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: https://rbap.org/wp-content/uploads/2016/04/m004.pdf