Recalibrating

, Tags: , ,
07-10-2021

And… I’m back.

I didn’t intend to take such a long break from this blog, but I did – at first, it was simply a heavy workload, and then, over the succeeding weeks, it just became easier to ignore the need to update it. I apologize to everyone who has been left waiting.

I’ve spent a great deal of time over the past few months thinking hard about the particulars of implementing an AML/CFT regime for real estate firms. This is not without self-interest. I sit on the boards of several real estate development companies – including that of our joint venture with Rockwell, and so I have also offered my expertise to our partners. The discussions to this point with my fellow board members and with the management teams have been robust, extensive and fraught with concern.

The clearest picture that emerges is that no one really knows what an effective AML/CFT regime for real estate firms looks like.

In a number of the discussions I’m having, the question arising is simple and straightforward: “What does minimum compliance look like?”

Let me step back to define what “minimum compliance” should be – and my apologies to the AMLC, who will of course be concerned that I might be belittling the importance of AML/CFT. “Minimum compliance” as I have seen it used refers to the cost of compliance – and while it is used primarily about the financial costs, I also take it to mean a minimum of disruption. I distinguish this from “paper compliance” – where just enough effort is made to comply the regulations, with no real focus on the effectiveness on the program.

Here are my initial thoughts on this, and please bear in mind that I’m by no means settled on any of these thoughts:

  1. The potential for disruption cannot be understated. AML requires a strong compliance culture to be effective, and the compliance culture for a real estate developer is different from that of a financial institution.
  2. Increasing the costs of compliance also raises the bar for new developers – this will actually hurt the market more than it will help, while further protecting the market share of big, established developers.
  3. Taking a risk-based approach to AML means that real estate developers should not be exposed to the same risks as banks, and should therefore not necessarily have the same features in their MLPP as a bank.

As with all good MLPPs, a DNFBP’s should be anchored in an institutional risk assessment – something I haven’t seen a lot of in the Philippines – and so the first step in raising awareness and building capacity is to present a robust methodology for developing an institutional risk assessment.

Which I’ll do next…


Photo by Brett Jordan on Unsplash

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