Anti-Money Laundering Act in the Philippines (5 Tips to Comply)

The Philippines is one of the Asia Pacific (APAC) region’s most prominent business destinations and a global hotspot for FinTech and financial services. Ranked as one of Southeast Asia’s favored investment destinations, the Philippines attracted over USD2.44 billion of foreign investment in the first quarter of 2022 alone.

However, the Philippines’ status and influence have also attracted the attention of criminals seeking to exploit the country’s financial system to launder money. That threat has prompted the government to develop and bolster its AML/CFT regulatory framework. With that in mind, anti-money laundering should be a significant concern for FinTechs and other financial services firms setting up and operating in the Philippines.

What is the Anti-Money Laundering Act?

The Anti-Money Laundering Act (AMLA) of 2001, or RA 9160, enables authorities to investigate money laundering and other financial crimes, protecting financial institutions and deterring criminals from using the Philippines as a money laundering destination.

As a member of the Asia/Pacific Group, the Financial Action Task Force-style body for the region, the Philippines is committed to implementing FATF’s Recommendations through provisions set out in the Act. Under AMLA, FinTechs are required to develop and implement a risk-based AML program, conducting customer risk assessments and deploying an AML/CFT response commensurate with that risk.

2021 AMLA amendment

Following a number of high-profile money laundering incidents, anti-money laundering in the Philippines has been subject to increased international scrutiny. One particular incident saw the theft of almost US$1 billion from the Bangladesh Central Bank, which was transferred to bank accounts in the Philippines and laundered in the Philippines’ casino system.

Responding to the theft, Philippine President Rodrigo Duterte announced his support for revisions to the Anti-Money Laundering Act, offering financial authorities more powers and enforcement tools. Those revisions were implemented in February 2021, via an amendment to AMLA. The amendment introduced the following key provisions:

• Covered persons: The amendment adds two categories of ‘covered person’ that are required to report suspicious transactions to the AMLC. The two new categories are ‘real estate developers and brokers’ and ‘offshore gaming operators”.
• Covered transaction: A new category of covered transaction has also been added to AMLA. Under the new rules, real estate developers and brokers must report transactions that exceed P7.5 million to the AMLC.
• Unlawful activities: The amendment expands AMLA’s scope to include two new unlawful activities:
  • Violations of regulations issued by the National Security Council-Strategic Trade Management Committee (NSC-STMCom).
  • Tax evasion where the tax due exceeds P23 million per taxable year.

  In addition to the proposed revisions to the Anti-Money Laundering Act, the Philippines’ government is in the process of rolling out a national ID system. The system would benefit anti-money laundering compliance in the Philippines by facilitating the faster verification of customer identities and subsequent transaction monitoring and screening measures. In the wake of the global coronavirus pandemic, the Philippines government is seeking to accelerate the introduction of the national ID system.

  

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  5 tips to comply with the AMLA in the Philippines

  To help your FinTech business manage its compliance obligations, browse our anti-money laundering Philippines guide:

  1. Check the latest policies issued and enforced by the financial regulators

  The Philippines Securities and Exchange Commission (SEC) and the Central Bank of the Philippines (BSP) act as the Philippines’ primary financial regulators. Collectively they are responsible for conducting the financial supervision of all banks and non-bank financial institutions in the country. The SEC is involved in policymaking and has the power to investigate violations of securities laws.

  The Philippines also maintains the Anti-Money Laundering Council (AMLC), a dedicated authority tasked with implementing the Anti-Money Laundering Act (2001), the country’s main AML legislation. The AMLC functions as regulator, financial intelligence unit, and law enforcement agency. Its mandate includes protecting the Philippines’ financial system from criminal activities and extending cooperation to other international financial regulators that are engaged in money laundering investigations.

  2. Review the Data Privacy Act

  The Philippines’ primary data protection legislation is the Republic Act No.10173, also known as the Data Privacy Act. The legislation applies to all private, personal, or otherwise sensitive data of natural and juridical persons in the Philippines. The Act sets out rules for the collection, processing, and sharing of data, and the need for firms to obtain consent when doing so. The Act includes a definition of the personal and sensitive data covered by its provisions.

