BSP cancels Philrem registration

Monetary authorities have cancelled the registration of three firms involved in remittance and foreign exchange, including Philrem Service Corp., one of the channels through which dirty money stolen from Bangladesh’s central bank last February was laundered in the country.

In a statement on Wednesday, the Bangko Sentral ng Pilipinas (BSP) said the Monetary Board—its highest policy-setting body—voided the respective certificates of registration of Philrem as a remittance agent, as well as Peso Remittance Express Inc. and Werquick Inc., both earlier registered as foreign exchange dealers/money changers/remittance agents.

Werquick had also been implicated in the $81-million money laundering controversy, as it was cited in a timeline submitted by Rizal Commercial Banking Corp. (RCBC) to the Anti-Money Laundering Council (AMLC).

“On Feb. 17, RCBC decided not to allow the further opening of new accounts by Philrem or Werquick, the remittance firm that converted the money from the consolidated account of William Go into pesos and transferred them to the ultimate beneficiaries,” the Inquirer reported last March, citing the report of the Yuchengco-led bank.

The BSP said the three establishments had made “significant violations” of rules governing nonbank financial institutions.

Specifically, the BSP said the firms violated Section 4511N of the Manual of Regulations for Non-Bank Financial Institutions, which governs the registration and operations of foreign exchange dealers, money changers and remittance agents. The said section required submission to the AMLC of a report on covered transactions and suspicious transactions under the Anti-Money Laundering Act (AMLA).

The BSP added that the three companies also violated Circular No. 706 issued in 2011, which detailed updated antimoney laundering rules and regulations.

Also, the BSP said it “will also be working closely with other relevant government agencies, such as the AMLC and the Department of Justice (DOJ), in their investigation of possible criminal and administrative violations under the AMLA and its implementing rules and regulations, of the [three] entities, including their directors and officers.”

Last April, AMLC filed before the DOJ a complaint for violation of AMLA against Philrem and its top officials, namely Salud Bautista, president; Michael Bautista, chairman of the board and treasurer; and Anthony Pelejo, antimoney laundering compliance officer.

Also in April, the BSP ordered banks to “take extra caution” when dealing with foreign exchange dealers, money changers and remittance agents following the money laundering scandal that shook the financial system.

Citing the antimoney laundering regulations under the Manual of Regulations for Banks (MORB), BSP Deputy Gov. Nestor A. Espenilla Jr. said “banks dealing with foreign exchange dealers, money changers and remittance agents should take extra caution and vigilance and shall perform enhanced due diligence, upon onboarding and during transaction monitoring, consistent with regulations and the bank’s procedures as provided under its Money Laundering and Terrorist Financing Prevention Program (MLPP).”

“The bank’s MLPP should contain appropriate risk management practices to ensure that money laundering and terrorist financing risks arising from dealings with foreign exchange dealers, money changers and remittance agents are effectively identified, assessed, monitored, mitigated and controlled,” Espenilla said in an April 5 memorandum.

The memorandum cited that “by the nature of their business, they [foreign exchange dealers, money changers and remittance agents] inherently pose higher money laundering and terrorist financing risk.”

In a meeting last March, the BSP and the Bankers Association of the Philippines (BAP) discussed the possibility of liberalizing, with attendant safeguards, the undocumented foreign exchange limit in order to discourage legitimate foreign exchange deals from going into the “black market” or foreign exchange brokerage and money changers outside the formal banking system.

The BAP had also proposed to hike to $2 million from $120,000 at present the amount of foreign exchange that banks can sell to residents without prior BSP approval. The BSP currently requires banks to secure underlying documents from clients who want to buy more than $120,000 per day from the banking system.

About 85 percent of foreign exchange transactions in the country are being conducted outside the banking system, industry estimates showed, as foreign exchange and money changing services are not illegal as long as they are registered.

The BAP had hence suggested to tighten regulations on money changers.

To ensure that transactions with foreign exchange dealers, money changers and remittance agents are sound as well as in line with risk management policies and practices, the BSP ordered banks to:

· Only deal with foreign exchange dealers, money changers and remittance agents registered with the BSP;

· Conduct appropriate due diligence when dealing with remittance agents as remittance partners to ensure that such will not be used as channel for money laundering and terrorist financing activities;

· Conduct risk assessment of foreign exchange dealers, money changers and remittance agents’ customers, considering relevant factors such as business operations, types of customers, product/service availed, distribution channel, jurisdictions they are exposed to and expected account activity;

· Perform enhanced due diligence (including a review of the antimoney laundering and combating the financing of terrorism measures and programs adopted by foreign exchange dealers, money changers and remittance agents, as well as submission of proof of registration with the AMLC), an unsatisfactory result of which should be a ground for denying the business relationship;

· And perform continuing account and transaction monitoring.

The BSP reminded banks that those who would violate these rules will be slapped monetary penalties as well as nonmonetary sanctions under the MORB’s antimoney laundering regulations.