FINANCIAL INSTITUTIONS must practice risk management in doing business with e-money and payment players to ensure financial stability and security against “dirty money” activities, the Bangko Sentral ng Pilipinas (BSP) said.

Memorandum No. M-2021-021 signed by BSP Deputy Governor Mamerto E. Tangonan on April 5 said the central bank’s directive to impose sound risk management policies when dealing with operators of payment systems (OPS) and nonbank electronic money-issuers (EMIs) is in line with their mandate under Republic Act 11127 National Payment Systems Act.

BSP-supervised financial institutions (BSFIs) were told to limit their transactions to only OPS and nonbank EMIs that have secured licenses with the central bank.

The central bank also reminded BSFIs to assess observable business activities and transactions of OPS and EMIs and to ensure they perform customer due diligence measures when dealing with them.

“Where a BSFI is unable to comply with the relevant customer due diligence measures, it shall not open the account, not commence business relations, business relations, refuse to perform the transaction or terminate the business relationship; and consider filing a suspicious transaction report…,” the memorandum said.

Transaction monitoring of personal accounts of beneficial owners of OPS or nonbank-EMIs is also expected from BSFIs that have business relationships with these firms.

Financial institutions are likewise expected to have systems in place to trace unusual movements of funds and transactions of the OPS or nonbank EMIs, as well as appropriate risk assessment and due diligence of these firms. This includes assessing their risk profile and other factors, including business, operations, customer profile, activities rendered, distribution channels, and exposed jurisdictions.

Financial institutions are also expected to establish policies and guidelines with criteria on anti-money laundering and counter-terrorism financing obligations, covered and suspicious transaction reporting.

The central bank last year put in place a new system for assessing dirty money and terrorism financing risks which uses a four-point rating scale to gauge risks ranging from low to high. The move was done as part of reforms to strengthen the country’s guard against money laundering and terrorism financing. — LWTN