Notes from: Regulatory Outreach: Discussing the revised AML/CFT Guidelines for DNFBPs by the Philippines’ AMLC

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Webinar: Regulatory Outreach: Discussing the revised AML/CFT Guidelines for DNFBPs by the Philippines’ AMLC, presented by ACAMS

Date: 29 Jun 2021 – 12 nn GMT+8

Speaker: Atty. Mel Georgie B. Racela, Executive Director, AMLC Secretariat

Moderator: Rosalind Lazar, Regional AML Director – APAC, ACAMS

Disclaimer: As the title of this post states, these are my notes from and reflections on a particular Webinar. In many cases, I am not quoting panelists or speakers verbatim, which can lead to misinterpretations of what was actually said, or intended to be communicated by, the speakers and panelists. Where this happens, the error is wholly mine.

Atty. Mel Racela has been in the spotlight a lot lately, since the announcement of the Philippines’ return to the grey list on the 25th of the month. He comes across as a straight shooter, careful and meticulous in his speech; exactly the kind of person one wants in charge of the country’s AML watchdog.

I found this talk a deviation from the usual fare for ACAMS. ACAMS tends to attract compliance and AML professionals from the big banks because of its admittedly high membership and course fees. I don’t really know how many compliance officers of Designated Non-Financial Businesses and Professionals (DNFBPs) in the Philippines are members of ACAMS. Still, the timing couldn’t have been better, and I would have cancelled any other engagements to join this Webinar had they gotten in the way.

As expected, much of the Webinar covered the updated guidelines for DNFBPs that were published on 26 Jun. Most of it covered the basics: what kinds of entities are now covered persons, what the expectations are, a rough sketch of the process for registration, and a few “gifts” in typologies to watch out for. This talk was really not intended to be a full discussion about the DNFP guidelines, merely a briefer – but it went a little deeper into the guidelines than was strictly necessary for just a briefer. Still, this was a discussion among subject matter experts, so it wasn’t that big a deal.

Since I’ll be referring to specific documents throughout this post, I’ll link them below now.

My notes and takeaways from this Webinar:

  1. DNFBPs have been regulated for some time now, but the updated guidelines include new professions. Old DNFPBs: dealers in precious stones, company formation agents, managers of cash and other assets. New DNFBPs: real estate brokers and developers, offshore gaming operators (“OGOs”) regulated by PAGCOR, and their service providers (“OGO-SPs”). This is not a complete list.
  2. Lawyers and accountants are now covered provided that they offer services detailed in the law (RA 11521, specifically, which amends RA 9160, the Anti-Money Laundering Act). There was some discussion about registration of individuals vs. firms – I’ll get back to this shortly. The AMLC is working with the PRC and the IBP to ensure lawyers and accountants are compliant.
  3. Covered Transaction Report (“CTR”) thresholds for DNFBPs are also laid out in the regulation: 1) Single transactions worth PHP500,000 or its equivalent in foreign currency, 2) For jewelry dealers, this goes up to PHP1,000,000 or foreign currency equivalent, and 3) For real estate developers and brokers, a cash transaction of at least PHP7,500,000 or foreign currency equivalent.
  4. Suspicious Transaction Reports (“STRs”) don’t really have thresholds, but they must be reported within 5 days of the transaction.
  5. DNFBPs are also now expected to comply with the financial sanctions regulations covering TF/PF as well, including freeze orders and such.
  6. Suspicious transaction indicators are given in the regulation, in Annex A.
  7. Five stages of supervision by the AMLC:
    1. Capturing – registration with the AMLC. The deadline for registration is Dec 21, 2021, or six months from the publication of the updated guidelines.
    2. Information Dissemination/Environmental Scanning – ensuring that issued regulations are continuously disseminated
    3. Risk Assessment – the expectation is that DNFBPs will refer to the national risk assessment and the sectoral risk assessments currently available at the AMLC’s Web site when preparing their own institutional risk assessments
    4. Compliance Checking – this is where the engagement with the AMLC is expected to show up clearly
    5. Enforcement Actions and Filing of Cases – the AMLC expects that it will have to “discipline the industry” – as an exception to my rule, this is taken verbatim from Atty. Racela’s talk.
  8. An important qualification to this last bullet point is that the AMLC is looking at how it engaged the money service businesses (MSBs) when they came under its purview. The AMLC required covered persons (banks, insurance companies, etc.) to require MSBs to show registration documents or they (the banks, insurance companies, etc.) face penalties. Needless to say, losing access to financial services would be devastating to most organizations.
  9. After registration, DNFBPs are expected to re-register every three years.
  10. Brokers are expected to register individually, with their PRC licenses as documentation, while lawyers are expected to register as a firm. The firm is expected to show that they offer the services which qualify them to become DNFBPs. It’s unclear how that will be done – perhaps a rate card?
  11. Atty. Racela was asked whether the AMLC was sufficiently resourced to cover all the DNFBPs on top of other covered persons. His answer was that no financial intelligence unit (FIU) has enough resources, which is why risk based supervision is important. The risk assessments will determine prioritization and areas of concern the AMLC will look into.
  12. The AMLC will take care of publishing lists of terrorists and other targets of sanctions on their Web site.
  13. Feedback was given that the P7.5M threshold for CTRs for real estate transactions seems too high. Atty. Racela replied that they place more emphasis on the STRs instead of the CTRs.
  14. Towards the end of the talk, during the Q&A, Atty. Racela addressed the country’s grey listing by the FATF. He said that as early as 2018, the AMLCFT Coordinating Committee had updated the strategy by developing action plans to address what ultimately became the 18 points raised by the FATF. He said that they had already addressed the technical deficiencies – there are no legislative measure requirements in any of the 18 action plans – and the challenge now is to implement existing laws, rules and regulations. I take this to mean that the AMLC sees no need to amend or revise the Bank Secrecy Law, but I could be wrong on this point.

Given that a number of DNFBPs are probably not ready to register, conduct a risk assessment, or develop a money laundering prevention program (MLPP), I’ll work on some how-to content next.

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