  While the Philippines has lagged behind other nations, regionally and globally, in the application of cloud technology, in 2013 it launched the GovCloud initiative, a private cloud initiative for government agencies. GovCloud hosts a range of basic cloud applications, such as email services and payment gateways, and the Philippines government intends to use the initiative as a foundation to build a wider cloud ecosystem within the country.

  3. Take a risk-based approach to monitoring customer transactions

  The Anti-Money Laundering Act 2001 generally requires Philippines FinTechs and other obligated institutions to monitor customer transactions on an ongoing basis in order to detect suspicious activity and prevent money laundering. The monitoring process should enable FinTechs to establish that a customer’s transaction activity is consistent with their known risk profile, and allow them to issue suspicious activity reports as quickly as possible when potential money laundering is detected.

  The transaction monitoring process mandated by the Anti-Money Laundering Act should focus on specific characteristics, including:

  • Suspicious transaction patterns (for example, a high frequency of transactions or multiple transactions over a short period of time).
  • Unusually complex transactions that do not fit a customer’s usual financial behaviour.
  • Transactions deliberately structured to avoid reporting thresholds.
  • Transactions involving high-risk countries.
  • Transactions involvingpolitically exposed persons (PEPs) or persons on sanctions/watch lists.

  4. Screen customers against the latest sanctions lists

  Under AMLA, FinTechs must screen transactions against international sanctions lists and watchlists to ensure that their customers are not subject to sanctions, involved in terrorism, or connected to terrorist organizations.

  The sanctions screening process should be conducted on an ongoing basis to ensure that FinTechs respond efficiently to changes in their customers’ risk profiles. Firms should screen their customers against the sanctions list circulated by the BSP and the AMLC, along with lists issued by international authorities such as the Office of Foreign Assets Control (OFAC) and the United Nations.

  FATF Greylist: The Philippines international profile should also be an AML priority. Following the Bangladesh Central Bank heist, the FATF added the Philippines to its list of Jurisdictions Under Increased Monitoring, also known as the ‘FATF greylist’. Inclusion on the greylist indicates that a country poses an increased risk of money laundering and terrorism financing – and that it may face additional economic sanctions.

  As of April 2022, the Philippines remained on the FATF’s greylist. While it acknowledged that the Philippines had made progress in combating financial crime in terms of implementing sanctions, the FATF noted that stronger AML measures were still needed to address money laundering in casino junkets and nonprofit organizations.

  The Philippines’ greylist status means that firms operating in the Philippines must review the FATF’s action plan for the country. Firms should gauge identified AML deficiencies against their own risk appetite, and put suitable compliance measures in place. It is also important to remember that partners outside the Philippines may seek to obtain compliance assurances before entering into business relationships. The Philippines’ government is working with the FATF to improve its AML/CFT performance. In addition to amendments to AMLA, those efforts include:

  • Closer coordination between the AMLC and the Philippine National Police.
  • Integration of the International Co-Operation Review Group (ICRG) with the National Anti-Money Laundering and Countering the Financing of Terrorism Strategy (NACS) as part of a national approach to AML/CFT.
  • The sharing of AMLC risk assessments, studies, and typologies with Philippines law enforcement agencies.
  • An initiative to hire more financial analysts, investigators, and lawyers to enhance the performance of compliance units.

  5. Conduct suitable CDD at onboarding

  The Philippines’ anti-money laundering rules require FinTechs to verify their customers’ identities and ensure that they are being truthful about the nature of their business. In practice, this means that firms must implement suitable customer due diligence measures (CDD) when they onboard new customers – and then throughout the business relationship.

  CDD checks in the Philippines should not only verify customers’ names and personal details but monitor customers for changes in politically exposed person (PEP) status and for their involvement in adverse media stories. Under a risk-based approach, firms should implement an AML program with two tiers of CDD, deploying enhanced due diligence (EDD) measures when customers present a higher level of AML/CFT risk.

  AML compliance in the Philippines: How ComplyAdvantage can help

  Complying with anti-money laundering regulations in the Philippines requires significant administrative effort. The complexity of regulations can create costly efficiency drains, while human errors can hamper the process further, and even lead to compliance penalties.

  ComplyAdvantage helps firms avoid those problems with automated AML solutions tailored to their unique risk profiles. Our solution takes advantage of smart technology to build speed and accuracy into your Philippines AML program while complementing the skills of existing compliance teams.

  

  Originally published 18 June 2020, updated 29 July 2024