While the green halo of renewables is highly regarded as the planet’s ultimate shield against climate change risks, the flourishing ‘silent infiltration’ of terrorist financing in many energy markets around the world is a ‘dark undercurrent’ that Philippine financial regulators will be judiciously keeping a close watch on.

In a recent Eco-Business Forum delving with “Unlocking Capital for Sustainability in the Philippines’, Lyn. Javier, assistant governor of the Policy and Specialized Supervision Sub-sector of the Bangko Sentral ng Pilipinas (BSP), indicated that the country will closely monitor governance compliance of banks and financial institutions for them to better understand possible exposure to such type of unwarranted funding exposure for renewable energy (RE) projects.

The BSP official similarly asserted that “we look at adherence to globally recognized practices – that is in accounting and transparency practices.”

Additionally, she emphasized that the accountability of banks will be strictly scrutinized “in ensuring the integrity of the transaction and in promoting the integrity of the financial system.”

Dr. Renate Reside, undersecretary for Tax Research and Expenditure at the Department of Finance (DOF), on the other, had given word that “we’re going to act responsibly,” while emphasizing that the government will make sure that the lenders to RE projects “are prudent and they follow international standards.”

According to global industry experts, many energy markets across Africa, Latin America as well as Southeast Asian countries are becoming fertile ground for inflow of illicit project financing –and bulk of these are funneled into RE projects as well as carbon credits trading activities because of the rapid infrastructure developments being advanced in the clean energy sector.

Typically, it was emphasized that terrorist-linked entities or those injecting ‘dirty money’ into clean energy markets would often resort to cross-border operations as well as multi-layered financial transactions and would commonly present themselves as legitimate investors, contractors or even intermediaries of corporate entities with overseas headquarters.

It was expounded that countries with deep-entrenched corruption practices, as well as those with regulatory loopholes in their financial system and have very weak monitoring and governance measures when it comes to money laundering activities; would be the usual targets of these terrorist financing activities.

At this stage, financial regulators are being apprised that even the existing anti-money laundering and counter-terrorism financing frameworks are no longer enough to combat the felonious encroachment of these unwarranted project funding sources.

Power markets that are overly excited in cornering RE investments, it was noted, would be the ‘favorite target’ of illegal capital formation because policymakers and regulators would often prioritize securing investment-dollars even if it means overlooking potential red flags on prospective investors.

And given the highly technical and complex nature of energy business – from project development to the sale of the output to the end-users and up to the supplemental ventures of carbon credits trading for RE, it becomes highly difficult to trace the origin of financing and even to establish the identity of the ultimate beneficial owners – especially in markets where proxies  or nominee-shareholders and dummies are allowed in corporate registrations of sponsor-firms.

RE projects, in particular, are treated as investments of global nature, but financial regulatory oversight would be largely domestic, and that’s where the inconsistency in policy enforcement could happen.