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BSP orders banks to be on alert for Ponzi, other illegal investment schemes

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BSP
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AMID THE recent spate of illegal investment schemes that victimize people mainly in cities and towns outside the capital, the Bangko Sentral ng Pilipinas (BSP) has issued a warning to the public against being lured by high returns on their money and asked banks to be on alert for unusual financial activities.

“These types of investment schemes include ‘Ponzi scheme’ wherein a fraudster lures investors with the promise of high returns that are to be generated through the investment or business efforts of the fraudster,” the central bank said in a memorandum published in its Website on Friday.

The memorandum, signed by Deputy Governor Chuchi S. Fonacier, called on BSP-supervised financial institutions (BSFIs) to be on alert for such schemes as they could be used to channel funds from such activities through deposit accounts of the lead perpetrators as well as their associates and related entities.

The central bank said it is “imperative” that BSFIs maintain a robust risk management system in place to help them protect their clients.

Some red flag indicators cited are frequent or significant deposits which do not match the customer’s financial profile, sudden spikes in account activities, ownership of several accounts where transaction movements deviate from the declared or known activities.

Other red flags include a newly-established business that has an unusually high volume of transactions, high volume of check issuances from a single customer not matching the client’s profile, and an unusual increase in bank branch transactions in areas that have been identified as sites for illegal investment schemes.

The central bank laid down guidelines for BFSIs to help their clients avoid becoming prey to such activities as well as monitoring suspected operators.

One of the guidelines is the use of preventive measures such as conducting strict customer due diligence, including verification of identity, background, financial profile, and sources of funds.

BFSIs are also urged to have a “surveillance mechanism to timely capture information, advisories, or news reports that identify personalities or entities involved in illegal investment schemes”.

“The SEC (Securities and Exchange Commission) regularly releases these advisories which should be considered as part of holistic assessment of the risk profile of a customer, including their relationship to those directly identified in the SEC advisories,” the BSP said.

BFSIs are also asked to ensure that branch personnel are duly informed of policies and procedures when coming across suspicious transactions. — Luz Wendy T. Noble





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