Memo No. M-2016-04 — Reminder on Sound Risk Management Practices when Dealing with Foreign Exchange Dealers, Money Changers, and Remittance Agents

7 April 2016

TO: All Rural Banks
RE: MEMORANDUM No. M-2016-04 – REMINDER ON SOUND RISK MANAGEMENT PRACTICES WHEN DEALING WITH FOREIGN EXCHANGE DEALERS, MONEY CHANGERS AND REMITTANCE AGENTS

Dear Rural Bankers,

Pursuant to Part 8 of the Manual of Regulations for Banks (MORB), banks dealing with foreign exchange dealers, money changers and remittance agents (FXDs, MCs and RAs) should take extra caution and vigilance and shall perform 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 (ML) and terrorist financing (TF) risks arising from dealings with FXDs, MCs, and RAs are effectively identified, assessed, monitored, mitigated, and controlled. To this end, banks should ensure the soundness and adequacy of their risk management policies and practices in dealing with FXDs, MCs, and RAs, which include, among others, the following:

1. Banks shall only deal with FXDs, MCs and RAs registered with the BSP for the appropriate authority to engage in a specified business;

2. When dealing with RAs as remittance partners or tie up or if the accounts are being used to facilitate their business, the banks have the ultimate responsibility for conducting appropriate due diligence necessary to the relationship to ensure that it will not be used as channel for ML/TF activities. Bank’s tie-up relationship with such customers shall not be used to circumvent existing regulations;

3. Conduct risk assessment of the FXD, MC and RA 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. By the nature of their business, they may inherently pose higher ML/TF risk which should be appropriately identified, monitored and mitigated;

4. Perform enhanced due diligence. Unsatisfactory result of the due diligence process shall be a ground for denying the business relationship.

5. Perform continuing account and transaction monitoring.

Banks are reminded that violation of the rules provided in Part 8 of the MORB shall be subject to applicable sanctions and penalties provided under Section X811 of the MORB.

For guidance and strict compliance.

You may also view/ download full copy of this memo through this link: http://rbap.org/wp-content/uploads/2016/04/m004.pdf

RBAP Secretariat

Guidelines in Strengthening Corporate Governance

To all rural bankers, pleased be informed of the recently issued Circular 749 or the approved Guidelines in Strengthening Corporate Governance in BSP supervised Financial Institutions.  Pursuant to Resolutions 111 and 227 of the Monetary Board, the 29-page circular stipulates the amendments on the Manual of Regulations for Banks under Subsections X141, X142, X174 to x177.

One of the new entries under X174.a is on the appointment of a Chief Risk Officer or any equivalent position who is independent from executive, operation and revenue-generating functions and, business line responsibilities.  While this new provision primarily targets commercial and universal banks, rural, thrift and cooperative banks may appoint a CRO or any equivalent position, but shall be subject to the same requirements applicable to CROS of KBs and UBs.

To secure a copy of CL 749 and annexes, please download from our Slideshare account:

C749
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Guidelines on submission of IT Profile Report

This is to notify all rural bankers of the required accomplishment and submission of IT Profile Report, for the creation of a baseline IT information and, risk profile the complexity of IT operations based on technology related products.

Below are the summarized guidelines in the submission of the IT profile, which RBAP hopes will be observed by all member banks:

1. The template can be downloaded at http://bsp.gov.ph/itprofile/template.  The initial IT profile report as of December 31, 2011 shall be submitted to the BSP on or before March 31, 2012.

2. For rural banks, the report should be submitted to: sdcrb-itprofile@bsp.gov.ph using the following format for the subject:
ITPROFILE,

3. The certification should be submitted to the Director of the BSP Supervisory Data Centre, duly notarized and signed bythe authorized official of the reporting institution.

4. Those who cannot transmit the IT Profile report can submit the reports in CD, together with the certification, within the prescribed deadline.

5. Said templates are available, upon request, at the at the BSP- SDC office.

For a complete breakdown of the guidelines, please download BSP Memorandum 11 at RBAP’s Slideshare account.

M011
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Amendments on the provision of Micro-Agri Loans

All member rural banks are hereby notified of the amendments on the provisions of Micro Agri Loans, as stipulated in the recently issued BSP circular.  The modifications are under subsection X361.7 of the MORB.

Particular attention should be given on Section 2, which lists several prudential requirements for compliance; Section 3 meanwhile covers the breakdown on product characteristics affecting purpose/term, eligibility, loan amount, loan value, payment and security.

To know more about these amendments, please download Circular 748 from our Slideshare Account.

Thank you.

C748
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Revised compliance framework for all banks

The BSP has just released Circular 747, amending the entirety of Section X180 of the Compliance System under the Manual of Regulations for Banks. These revisions were approved by the Monetary Board in its resolution signed on the 20th of January 20, 2012.

Please take note that all should comply on or before July 1, 2012.

Among those revised are the following:

1. The inclusion of statement of policy;
2. Mitigation on business risk;
3. Renumbering and amendments on of sections X180.5, X180.1, X180.2, X180.4
4. Removal of “Role and Responsibilities of the Compliance Function under x180.7
5. Renumbering of Section x180.8, or the Cross Border Compliance Issue and Section X180.9, or the Outsourcing of Risk Compliance Assessment and Testing.

For more details, please download the 6-page PDF file from our Slideshare account.

Thank you.

C747
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Amendments on exemptions granted to small and micro-enterprises

This is to notify all rural banks concerned of the amendments on subsection X304.1 of the Manual of Regulations for Banks, with respect to the extension of submission granted to micro and small enterprises.  As stipulated:

“Loans small and micro enterprises which are not specifically exempted from the additional documentary requirements specified under the third paragraph of this subsection shall be exempted from said additional documentary requirement upto 31 December 2014.”

For more details on this, please download the attached pdf file: c746

Thank you.

Circular No. 745

Please be advised that Subsection 4306Q.5 of the Manual of Regulations for Banks has been amended, pursuant to Monetary Board Resolution No. 1952, dated 27 December 2011. The amendments cover the reporting requirements for write-off of loans, other credit accomodations, advances and other assets.

C745
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