The Market Monitor Minding the Nation's Business
Bangko Sentral ng Pilipinas (BSP) issued additional clarification and directives to all BSP supervised financial institutions (BSFIs) in handling targeted financial sanctions (TFS) that match their risk profiles.
Memorandum Order M-2022-007 issued Feb. 2, BSP Deputy Governor Chuchi G. Fonacier said banks and non-banks must carefully consider and study the TFS guidelines that were issued by the BSP in 2021 following the Anti-Money Laundering Council’s regulatory issuance amending certain provisions in the implementing rules and regulations of Republic Act No. 9160 or the Anti-Money Laundering Act of 2001.
The AMLC defines TFS as referring to both asset freezing and prohibition to prevent funds or other assets from being made available, directly or indirectly, for the benefit of any individual, natural or legal persons or entity designated, based on the United Nations Security Council (UNSC) resolutions and its designation process.
The BSP said TFS, specifically, will prevent funds from being used for terrorism, terrorist financing (TF), proliferation of weapons of mass destruction (WMD), and proliferation financing (PF).
The central bank further clarified that the purpose of TFS is to: coerce a regime, or individuals within a regime, into changing their behavior or aspects of it by increasing the cost on them to such an extent that they decide to cease the offending behavior; constrain a target by denying them access to key resources needed to continue their offending behavior, including the financing of terrorism or nuclear proliferation; signal disapproval, stigmatizing and potentially isolating a regime or individual, or as a way of sending broader political messages nationally or internationally; and/or protect the value of assets that have been misappropriated from a country until these assets can be repatriated.
BSFIs conduct TFS risk assessment, which is the identification and evaluation of sanctions’ risk or risks of potential breach, non-compliance/non-implementation or evasion of TFS obligations.
The BSP said that when designated individuals and entities are able to access financial services because of weak customer onboarding procedures, lack of staff training, among other issues, this is considered evasion of TFS obligations.
TFS is one of the Philippines’ committed 18 action plan items to the global anti-money laundering watchdog to get out of the “jurisdictions under increased monitoring” or the “grey list”.
On June 25, 2021, Paris-based Financial Action Task Force (FATF) has put the Philippines back on its grey list, one of 22 countries flagged by the FATF with serious Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) deficiencies. The last time the country was on the FATF watch list was in 2013.
In a Global Source Partners report, BSP Governor Benjamin E. Diokno said that if the Philippines will fail to accomplish the 18 action plan items that are needed before delisting, the FATF “may consider calling on countries to impose countermeasures against the Philippines, and this may have repercussions on the economy.”
The FATF deadline for completing the 18 action plan items is until January 2023. Progress reports are submitted to the FATF in three reporting cycles in a given year, or in January, May and September.
Diokno said that in the FATF’s latest statement, it had indicated that the Philippines “has taken steps toward improving its AML/CTF regime, by developing and implementing guidance on delisting and the unfreezing of assets for targeted financial sanctions related to proliferation financing, hence already compliant with one action plan item.”
“To date, the Philippines has 17 remaining action plan items. The Philippines, under the whole-of-nation approach, has been working to address the remaining action plans within the deadline given,” he said.
As part of efforts to correct deficiencies in reducing “dirty money” risks, the BSP has increased the AMLC manpower for the speedier collection of suspicious information.