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By Melissa Luz T. Lopez, Senior Reporter

Banks ordered to update anti-money laundering rules

Posted on March 18, 2017

THE Bangko Sentral ng Pilipinas (BSP) has ordered banks and other financial entities to update their anti-money laundering rules to accommodate a more “flexible” approach on client verification, which allows the firms to adopt digital processes and relax requirements for the unbanked segment.

The new rules provides simpler standards to verify client identity by easing documentary requirements and allowing the use of digital platforms for know-your-customer procedures. BW FILE PHOTO
The central bank through Circular 950 released the amended guidelines for banks and other supervised entities in carrying out anti-money laundering procedures, which allow a “risk-based” approach to existing know-your-customer (KYC) rules.

BSP Deputy Governor Nestor A. Espenilla, Jr. previously said that the new measure reflects changes to the implementing rules of the Anti-Money Laundering Act of 2001 which took effect in January, which provides simpler standards to verify client identity by easing documentary requirements and allowing the use of digital platforms for KYC procedures.

“The revised regulations emphasize the importance of a sound money laundering/terrorist financing risk assessment, the foundation of a proportionate, risk-based approach, to appropriately focus greater efforts and resources on areas posing higher risks, while reducing these for low-risk transactions,” the BSP said in a statement on Friday.

Mr. Espenilla said last week that the new guidelines would allow banks to accept “any official documents” in opening bank accounts or transacting with non-bank financial firms, in lieu of identification (ID) cards issued by national government agencies.

This is to “ensure that the financially or socially disadvantaged are not denied access to financial services,” as the central bank looks to boost financial inclusion by relaxing the requirements for the unbanked sector.

The National Baseline Survey on Financial Inclusion published by the central bank in 2015 showed that only 43% of Filipino adults held savings, with 68% of them opting to keep their money at home rather than placing them in accounts under financial entities.

However, micro-businesses and low-income consumers seeking to open bank accounts may be given a “restricted account,” wherein transactions are limited to below P100,000 per year and will not be allowed to receive or send remittances abroad. The owner is given a year to secure a valid ID, or else the account may be closed.

Financial firms are required to set criteria and identify whether its customers are of low, normal, or high risk; and apply reduced or heightened due diligence measures as necessary.

Mr. Espenilla said the same circular will also allow banks to offer electronic KYC procedures by using online channels like video calls and geocoding to verify a client’s identity, but subject to technical standards.

Banks and financial firms must monitor compliance to the anti-money laundering rules on a group basis, which covers the head office, branches, and other units. The entities must update their internal anti-money laundering protocols within six months after the circular is published for general circulation.