Banks and other Bangko Sentral ng Pilipinas (BSP) supervised financial institutions (BSFIs) such as pawnshops and e-money issuers have “low” to “medium” risk exposures when it comes to money laundering (ML), terrorist financing (TF) and proliferation financing (PF), based on the BSP’s latest sectoral risk assessment (SRA) report.

“The SRA showed us the results of the hard work not only of the BSP, but also of BSFIs and our partner agencies in our fight against money laundering and terrorist financing,” BSP Governor Benjamin E. Diokno said over the weekend.

“But we should also use the results of this exercise as a reminder to remain vigilant to the threats that undermine the integrity of the Philippine financial system,” he also said.

The BSP’s third SRA on ML, TF and PF show the banking sector’s threats and vulnerabilities. The report is intended to “enhance and update” the sector’s “understanding of the extent of proceeds of unlawful activities being coursed through BSFIs” and the “BSFIs’ vulnerabilities to be used as channels or conduits for these proceeds.”

The report said the net ML/TF/PF risk exposure of banks are rated as “medium” but pawnshops or “pawning operations” and financial inclusion products have “low risk”. However products that BSP consider as channels for financial inclusion such as e-money and remittance services of pawnshops were assessed as having “medium” risk.

The SRA results were reviewed in terms of the following: criminal activities and corruption; drug trafficking; investment fraud and swindling.

The BSP said violations of the Electronic Commerce Act of 2000 and cybercrimes, “pose the highest level of threat to the sector.”

“This is in view of the high number of incidents of varied typologies and schemes, the significant amount of criminal proceeds they generate, and materiality of impact to the sector,” said the BSP. 

The BSP reminded banks and other BSFIs to take into careful consideration the latest SRA results. “(The BSP) expects BSFIs to consider the results of the SRA in their enterprise-wide risk assessment and to use these as inputs in enhancing their risk mitigation policies and strategies.”

The Anti-Money Laundering Council (AMLC) and BSP conducted the SRA, including other relevant agencies or institutions in-charge of the National Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Strategy of the Philippines that “calls for a whole-of-government approach to strategically respond to the identified ML/TF/PF risks,” according to the central bank.

Diokno disclosed last November 2020 that there are P3.19 billion of COVID-19 financial crimes filed as suspicious transaction reports (STRs) from January to August last year.

Online fraudulent activities is a top reason for STR filing which Diokno described as unauthorized account access through skimming and phishing, and other violations of the electronic commerce law.

Online fraudulent activities was estimated at P2.7 billion and accounted for 49 percent of STRs which are transactions of covered persons such as banks, of “any of the suspicious circumstances” listed in the Anti-Money Laundering Act of 2001, regardless of amount involved.

Diokno said AMLC analyzed the financial crime landscape using the STRs, and the first study or Series 1 was in July and Series 2 (“COVID-19 Financial Crime Trend Analysis and Typologies Brief, Series 2) updated the first one for the period January to August and covered the months when most areas in the country were in community quarantines. 

STRs on electronic banking transactions, in the meantime, increased by 1680 percent for inward fund transfers and 5,158 percent for outward fund transfers, said Diokno. STRs, involving cash-in and -out via electronic cash cards, increased by 580 percent and 197 percent, respectively.