The central bank-led Anti-Money Laundering Council (AMLC) is currently scrutinizing selected covered persons to test the effectiveness of its risk-based supervision of targeted financial sanctions (TFS).
This is one of the country’s committed action plans via the AMLC to get out of the “grey list” of the global watchdog for anti-money laundering, the Financial Action Task Force (FATF). The Philippines was placed back in the grey list on June 2021 as one of countries under jurisdictions with strategic deficiencies.
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 UNSC is responsible for maintaining global peace and security.
The government has committed to comply with 18 action plans to be delisted by 2023. The TFS is one of the FATF recommendations against terrorist financing (TF) and proliferation financing (PF).
The AMLC over the weekend said it has selected covered persons to be tested to “determine the effectiveness of their customer- and transaction-screening systems in the implementation of TFS.”
“This TFS thematic review is among the initiatives that will effectively demonstrate the AMLC’s risk-based supervision of TFS on TF and PF and will help address said action plan,” said AMLC.
Based on its 2022 thematic review of the effectiveness of TFS, the AMLC said it “applies a risk-based approach in performing its overarching role as the primary anti-money laundering/counter-terrorism financing (AML/CTF) supervisor and enforcer to ensure compliance of all covered persons, including designated non-financial businesses and professions (DNFBPs)”. This is done under the Anti-Money Laundering Act of 2001, as amended, and the Terrorism Financing Prevention and Suppression Act of 2012.
The AMLC said that as grey listed FATF, the Philippines “must improve its AML/CTF regime” and “removal from such list requires accomplishing the country’s action plan within the prescribed timeline.”
The committed action plan includes enhancing the effectiveness of the TFS framework for TF and PF of weapons of mass destruction. “Thus, the Philippines must, among others, demonstrate that covered persons understand their TFS obligations and that supervisors undertake risk-based supervision of TFS measures of financial institutions and DNFBPs,” said AMLC.
Last February, the Bangko Sentral ng Pilipinas (BSP) issued additional clarification and directives to all BSP supervised financial institutions (BSFIs) in handling TFS that match their risk profiles.
In a memo, BSP Deputy Governor Chuchi G. Fonacier said BSFIs must carefully consider and study the TFS guidelines that were issued by the BSP in 2021 following the AMLC’s regulatory issuance amending certain provisions in the implementing rules and regulations of Republic Act No. 9160 or the AMLA.
The BSP said TFS, specifically, will prevent funds from being used for terrorism, TF, proliferation of weapons of mass destruction (WMD), and 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.
The BSP said BSFIs which are covered persons under the AMLA, are required by applicable laws and regulations to implement TFS and to comply with the financial sanctions such as targeted asset freeze and prohibition against dealing imposed on designated individuals and entities.
The last time the country was on the FATF watch list was in 2013. To be delisted from the grey list, the FATF has set a deadline for completing the 18 action plan items which 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.
The Philippines has addressed the technical deficiencies with the AML/CTF laws such as the Anti-Terrorism Act of 2020 and amendments to the AMLA.