Give BSP more power in fighting financial fraud, PH urged

The International Monetary Fund (IMF) has urged the Philippines to amend its bank secrecy law to give teeth to the Bangko Sentral ng Pilipinas (BSP) in fighting financial fraud.

“Significant weaknesses in the legislative framework, arising notably from the bank secrecy laws and the lack of power for the BSP to supervise the parent-companies and their affiliates of banking groups, present a material hindrance to effective supervision,” the Washington-based IMF said in its latest financial sector assessment report for the Philippines published this week.

“The bank secrecy laws state that all bank deposits with banking institutions in the Philippines are considered to be of an absolutely confidential nature and may not be examined, inquired or looked into by any person, including the BSP, except in defined circumstances,” the IMF noted.

Specifically, the Philippines’ bank secrecy laws “operate to restrict the availability of information regarding the identity of depositor account holders,” the IMF pointed out.

“The BSP has the power to access supervised bank records to conduct its supervisory work. The BSP has open access to the bank’s board, management and staff, when required. However, bank secrecy laws restrict access to information related to depositors,” the IMF said.

For the IMF, the BSP can be more effective in overseeing the domestic financial sector if it has unimpaired access to information on all customer accounts, and the ability, without constraints, to employ and share depositor information for any prudential purpose in order to fulfill its supervisory mandate to address safety and soundness concerns.

In particular, information such as funding concentrations from related parties, intra-group dependencies, cash-flow analysis, related-party transactions, as well as off-site antimoney laundering data and analysis must be accessible to and available from the BSP, the IMF said.

As such, the IMF urged the Philippines to “amend the bank secrecy laws to grant the BSP full access to banks’ deposit and other data.”

The BSP and the economic team have been pushing for the amendment of the country’s antiquated bank secrecy law to avoid a repeat of cross-border financial fraud that implicated local financial institutions, such as the Bangladesh Bank cyberheist in 2016 as well as the more recent scandals involving Australia’s Westpac and Germany’s Wirecard. —BEN O. DE VERA