To ensure the removal of the Philippines from the global “dirty money” watchlist, the Bangko Sentral ng Pilipinas (BSP) recently released a circular calling for a freeze order against assets and funds related in any way to terrorist and proliferation financing.
In a draft circular released to all banks and the non-banking sector, the BSP is proposing to enhance banks’ and other BSP-supervised financial institutions’ (BSFI’s) adoption of appropriate policies and procedures to implement TFS related to terrorism and PF, including the freezing and unfreezing actions as well as prohibitions from conducting transactions with “designated persons”.
According to the same circular, the order will be implemented “within a matter of hours” and will take effect immediately once flagged by the Anti-Money Laundering Council (AMLC).
The BSP is also amending certain provisions on the risk management and definition of terms on targeted financial sanctions (TFS), which refers to asset freezing and prohibitions to prevent funds, or other assets to be used to fund terrorism, terrorist financing (TF), for the proliferation of weapons of mass destruction, and for proliferation financing (PF).
Proliferation financing is defined by the FATF as the provision of funds or financial services used for the manufacture, acquisition, possession, development, export, trans-shipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and their means of delivery and related materials (including both technologies and dual-use goods used for non-legitimate purposes), in contravention of national laws or, where applicable, international obligations.
Adopting risk-based measures to reinforce the full implementation of TFS or asset freezing
The BSP, as per AMLC provisions, defines designated persons as any person or entity designated as a terrorist, one who finances terrorism, or a terrorist organization or group under the applicable United Nations Security Council Resolutions (UNSCR) and their successor resolutions; any person, organization, association, or group of persons designated (as such by) the Anti-Terrorism Act of 2020 (ATA); and any person or entity designated under UNSCR and their successor resolutions.
“TFS implementation related to terrorism, TF, proliferation, and PF is rule-based as the full application of the TFS is required,” BSP Governor Felipe M. Medalla was quoted as saying in the draft circular.
This will require both asset freezing and prohibitions. “The full implementation of TFS requirements include, among others, detecting and preventing the non-implementation, potential breach, or evasion of TFS,” added Medalla.
Part the of general requirements to implement TFS, covered persons, which are BSFIs, will adopt risk-based measures to reinforce and complement the rule-based full implementation of TFS requirements. This will include, at a minimum: sanctions policies and procedures; maintenance of a sanctions database; sanctions screening procedures; disposition of matches and handling; and delisting and unfreezing.
BSP sets November 21 as the deadline for feedback
The BSP is giving banks and non-banks until November 21 of this year to submit their feedback and other recommendations on the proposed circular.
Since June last year, the Philippines is a grey-listed jurisdiction by the anti-money laundering watchdog, the Financial Action Task Force (FATF), because of deficiencies in implementing anti-money laundering policies.
With FATF’s increased monitoring of the country’s anti-money laundering and combatting the financing of terrorism (AML/CFT) regime, the government has committed to swiftly resolve all identified deficiencies within a timeframe and must report its progress to the FATF frequently.
AMLC is the country’s financial intelligence unit and is mandated to implement the Anti-Money Laundering Act of 2001, as amended, as well as the Terrorism Financing Prevention and Suppression Act of 2012 and the Anti-Terrorism Act of 2020.
The work of the AMLC is to protect bank accounts and to prevent the Philippines from becoming a haven for money laundering and for terrorism financing. In a nutshell, the AMLC “requires and receives covered and suspicious transaction reports (STRs) from covered persons” and it also “collects, evaluates, and analyzes financial information, regarding potential money laundering and terrorism financing; and disseminates financial intelligence reports to law enforcement agencies, foreign financial intelligence units, and other AMLC units to support and assist investigations.”
Based on an October 21 FATF update on jurisdictions under increased monitoring, it has been noted that since last year, when the Philippines was again placed under its “grey list”, the Philippine government has since made a high-level political commitment to work with FATF and the Asia/Pacific Group to strengthen the effectiveness of its AML/CFT action plans.
“The Philippines has taken steps towards improving its AML/CFT regime, including by demonstrating that appropriate measures are being taken with respect to the NPO (non-profit organization) sector and implementing supervision for targeted financial sanctions,” the FATF said in a recent press statement.
The anti-money laundering watchdog said the country “should continue to work on implementing its action plan to address its strategic deficiencies” which were six items it listed in the FATF update.
The FATF has taken note of the Philippines’ progress in adopting stronger measures against AML/CFT in the latest mutual evaluation report (MER). Based on the country’s third follow-up report (FUR) on its MER, the FATF said the country has acted sufficiently to resolve some of the AML/CFT issues within the agreed timelines.