Should banks fail to comply with the central bank’s order to implement a sophisticated fraud management system (FMS), the Bangko Sentral ng Pilipinas (BSP) could go as far as suspending their licenses, on top of holding them liable for losses their clients incur from fraud.

“We are the regulator of banks. We are supposed to ensure that banks comply with our regulations. So, if they fail, administratively, we can hold them liable. We can impose fines, penalties, or even suspend their licenses. That’s possible,” BSP Deputy Governor Elmore O. Capule told reporters on the sidelines of the Manila Tech Summit on Aug. 27.

Capule, who oversees the corporate services sector, said such sanctions are in addition to any restitution that clients may seek from their banks.

“This means that if I am a client who got scammed, and it turns out banks are not complying with the fraud management system, they will be obliged to repay me. I don’t have to go after the scammer,” Capule said.

“Remember, that is their product. They were the ones who sold me that electronic product. Therefore, they are required to put certain safeguards in place,” Capule argued.

Capule noted that banks are taking the directive “seriously,” given the massive costs involved in the creation of FMS.

If banks request the one-year deadline to be extended, Capule said the finality of the transitory period will be revisited by the BSP after a year. To note, banks were given until August 2026 to set up their own systems.

As such, high-level financial institutions are expected to meet all requirements by August next year. Those that remain non-compliant could be held liable for restitution if clients fall victim to scams.

“After one year, it will be difficult for the BSP to say we will extend, because there are people falling victim to scams. This regulation is designed to protect the public. So if we extend it, it could be said of us that we’re not protecting the public,” Capule told reporters.

“It’s still one year—and we are reminding them that the clock is ticking,” he further said.

According to Capule, BSP-supervised financial institutions (BSFIs) have begun complying with the order, as they were previously given a circular outlining minimum standards.

While one-time passwords (OTPs) can be integrated into the emerging FMS, Capule asserted that new technology requires more advanced measures. “You cannot do it with one or two. There has to be multiple fraud management systems.”

“You combine various features to help clients avoid being scammed by flagging suspicious transactions.” More sophisticated measures include blacklisting, identifying probable fraudulent accounts, monitoring transaction speed, and tracking geolocation.

Capule also noted the new features of FMS should trigger red flags, similar to credit card alerts, and can even block suspicious transactions. For instance, sudden changes in account details may be temporarily blocked to prevent potential scams.

To recall, the BSP had stated that commercial banks or large banks were on track to fully comply with the mandate. It can also be recalled that it was the “smaller institutions” who appealed for the transitory provision.

Against the backdrop of a costly transition, Capule argued that the regulations are non-discriminatory.

“Under the regulation, compliance costs are proportionate. Banks with transactions exceeding ₱75 million over six months need more sophisticated systems,” Capule said, which include geolocation and velocity checks.

“For transactions under ₱75 million over six months, the fraud management system remains basic,” Capule further said, adding that “smaller rural or thrift banks may not be required to have all of those facilities.”