A total of P20.61 billion-worth of transactions had been reviewed by the Anti Money Laundering Council (AMLC) from 2019-2021 as the Bangko Sentral ng Pilipinas (BSP) steps up efforts to detect unlawful activity or money laundering.
The central bank-led AMLC risk and vulnerability review covers registered designated non-financial businesses and professions (DNFBPs).
Bangko Sentral Deputy Governor Chuchi G. Fonacier, in a circular to all supervised financial institutions (BSFIs) last Tuesday, Feb. 22, said BSFIs should be informed of the updates to the risk and vulnerability assessment of the DNFBP sector.
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“All BSFIs are expected to consider the money laundering, terrorist financing, and proliferation financing risks arising from the transactions of DNFBPs in their risk assessment,” said Fonacier.
DNFBPs include the following: jewelry dealers; dealers in precious metals and precious stones whose business is trading in precious stones; company service providers or CSPs; lawyers and accountants; and offshore gaming operators or OGOs and their service providers or SPs that are supervised, accredited or regulated by the Philippine Amusement and Gaming Corp. or Appropriate Government Agencies or AGAs.
Based on the AMLC’s report on the “2021 Risk Review on AMLC-Registered DNFBPs and an overview of the Risk-Based Supervisory Framework”, in monitoring DNFBP’s illegal practices, they have accumulated some P20.61 billion of CTRs and about 96 percent or P19.77 billion were filed by CSPs from 2019 until 2021. Meantime, accountants’ CTRs amounted to P841 million while jewelry dealers had only P2.44 million.
However, most of the market are unregulated and the report are just from registered DNFBPs which are limited. Only 4,020 of 35,752 industry players are registered with the AMLC as of end-June 2021. As for CSPs which made up the bulk of the three-year CTRs, only 34 are AMLC-registered out of 88 players.
AMLC said covered persons filed 4,369 CTRs from 2019 to 2021 and about 18 suspicious transaction reports (STRs) were found. The CSPs accounted for 4,147 of CTRs.
But, all of the 18 STRs came from the filings of the jewelry dealers. The report said that for the period 2019 to 2021, only suspicious transactions coming from the jewelry sector were reported to the AMLC. “In 2021, 18 STRs were reported identifying fraud and illegal exactions and transactions as the predicate crime related to the transaction. It may be noted that there is still an evident lack of understanding of the sector with regard to filing of covered and suspicious transactions,” said the AMLC.
AMLC described the local jewelry industry as fragmented and involved small producers or operations owned by single proprietorship set up. It said that a number of regulations “have already been passed concerning the jewelry industry focusing on tax and import and export regulations, however, the sector remains unregulated unlike its ‘semi-related’ business, the pawnshop industry.”
The overall vulnerability and risk assessment for jewelry dealers is still at medium level. “With the available data and the responses provided, the threat assessment is still set at the medium level,” said AMLC. Of the 2,346 jewelry dealers in the country, only 86 are registered with the AMLC.
The threat assessment for CSPs and jewelry dealers are in fact at low medium levels while lawyers and accountants, as well as OGOs and SPs are at medium levels.
The inherent vulnerability level for the jewelry dealers in terms of level of cash activity is medium high, according to AMLC. “The value of products for the jewelry sector ranges from less than P500,000 to more than P100 Million. While the sector uses credit cards and bank transfers as mode of payments, large cash payments (61 percent) is still the common practice which makes the sector more vulnerable to money laundering,” the report said.
Since 2011, the DNFBP sector has been tagged as having medium to high money laundering and terrorism financing risks. The current report however does not include real estate brokers, real estate developers, and casinos since these are covered by separate risk assessments.
AMLC said that based on the threat, vulnerability, and overall risk levels of the DNFBP sector, and the risk that the sector may be used for money laundering and terrorism financing, they have identified the following priorities: to establish the total population of each industry in the sector by entering into agreements with other government agencies and local government units to enhance registration and environmental scanning; and to intensify outreach activities to raise awareness of the anti-money laundering/counter terrorism financing or AML/CTF obligations of the sector.
The government will also make, as a matter of policy, the regular dissemination of the Risk Assessment and Data Collection Questionnaire to all DNFBPs, particularly to newly registered DNFBPs and to create a risk-based supervisory plan based on the results of the assessment, giving priority/enhanced supervision and monitoring to sectors which are more vulnerable to money laundering and terrorism financing.
The AMLC said it will likewise prioritize the following: to engage the cooperation of the Supervising Authorities or Appropriate Government Agencies, as well as the private sector and industry associations in environmental scanning and information dissemination to ensure the reach of the Anti-Money Laundering Act of 2001 or AMLA; to publish in the AMLC website the results of this updated risk assessment to increase public awareness; and to increase AMLC personnel commensurate to the growing number of DNFBPs to ensure compliance examinations will be adequately conducted.
The Paris-based anti-money laundering watchdog, the Financial Action Task Force (FATF), has placed the Philippines back in its “grey list” on June 25, 2021. The last time the Philippines was on the grey list was in 2013.
The AMLC and the whole of government has to continuously work together toward the country’s removal from the FATF International Cooperation Review Group’s grey listing, said the BSP.
To get out of the FATF watch list, the Philippines must resolve and address 18 ICRG action plan items. The Philippines has already addressed the technical deficiencies with the AML/CTF laws such as the Anti-Terrorism Act of 2020 and amendments to the AMLA.