The Bangko Sentral ng Pilipinas (BSP) is proposing new guidelines on the reporting governance framework of money service businesses (MSBs) which includes changes to risk monitoring, disclosure of crimes and losses, as well as adjustments to penalties for non-compliance.

The draft circular released Tuesday, March 5, and circulated for comments to MSBs such as remittance transfer companies (RTCs) and money changers/foreign exchange dealers (MC/FXD), basically covers financial records, reports and audited financial statements of MSBs and also fulfill the BSP’s obligation to strengthen the country’s anti-money laundering and combating the financing of terrorism (AML/CFT) measures.

The BSP said the amendments should “enhance regulatory and supervisory activities over MSBs to ensure that attendant risks remain manageable as the industry continually evolves and business models become increasingly complex amidst emergence of new players in remittance and breakthrough financial technology.”

The draft circular has a feedback deadline of March 15 to give the industry time to give BSP their inputs and recommendations.

One of the proposed changes is the adjustment in monetary sanctions if an MSB fails to comply with the rules on the submission of delayed, erroneous, and unsubmitted reports. The previous penalty as stated in the BSP manual of regulations for non-bank financial institutions is P60 for each occurrence in the case of erroneous reports, or for each day for delayed or unsubmitted reports which will accumulate until complied with.

Based on the proposed circular, the applicable penalty will be based on a prescribed fine for each occurrence or for each day until compliant.

“The Bangko Sentral shall prescribe reasonable reporting standards which shall consider the cost of reporting relative to the expected benefits,” said the BSP.

The prescribed standards are proposed as: P150 to P450 for MC/FXD secondary report; and P450 to P1,350 primary report for RTC.

For the reporting of crimes and losses, MSBs will still report to the BSP crimes whose amount is P20,000 and more from robbery, theft, swindling or estafa, forgery and other deceits. If it involves personnel regardless if it led to the destruction or loss of MSB property, this will be reported to the BSP even if the amount involved is under P20,000.

In the latest version of the circular, incidents involving material loss, destruction or damage to the MSB’s property or facilities, other than arising from a crime, will be reported to the BSP when the amount involved per incident is P100,000 or more. This was higher than the previous threshold of P20,000.

The BSP said in amending the reporting governance framework “the proper conduct and effective supervision of MSBs are facilitated by the accurate and timely submission of required information concerning their financial condition and results of operations.”

“At the same time, high quality individual MSB reports contribute to the preparation of aggregate statistics that enable MSBs to make better-informed business decisions. It is incumbent upon the board or proprietor and senior management to implement an effective reporting system to generate complete, accurate, consistent, reliable, and timely reports to the Bangko Sentral,” said the BSP in the circular.

In addition, it added that MSBs are expected to capitalize on available information technology in establishing an effective reporting system “that is appropriate for their size and complexity of operations.”

The BSP also noted that in complying with the reporting standards, MSB reports “must be complete, accurate, consistent, reliable, and timely to be considered compliant with the Bangko Sentral reporting standards.”

“Said reports should have been reviewed and validated by the MSBs prior to submission to the Bangko Sentral to ensure its completeness and correctness. Adequate internal controls should likewise be in place to ensure adherence to the reporting standards,” said the BSP. Reports pertain to an MSB’s financial condition such as with regards to its solvency, liquidity, and profitability, as well as its operations and management.

The BSP monitors other forms of MSBs such as electronic money or e-money businesses and also regulate all RTCs including remittance platform providers and e-money issuers.

In the October 2023 BSP report, pawnshops and MSBs are still the main financial service access points borrowers in need of immediate liquidity. They offer not only remittance and money-changing services, but also cash-in and cash-out agents in the countryside.

As of end-June 2023, the central bank monitors 7,950 MSB offices. 

Of the 7,950 MSBs, 735 are head offices and 7,215 are branches. MSBs are dominated by large-scale remittance operators with average monthly network volume of transactions of at least P75 million, according to BSP data.