In 2021, the Financial Action Task Force (FATF) put the Philippines under the “gray list,” effectively placing the country under increased surveillance to monitor its progress against money laundering and terrorism financing. The said designation also meant that the country will be subjected to higher interest rates and processing fees, as well as more layers of scrutiny from financial institutions (FIs).
In a study conducted by the International Monetary Fund (IMF) published in May last year, it was found that gray listing has a negative impact on the country’s capital flows.
“The (gray) status sends a signal to other countries and investors that there is a heightened risk in the Philippines,” said Jericho Jensen, Chief Data and Analytics Officer and Chief Information Officer of MDI Novare, in a press statement. “Hence, it serves as an important reminder for financial institutions to be cognizant of their role in fighting money laundering and terrorism financing.”
MDI Novare Technologies is one of the leading IT systems integrators and software powerhouses in the country today. To address the situation, it recently launched a series of webinars to help educate financial institutions about anti-money laundering and counter-terrorism fighting activities. The webinar series was also meant to aid the government in its efforts to establish a clean and safe financial sector.
MDI Novare, which remains committed to supporting local financial institutions, particularly rural banks, has since kicked off the series with a webinar entitled “A-L, An Introduction to Anti-Money Laundering Systems in the Philippines.” Led by Atty. Rainier Dela Fuente, an accredited AML trainer and consultant and a former financial investigator at the Anti-Money Laundering Council, the virtual event discussed ways and means how rural banks can further enhance their technical and technological know-how so they may fight off financial crimes through the implementation of a robust monitoring system.
The webinar also talked about equipping financial institutions with the needed skills on how to report on suspected money laundering activities and how to combat them.
Legal measures put in place to counter money laundering
Despite its current gray listing, the Philippines has started adopting and implementing legal measures to counter money laundering and terrorism financing. One of the most notable legal measures instituted is the Anti-Money Laundering Act (AMLA) in 2001, as amended.
The AMLA aims to protect the integrity of bank accounts by ensuring that only accounts originating from legal sources are maintained and those linked to criminal activities are removed from the banking system.
The act also aims to prevent the country from being tagged as a money laundering destination.
The Philippine government, through AMLA, has since bolstered its international commitment to prevent financial crimes by fulfilling its obligation through the exchange of information with other countries and relevant agencies.
Some of the most recent AMLA amendments include the enactment of Republic Act 11479 or the “Anti-Terrorism Act,” which became law in July 2020, and Republic Act 11521, which was approved in April last year and effectively amended RA 9160 or the “Anti-Money Laundering Act of 2001.”
Based on RA 11521, real estate developers, brokers, offshore gaming operators, and service providers will now be included as covered persons under the AMLA. It also expanded the scope of transactions that are subject to strict scrutiny. These include transacting, converting, transferring, posing, moving, concealing, and/or disguising transactions associated with money laundering, It also includes preparatory acts such as attempting or conspiring to commit money laundering.
Under current laws, the owner of a sole proprietorship, partners, and the board of directors or trustees of a corporation are liable since they now have the ultimate responsibility of complying with the AMLA and implementing its rules and regulations.
A monitoring system to assist rural banks, FIs launched
Under the law’s compliance framework, rural banks and other financial institutions are required to submit timely reports to avoid penalties and punishments. They must also confirm and verify the identity of their clients based on official documents. Customer profiling must also be done with due diligence using a risk-based approach.
Transaction reporting, on the other hand, shall include Covered Transaction Reports (CTR) and Suspicious Transaction Reports (STR). A CTR is triggered when a transaction goes beyond a certain set amount, for example, ₱500,000 for banks. An STR, meanwhile, is generated depending on some red flags such as the client’s lack of underlying trade or legal obligation, linkage to money laundering activity, or if the amount transacted is not commensurate with the client’s profile or financial capacity.
Records must also be stored for a period not less than five years.
To enable rural banks and other banking institutions to achieve this task, MDI Novare launched SIEVE AML Transaction Monitoring System, a comprehensive anti-money laundering solution that leverages data integration, analytics, alert/case management, and AMLC regulatory reporting.
The new solution is built on a sophisticated, high-performance platform that supports the end-to-end process of combating financial crime. It also works with large volumes of data while automating the tasks as much as possible.
Some of the key features of the SIEVE AML system include automated transaction monitoring, intelligent network analysis, 360-degree understanding of customers and their transactions, as well as a simple but highly-configurable business user and/or investigator-centric interface.
Now with more than 30 years of experience and expertise in the information technology industry, MDI Novare is considered a leading digital transformation enabler for telecommunication companies, financial institutions, manufacturing, and BPO firms, as well as government agencies thanks to its next-generation technologies, automation processes, and other end-to-end solutions.