Fee hikes seen to hit OFW remittances
Overseas Filipino workers (OFWs) are at risk of paying more to send money to their families in the Philippines as foreign banks have become more picky in dealing with local banks as a consequence of the recent $81-million money laundering controversy, the chief of Ayala-led Bank of the Philippine Islands said.
At BPI’s annual stockholders meeting yesterday, cyber security and money laundering issues were raised by several shareholders, indicating that the Bangladesh central bank heist and its impact on the banking system remained top of mind among people.
BPI president Cezar Consing assured shareholders that BPI was unlikely to be used for money laundering. He noted that every week, around 20,000 remittance transactions were coursed through the bank, of which 99.9 percent was flowing to corporate clients which the bank knew very well. Even small remittances addressed to individuals are checked at several levels.
“Foreign banks are beginning to be much more choosy with which local banks to deal with. Fortunately, I can say that this incident has not affected our dealings with foreign banks. If anything, more foreign banks now want to deal with us, in some cases almost exclusively,” Consing said.
But with less players involved, Consing said it’s possible that remittance charges would go up. “That’s one of the very sad effects of this,” he said.
In a press briefing after the stockholders meeting, Consing said foreign financial institution — which typically act as correspondent banks or remittance partners — were previously more prepared to spread out their business among several local banks.
“We see them now concentrating business to fewer Philippine banks. We are a beneficiary of that greater concentration. But there is a downside to that. The downside is it makes flows more difficult. We are a beneficiary of that greater concentration but that is not necessarily good for the system. It is not something I am necessarily cheering about,” he said.
Rizal Commercial Banking Corp. (RCBC)—through which the $81 million money stolen from the central bank of Bangladesh entered the country—earlier apologized for the involvement of its personnel in money laundering and vowed to address any weaknesses in its controls and operations which may have facilitated the scheme.
Consing favors strengthening local regulations to remove the “regulatory arbitrage” or differences with other jurisdications that may be exploited by transnational criminals.
“It’s time that we begin to align ourselves with global best practices,” he said. “Our bank secrecy laws are tougher than most other jurisdictions and our anti money laundering laws are laxer than most jurisdictions. So that combination means that – guess what – Philippine financial institutions become an attractive conduit,” said Consing.
But Consing said another level of regulatory arbitrage was happening at the domestic level – that between the regulated banking system and other financial institutions like money changers. “That’s another area of regulatory arbitrage that probably ought to go away or be lessened. I think one of the outcomes of all these discussions will be initiatives to address those two levels of regulatory arbitrage.”
BPI executive vice president Antonio Paner said having a uniform application of regulations was a good point to improve security across the financial system. He noted that other entities were not as stringent in terms of know-your-customer rule and were not bound to strict documentation and auditing requirements slapped on banks.
On bank secrecy laws, BPI executive vice president Simon Paterno said the local foreign currency deposit unit (FCDU) – created in the 1980s during the country’s debt crisis years where foreign exchange was scarce – was the most protected in terms of deposit secrecy laws.
“The FCDU system was born at that time there was capital flight. The secrecy laws were created so that Filipinos with dollars won’t send them overseas,” Paterno said, noting that such conditions no longer exist today.
On BPI’s operations, Consing said this year was “shaping up very solidly” with the first quarter results looking good. “What you’ll see is continued growth in core intermediation income and you’ll also see reasonably good trading numbers. Our treasury folks have been very astute in piking right moments in time.”