In the wake of money laundering scandal, PH financial system tightens compliance

(First of a series)

“Money remittance transactions are governed by AMLA (Anti-Money Laundering Act) provisions and customer agrees to comply therewith, including disclosure and sharing of personal information,” the fine print on the back of a money transfer confirmation receipt read.

“Customers warrant that all the required information given, including proof of personal identification, are true and correct. (The company) reserves the right to refuse acceptance if it finds the transaction violative of AMLA and other pertinent laws,” it added.

Thus read the terms and conditions on the back of an acknowledgement receipt of LBC Express Inc. which Joey Reyes received after he sent P3,000 to his hometown in Mindanao for his father’s medicines.

Emerging from a small LBC office in a wet market in Quezon City, the call center worker admitted he did not read the eight-item list in fine print on the back of the receipt he signed. But he did notice that the money courier’s employees had become stricter in requiring customers to affix more signatures on the remittance forms.

It is a phenomenon he also noticed in other pawnshop-based cash transfer firms which he uses to send payments to merchants whenever he buys items online.

Reyes may not know it, but the minor inconveniences he and others like him are experiencing—more forms of official identification, affixing more signatures on receipts and providing more personal data on client information sheets—are a direct result of the $1-billion cyber heist attack on the Bangladeshi central bank early this year, $81 million of which was successfully laundered via the Philippine financial system.

“Before, I would have to sign once or twice on the remittance form,” Reyes said. “But now, I have to sign four times: two in front, and two at the back of the form.”

He also noticed that midway through 2016, the employees of the remittance firm he frequents to send money to his parents in the province finally insisted on him filling up a detailed customer information form, which was necessary for him to be given a “frequent client ID.” This was optional in recent years but now a necessity to be able to send cash through this firm.

“I know my personal details are recorded in their system since long ago, so it was easy to send money,” he said. “But around June or July of this year, they insisted that I fill up and sign some forms, even if they already had my records in this branch.”

The stricter enforcement of so-called “KYC” rules—banking jargon for “know your customer”—is a welcome development for the Bangko Sentral ng Pilipinas (BSP), which had long been telling local financial institutions to take antimoney laundering laws more seriously, with a mixed degree of success.

According to BSP Deputy Governor Nestor Espenilla Jr., there had been a global trend toward more intensified efforts to combat money laundering and terrorist financing. One way banks around the world were responding to this shift was through a policy of “de-risking”—reducing or eliminating risks from non-compliant clients by making it either more expensive or more inconvenient for them to transact with the bank, or by cutting commercial ties completely.

“In reaction to that, major correspondent banks have also cracked down on all of their relationships globally,” he said. “The Philippines is not exempt from that. We were beginning to be affected, especially since we have a lot of cross border flows and remittances.”

According to the central bank official in charge of bank supervision, the Bangladesh Bank incident—where $81 million in funds stolen from the central bank of the impoverished South Asian country was remitted to the Rizal Commercial Banking Corp., and then onto the country’s casino industry—was an electrical jolt to the policymakers in the local financial system.

(To be continued)