THIS REFERS to a column piece entitled “A Ridiculous Requirement of the Insurance Commission” of Oscar P. Lagman, Jr., in his column, Musings, published in the July 6, 2020 issue of BusinessWorld, which was probably occasioned by his daughter’s experience.
We wish to clarify a few points to correct some misleading views and dispel misimpressions that the article might have engendered.
First, the 2017 Second National Risk Assessment (NRA) Report on Money Laundering and Terrorism Financing (ML/TF) assigned to the Insurance Sector a threat or risk rating of medium. In fact, data gathered during the First and Second NRA show that the number of suspicious transaction reports (STRs) from the insurance industry had risen.
Second, home insurance may be used to launder criminally-obtained funds. A money launderer might seek to insure property in excess of its value. To give the appearance of legitimacy, a money launderer may be willing to lose 10-20%, the leaving the greater bulk of funds laundered.
Third, the AMLC has had many freeze and civil forfeiture cases predicated on such crimes as plunder, corruption, fraud and violations of the Securities Regulation Code, and illegal trafficking where insurance had been used to commit money laundering. Nobody should take it for granted that money launderers can and may use the insurance sector for their criminal ends.
Fourth, covered persons such as insurance companies, banks, securities dealers and jewelers, are required to conduct Know-Your-Customer (KYC) and Customer Due Diligence (CDD) pursuant to Republic Act No. 9160 or The Anti-Money Laundering Act of 2001, as amended (AMLA). This requirement is crucial for the Anti-Money Laundering Council (AMLC) to combat ML/TF, as they provide profiling of customers, trace the flow of funds, establish linkages between and among criminal elements, detect money laundering and so on. The AMLA requires the supervising authorities, namely, the Insurance Commission, the Bangko Sentral ng Pilipinas (BSP) and the Security and Exchange Commission (SEC) to impose upon covered persons under their jurisdiction the submission the conduct of KYC and CDD of their clients.
Fifth, no covered person is exempted from conducting KYC and CDD. All customers, regardless of level of risk, economic or political clout and influence in society, must comply with KYC and CDD requirements. This situation is not peculiar to the Philippines; most countries, developed or not, with the possible exception of blacklisted jurisdictions like North Korea, adhere to this international standard to combat ML/TF. Powerful and influential people have been the subjects of money laundering cases, based on AMLA requirements. The AMLA is the great leveler.
The adverse consequence of laxity in these and other requirements under the AMLA is the rise in the incidence of domestic and international crimes involving the Philippines, and in business and financial costs (affecting inward remittances), and the decline of the Philippines’ credit worthiness in the international financial system, to name a few.
To sum up, the Insurance Commission’s requirements on AMLA compliance are not ridiculous. We hope these clarify the points that Lagman raised.
Very truly yours,
MEL GEORGIE B. RACELA
Executive Director
Anti-Money Laundering Council
