By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) re-issued previous warnings to banks to transact only with BSP-registered money service businesses (MSBs) in particular virtual currency exchanges (VCEs).
The BSP reminded banks not only to ensure the “soundness and adequacy of their risk management policies and practices” but to perform due diligence based on the Money Laundering and Terrorist Financing Prevention Program (MTPP).
BSP Deputy Governor Chuchi G. Fonacier signed Memorandum No. M-2019-021 (“Reminder on Sound Risk Management Practices when Dealing with Virtual Currency Exchanges”) last Tuesday. VCEs are companies or businesses offering services or engaging in activities that provide facility for the conversion or exchange of fiat currency to VC or vice versa, according to the BSP.
“As a safeguard against unregistered VCEs, BSFls (BSP supervised financial institutions), upon onboarding and during transaction monitoring, should exercise extra caution and vigilance as well as perform enhanced due diligence, as necessary, in accordance with their MTPP as prescribed under existing regulations,” Fonacier said in the memo.
The memo said banks should observe the following, among others:
Deal only with VCEs registered with the BSP for the appropriate authority to engage in a specified business activity;
Conduct risk assessment of the VCEs, considering relevant factors such as business operations, types of customers, product/service availed, distribution channels, jurisdictions they are exposed to and expected account activity;
Perform enhanced due diligence, as warranted, which includes, among others:
obtaining proof of the VCEs’ registration with the BSP and periodically update registration status; evaluating and understanding the business operations, distribution channels, customer profile, and MTPP of the VCEs, and obtaining the purpose of the BSFI account and anticipated account activity; verifying registration with the AMLC (Anti-Money Laundering Council) to comply with the reporting requirements; and obtaining additional information and conducting validation procedures as provided under existing rules and regulations.
Perform continuing account and transaction monitoring, which includes but is not limited to: proactively monitoring VCEs’ transactions, based on appropriate para-meters or alerts scenarios that capture their financial profile and behavioral account activities.
“Similarly, there should be transaction monitoring system for personal accounts of the owners or proprietors of the VCE,” said Fonacier.
The monitoring of transactions should also include: implementing robust systems to identify unusual movements of funds or transactions of the VCEs for further investigation and determination if filing of suspicious transaction report is warranted; and periodically updating the counterparty risk assessment based on risk and materiality, to ensure that their risk profile remains current and relevant, according to the memo.
“Establishing policies and guidelines, with defined criteria or grounds, such as material non-compliance with AML/CFT obligations, particularly covered and suspicious transaction reporting, for termination of business relationship as a result of ongoing monitoring, are also part of account and transaction monitoring,” the memo instructed banks.