Banks told to tighten watch vs stealthy financial criminals

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is urging banks to improve their beneficial ownership (BO) due diligence to boost transparency and deter financial criminals hiding behind seemingly legitimate businesses with complex corporate structures.

Memorandum No. M-2024-021 dated June 20 provided the BSP supervised financial institutions (BSFIs) with a guidance paper that would serve as their reference material in benchmarking best practices for enhanced identification and verification of BOs, or the person(s) who ultimately owns or controls an organization.

This, as the BSP pointed out the increasing importance of BO due diligence as an essential element in fighting money laundering and terrorist financing.

The Philippines has yet to exit the so-called “gray list” of the Paris-based watchdog Financial Action Task Force (FATF), which urged the country to “swiftly” plug the remaining holes in its defenses against money laundering.

READ: PH still on FATF money laundering ‘gray list’

Being on the gray list means the Philippines is still under “increased monitoring”, particularly its progress in resolving within agreed timeframes some strategic deficiencies in its defenses against dirty money and terrorism financing.

Institutional risk assessment

FATF said, among others, the country should “enhance and streamline” the access of law enforcement agencies to “accurate and up-to-date” BO data that can be used against individuals hiding their illicit activities and dirty money behind secret corporate structures.

President Marcos wants the Philippines removed from the  FATF gray list by October 2024.

READ: FATF’s ‘gray list’

Moving forward, the guidance paper from the BSP said using a risk-based approach in verifying BO information would “further reinforce the risk management posture of the BSFIs to curb illegal activities coursed through corporate vehicles.”

But these measures, the BSP added, should be coupled with continuous and bespoke training programs for all concerned employees of BSFIs.

“It is imperative that BSFIs, through the proper conduct of IRA (institutional risk assessment), continue to understand their respective risk exposures to crimes and criminal proceeds hidden through shell companies and complex corporate structures,” the central bank said.

”The results of the IRA must inform their risk mitigation strategies,” it added.