The Market Monitor Minding the Nation's Business
By Riza Lozada
The Anti-Money Laundering Council (AMLC) is requiring financial institutions to conduct enhanced due diligence on clients from high-risk jurisdictions before terminating banking services and advising against arbitrary closure of accounts.
The AMLC, an agency under the Bangko Sentral ng Pilipinas (BSP), defines a high-risk customer as one who is “from a country other than the Philippines that is recognized as having inadequate internationally accepted anti-money laundering standards, or does not sufficiently apply regulatory supervision or the Financial Acton Task Force (FATF) recommendations, or presents greater risk for money laundering, its associated predicate offenses including corruption and terrorism financing.”
The AMLC issued Resolution 69 on Aug.17, which, among other things, specified procedures on restricting banking services against persons in jurisdictions the AMLC considered as high risk.
BSP Deputy Governor Nestor Espenilla Jr. issued a circular last Friday directing financial institutions, including banks, to strictly implement the AMLC resolution.
“Mere inclusion of one’s jurisdiction in the FATF Public Statement [black list] would not justify imposition of any restriction or limitation of banking services or closure of account without performing enhanced due diligence measures,” the resolution said.
“Termination of account can be resorted to only when there is a failure of enhanced due diligence,” it added.
The AMLC resolution stated that “the provision of the law shall not be construed or implemented in a manner that will discriminate against certain customer types, such as politically-exposed persons, as well as their relatives, or against a certain religion, race or ethnic origin, or such other attributes or profiles when used as the only basis to deny these persons access to the services provided by the covered person.”
“Whenever a bank, or quasi-bank, financial institution or whenever any person or entity commits said discriminatory act, the person or persons responsible for such violation shall be subject to sanctions as may be deemed appropriate by their respective regulators,” it said.
The BSP said enhanced due diligence, at a minimum, should included obtaining senior management approval for establishing or continuing business relationships; taking reasonable measures to establish the source of wealth and source of funds; and conduct enhanced on-going monitoring of the business relationship.
A covered institution shall apply enhanced due diligence on its customers if it acquires information in the course of its customer account or transaction monitoring that justifies reclassification of the customer from low or normal risk to high-risk pursuant to the AMLC rules or by its own criteria.
“Where additional information cannot be obtained, or any information or document provided is false or falsified, or result of the validation process is unsatisfactory, the covered institution shall terminate and refrain from further conducting business relationship with the customer without prejudice to the reporting of a suspicious transaction to the AMLC when circumstances warrant,” the AMLC said.
Once a client passes the enhanced due diligence tests under AMLC rules, the client should be accepted subject to some restrictions or limitation to control the risk based on the covered person’s risk assessment, it added.