Banks urged to monitor PEPs’ deals

Senator Miriam Defensor-Santiago. RYAN LEAGOGO/INQUIRER.net FILE PHOTO

MANILA, Philippines–Banks should be required to pay closer attention to the transactions of “politically exposed persons” to prevent the laundering of the proceeds of corruption or the use of fronts for ill-gotten wealth, according to Sen. Miriam Defensor Santiago.

Santiago has filed a bill that will require banks to practice enhanced due diligence and stricter monitoring of accounts beneficially owned by politically exposed persons (PEPs).

She explained that politically exposed persons refer to current or former senior officials in the executive, legislative, administrative, military or judicial branch; a senior official of a major political party; a senior executive of a corporation, foundation or other entity formed for the benefit of any such individual; an immediate family member of such individual, such as spouse, parent, sibling and in laws; and any individual publicly known, or actually known by the relevant financial institution, to be a close personal or professional associate.

In her explanatory note to the bill filed earlier this month, Santiago pointed out that the United Nations and the Paris-based Financial Action Task Force on Money Laundering (FATF) are promoting the idea of banks engaging in due diligence measures focusing on politically exposed persons to combat money laundering.

She said PEPs have been recognized as high risks for money laundering, and have been able to use financial institutions in various ways to hide ill-gotten wealth.

“To conceal and prevent recovery of assets illegally obtained, PEPs have used relatives and close associates to act as nominees, dummies or fronts who form corporate entities and open bank accounts in the nominee’s name but are actually beneficially held or controlled by the PEPs,” she said.

Under Santiago’s bill, which she said is based on the FATF’s recommendations, banks will be required to practice due diligence measures with a special focus on PEPs.

A declaration of beneficial ownership will be required of customers opening accounts, in the case of PEPs. They will be required to complete a written and signed declaration identifying themselves, the legal entity for which the person is opening the account, and any beneficial owners associated with the legal entity.

The bill also states that banks should maintain a system of verifying the true identity of clients. For corporate clients, the banks should have a system for verifying their legal existence and organizational structure, as well as the authority and identification of all persons purporting to act on their behalf.

The measure also proposes that public officials be required to provide banks with copies of their statement of assets, liabilities and net worth (SALN), and subsequent updates.