Bangko Sentral orders banks to be more cautious and vigilant

With the Philippines in the midst of a money laundering scandal involving $81 million of stolen Bangladesh funds, the Bangko Sentral ng Pilipinas (BSP) has ordered local banks to be more cautious and vigilant in processing foreign exchange transactions.

The scandal has compelled the BSP to issue a memorandum on April 5, 2016 to all banks: "Reminder on sound Risk Management Practices when Dealing with Foreign Exchange Dealers, Money Changers and Remittance Agents."

In the memo, BSP Deputy Governor Nestor A. Espenilla Jr. to issue a memorandum ordering that "... banks dealing with foreign exchange dealers, money changers and remittance agents should take extra cautious and vigilance and shall perform enhanced due diligence, upon onboarding and during transaction monitoring, consistent with regulations and the bank's procedures as provided under its Money Laundering and Terrorist financing Prevention Program (MLPP)."

This means that the MLPP should contain appropriate risk management practices to ensure that money laundering and terrorist financing risks are mitigated.

Espenilla is the deputy governor in charge of the Supervision and Examination Sector of the BSP.

Memorandum No. M-2016-004 was issued two months after the $81 million of stolen funds entered the Philippine banking system on February 5, 2016 through the Jupiter Street branch of Rizal Commercial Banking Corporation.

“To this end, banks should ensure the soundness and adequacy of their risk management policies and practices,” the memorandum read.

Such practices include:

• dealing only with parties registered with the BSP

• exercising the “ultimate responsibility” in dealing with remittance agents

• conducting risk assessment of customers of money changers, remittance agents, and foreign exchange dealers

“By nature of their business, [forex dealers, money changer, and remittance agents] may inherently pose higher money laundering/terrorist financing risk which should be appropriately identified, monitored, and mitigated," according to the memorandum.

MEMORANDUM NO. M-2016-004

RCBC

The April 5 memorandum also coincided with the fourth Senate hearing on the Bangladesh Bank heist.

RCBC was linked to the money laundering scheme, since four of the five fictitious accounts opened at the Jupiter branch directly received the $81 million that was moved from the Bangladesh Bank account in New York.

The five accounts were opened in May 2015, according to Senator Paulo Benigno Aquino IV, a member of the Senate blue ribbon committee investigating scheme.

RCBC officials have denied any involvement in the transactions and claimed that these were instigated by sacked Jupiter branch manager Maia Santos-Deguito without their knowledge.

Deguito claimed that she was just following orders and said that she did not receive anything from the transactions.

PhilRem

PhilRem Service Corp. was the remittance firm which handled the fund transfers from the RCBC accounts to several casinos and junket operators.

PhilRem officials claimed they were not aware that the funds were part of a money laundering scheme and that they were simply carrying out the transfers on orders of Deguito.

“Sana pala 'di na kami tinawagan, at 'di namin kinuha ang transaction nito kung ganitong stolen lang pala ang money,” PhilRem President Salud Bautista said during the third committee hearing on March 29. – VDS, GMA News