Bangko Sentral ng Pilipinas said it will strengthen regulations on non-bank financial institutions to make the industry players comply with anti-money laundering measures.
Bangko Sentral Deputy Governor Nestor Espenilla Jr. said the move was in line with the move to prevent the recurrence of money laundering activities in the country, the latest of which involved $81 million that was believed stolen by cyber thieves from the account of Bank of Bangladesh in the Federal Reserve in New York.
The dirty money entered the Philippine banking system through a branch of Rizal Commercial Banking Corp. in Makati City in February. One of the conduits in the transfer of the illegal funds was remittance company Philrem Service Corp.
“We are reviewing Circular 471 which is the regulation on non-bank financial institutions which includes remittance businesses…. So we are upgrading the regulations,” Espenilla told reporters.
“It is under exposure right now, so we are taking industry comments. We are tightening the oversight over non-bank financial institutions such as remittance businesses, money changers and foreign exchange dealers,” Espenilla said, adding that it would “also reflect the recent experience.”
He said the upgraded rules, with clearer and well-defined obligations particularly on money laundering responsibilities, would apply to all existing players. “So we want to basically make sure that everybody follows the same money laundering protocol same as banks,” he said.
Espenilla said in April the regulator was also closely monitoring activities of pawnshops and non-stock savings and loans associations. He said pawnshops, in particular, had evolved beyond the traditional construct of a corner establishment where anybody could bring their jewelry in exchange of money as payback.
He said a significant chunk of pawnshop business was actually derived from remittance activities and other kinds of cross-solling activities. He said pawnshops were the top distributors of micro insurance more than banks, competing with the traditional insurance agents.
Espenilla said the country’s pawnshop law was based on presidential decrees that were issued during the Martial Law and implemented by Bangko Sentral.
Espenilla said shadow banking was an area of growing interest and concern because an unintended consequence of strengthening oversight over the formal banking system might result in the potential enlargement of shadow banking.
Bangko Sentral delisted a total of 250 pawnshops, foreign exchange dealers and remittance agents as of May 31, 2016. Among the delisted firms was Philrem Service Corp. Bangko Sentral said it cancelled the certificate of registration of Philrem for violation of the rules governing non-bank financial institutions.