New antimoney-laundering rules to focus on riskier institutions

A new money laundering risk assessment framework is expected to improve the Philippines’ defenses against the traffic of illicitly acquired cash and ensure the country’s compliance with international laws, according to the central bank.

In essence, the new monitoring tool will result in regulators devoting more resources and paying closer attention to financial institutions that present higher risk of being used as money-laundering conduits, as opposed to the present scheme where the Anti-Money Laundering Council is forced to monitor all players across the industry evenly, regardless of profile or track record.

Security vs dirty money

In an online briefing, Bangko Sentral ng Pilipinas Gov. Benjamin Diokno said the Money Laundering Terrorist/Financing Risk Assessment System (MRAS) would help secure the financial system against dirty money.

“The MRAS bolsters the BSP’s arsenal of supervisory tools in fighting money laundering, terrorist financing and related threats in the financial sector,” he said. “With BSP set to implement [this scheme] alongside the adoption of the Supervisory Assessment Framework, we see MRAS contributing to the overall stability of the domestic financial system.”

An enhancement to the existing Anti-Money Laundering Risk Rating System, MRAS uses a four-point rating scale—high, above average, moderate and low—in evaluating a BSP-supervised financial institution’s money-laundering risk profile.

MRAS evaluates inherent risks, the quality of risk management and the effectiveness of a financial institution’s self-assessment systems. Integral to this is the context of the risk as well as the firm’s business model and operations.

Under the framework, more supervisory resources will be allocated to financial institutions with higher net risk exposures and those that pose heightened risk to the safety and soundness of the financial system.

Tight financial borders

The new supervision scheme is seen to benefit financial institutions as they will be informed of sources of risks and vulnerabilities and can then prepare appropriate measures to address them, Diokno explained.

Of late, the central bank has been unveiling a slew of measures to further tighten the country’s financial borders against money-laundering, including new rules that govern up and coming modes of transferring values of money.

This includes a recent policy making the movement of cryptocurrencies subject to the central bank’s rules on financial service providers to guard against the potential use of so-called virtual assets in laundering.

In particular, the Monetary Board recently approved the guidelines on virtual asset service providers—entities that facilitate financial services via blockchain, Bitcoin, cryptoassets and digital currencies—to cover new business models and activities.