BSP sets P1-M fine on banks’ incorrect FX reports

Published August 16, 2022, 8:10 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) will slap up to P1 million penalty for the misreporting of foreign exchange (FX) transactions and other violations of FX rules to protect the local currency and maintain price stability.

The P1 million penalty is part of amendments the BSP is proposing in its FX regulations on reporting guidelines and penalty provisions. Under the BSP law, violators to the FX rules may be imposed a maximum monetary penalty of P1 million for each transactional violation or P100,000 per calendar day for violations of a continuing nature.

“In case profit is gained or loss is avoided as a result of the violation, the BSP may also impose a fine of no more than three times the profit gained or loss avoided,” said the BSP in the proposed circular.

BSP building and logo/Reuters

To ensure fairness, consistency and reasonableness in the imposition of monetary penalties, the BSP said it will consider the “attendant circumstances of each case” or the nature and gravity of the violation “or irregularity and the size of the financial institution, including other aggravating and mitigating factors.”

“Further, (the) BSP may impose monetary penalties singly or in combination with non-monetary sanctions, if appropriate,” it said.

The proposed circular has a feedback deadline of Aug. 21 for banks to submit their counter proposals or recommendations.

In the draft circular currently being circulated among BSP supervised financial institutions (BSFIs), the BSP defined failed reporting as erroneous, delayed and unsubmitted reports which will have its corresponding penalties for violating the reporting standards.

The BSP said the applicable monetary penalty will be assessed based on a prescribed fine for each occurrence such as erroneous reports and for each calendar day in the case of delayed or unsubmitted reports.

To ensure compliance with FX laws, rules, regulations, orders or instructions, the BSP said that it “recognizes that there is a need to impose monetary penalties as one of the possible administrative sanctions to hold (banks) and/or their directors/trustees, officers and/or employees accountable for their conduct, deter future commission of violations, achieve the overarching supervisory objectives of changed behavior and mitigated risk, and promote and maintain price stability, external sustainability and the integrity and value of the Philippine peso.”

Those covered by the rules are big banks, authorized agent forex corporations, digital banks, thrift banks, offshore banking units, rural/cooperative banks and representative offices. Penalties range from the highest at P3,000 for the big banks or the universal/commercial banks to P300 for representative offices.

In determining penalties, the BSP will also a adopt a demerit points system wherein the total number of demerit points for a calendar year will be computed based on the total amount of penalties divided by the prescribed fine for the applicable reporting category.

For example, a 60 demerit points will translate to P180,000 for violating rules on FX primary reports. If a violator has incurred 100 demerit points, the bank will be considered a habitual violator of the reportorial requirements.

Last month, the BSP also released a draft circular to streamline FX rules for borrowing, other financing and investments. It amends FX regulations covering operational relief measures for FX transactions. The BSP is also revising the minimum documentary requirements for the registration with BSP of inward invesments as well as FX inwardly remitted to fund investments.

In May, the BSP approved changes to a more streamlined rules and regulations on the cross-border transfer of foreign currencies.

The central bank has been reviewing its policy on the cross-border transfer of local and foreign currencies as well as amendments to other FX regulations such as reporting guidelines, among others.

Amending the FX rules from time to time ensure that it remains appropriate to the needs of a dynamic and expanding local economy. Updating FX rules will also support regional integration with regional and global markets, and enhance data capture on FX transactions.

The BSP since 2007 has approved and completed 12 rounds of FX policy liberalization.