Finance


BSP requires money service businesses to tighten internal controls




Posted on August 09, 2017


THE CENTRAL BANK has required money changers and remittance agents to set up internal control systems and follow stricter rules on record-keeping, as the regulator tightens its watch on non-bank channels to curb shady transactions.

The Bangko Sentral ng Pilipinas (BSP) issued Memorandum No. M-2017-024 last week, setting the minimum internal control standards for money service businesses (MSBs) such as remittance and transfer companies, money changers, and foreign exchange dealers.

Under the guidelines, the board of directors and owners of such firms must craft internal policies that would establish standard operating procedures for its daily business, including policies on handling consumer complaints, hiring, as well as the accreditation and delisting of remittance sub-agents.

Specifically, the central bank’s memorandum circular requires MSBs to clearly identify and segregate duties and functions of its employees, including cash handling and record keeping, “to prevent the likelihood of mismanagement or fraud.”

“No individual shall have complete authority and responsibility for handling all phases of any transaction from beginning to end, without some check or balance from some part of the organization. In addition, no employee shall also be permitted to process a transaction wherein the said employee is either a beneficiary/remitter or buyer/seller of currency,” read the issuance signed by BSP Deputy Governor Chuchi G. Fonacier on Aug. 1.

MSBs must also ensure that there are dual control systems in processing transactions, wherein the work of one employee needs to be verified by another and is duly authorized, recorded, and settled.

“All remittance and/or foreign exchange transactions shall be conducted only at the entity’s principal place of business and other registered branches,” the new rules also prescribed, bringing the standards closer to integrity checks imposed on banks.

The proposed changes come a year after the $81-million Bangladesh Bank heist -- the biggest cross-border money laundering case in the country thus far -- which saw stolen funds pass through a local bank and a remittance firm to make the transfers appear legitimate.

Unidentified hackers tapped into the Bangladesh Bank’s account at the New York Federal Reserve to transfer $81 million to four accounts under the Rizal Commercial Banking Corp.’s Jupiter Street branch in Makati, where the money was then withdrawn and converted into pesos by PhilRem Service Corp., the remittance agent that doubled as money changer and courier to Chinese casino players.

During the Senate hearings on the case, PhilRem president Salud R. Bautista said they exchanged dollars to pesos which were claimed by a Chinese high-roller at her home and at a casino.

The new rules also require non-bank players to ensure that all MSBs will issue official receipts, disbursement vouchers, and application to sell or purchase foreign currency which are number-controlled and duly recorded.

The money agents should also keep accurate and detailed records in compliance with Philippine Financial Reporting Standards following a calendar year, while all records must be stored for five years and be made available to BSP examination if so required.

These guidelines follow a new circular announced in January which required local and international remittance MSB networks, sub-agents, and partner firms to register with the BSP as they do business in the Philippines.

BSP Governor Nestor A. Espenilla, Jr. said he is also looking to ease rules on foreign exchange to recapture transactions towards banks and away from the black market. -- Melissa Luz T. Lopez