred. But this approach falls short in detecting OSAEC. Within financial institutions, prevention efforts against emerging crimes like scams, fraud and estafa are usually managed through anti-fraud operations and not the AML team.

OSAEC usually involves ad hoc, low-value, person-to-person payments made by offenders to fund immediate abuse. This distinction is crucial: to protect children, financial institutions must shift the monitoring paradigm to real-time detection and behavior analysis, which is more aligned to fraud prevention. This approach provides the best chance to stop payments that result in harm to children and provide actionable, timely intelligence to law enforcement.

• Establish a duty of care and build sector-wide standards for accountability. To combat OSAEC, financial institutions should be held to a higher duty of care around protecting children and not being passive platforms that facilitate OSAEC payments. This is similar to expectations for countering terrorism financing.

Establishing a duty of care should start with board-level commitment and policies that make the safe-guarding of children in the Philippines a priority. This should involve integrating child protection measures across products and services, focusing on prevention. In fact, under Republic Act 11930, or the Anti-OSAEC and Anti-CSAEM Act, payment service providers that operate on the internet are required to adopt systems, standards and procedures for “preventing, blocking, detecting and reporting” OSAEC and CSAEM.

Additionally, financial institutions, particularly correspondent banks and partner institutions, could play a critical role in raising standards for protecting children across the Philippines. By setting OSAEC-specific protocols across their networks, correspondent banks can ensure that institutions that deliver the cash to facilitators apply measures to detect and disrupt OSAEC payments.

Furthermore, institutions can apply additional scrutiny or enhanced due diligence when there is payment activity that could indicate OSAEC to confirm the legitimacy of the transaction. Every institution in the payment chain has the opportunity, and thus the duty, to provide a level of defense and protection.

• Expand information sharing and rapid response. Combatting OSAEC requires better information sharing and rapid response mechanisms. Because OSAEC perpetrators may use multiple financial services, it is imperative that information on suspicious transactions and persons be available to financial regulators and law enforcement.

The Philippines should establish a rapid response framework, similar to Australia’s Fintel Alliance or Singapore’s Anti-Scam Center, that would facilitate real-time collaboration between financial institutions, regulators and law enforcement. Such a framework would empower financial institutions to act swiftly to stop the payments and report to law enforcement, improving the speed and effectiveness of safeguarding efforts.

To accomplish this, the Anti-Money Laundering Council is integral, as it plays a vital role in the sharing of information among relevant actors. The AMLC can ensure that high-risk customers are properly identified, potential OSAEC payments are disrupted and law enforcement are alerted to support timely intervention to prevent harm.

Child protection is a social and moral responsibility for the financial sector. Beyond regulatory obligations, BSP-licensed institutions should consider the impact of their business operations on the wider society. Financial institutions that operate under a clear social license are those that focus on being ethical, sustainable and socially responsible. There is perhaps no greater responsibility than to ensure that their business practices can prevent the sexual abuse and exploitation of children. This is more than compliance – it’s a commitment to safeguarding the most vulnerable Filipinos, our children, and ensuring that the payment system does not facilitate their exploitation.

Financial institutions in the Philippines can make a profound difference and emerge as global leaders in the fight against OSAEC. Protecting children from exploitation should not be seen as just another regulatory impost. It is a moral obligation of all institutions given a license to operate, one that demands immediate and comprehensive action.

Why? Because there are nearly half a million Filipino children and millions more vulnerable who can no longer wait!

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Eric Favila is founder and CEO of AMLakas Corporation, a pioneer in delivering advanced software solutions and advisory services to enhance financial crime prevention in the Philippines’ financial sector. Erin Canino is a US-trained attorney and Legal Fellow with International Justice Mission Philippines.