Designing anti-money laundering awareness and education for safer banking in rural areas

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IN 2021, the Philippines was included in the “gray list” of the Financial Action Task Force that placed the country under an increased monitoring to check its progress or measures against money laundering and terrorism financing.

The designation means the country and the businesses operating within are at high risk, and submission of more regulatory documents and enhanced observance of due diligence are needed.

The status also signals other countries and investors that there is heightened risk in the Philippines. In a study conducted by the International Monetary Fund published May 27 last year, gray listing has a negative impact on the country’s capital flows. Hence, it is an important reminder for financial institutions of their role in fighting money laundering and terrorism financing,” said Jericho Jensen, Chief Data and Analytics Officer and Chief Information Officer of MDI Novare Technologies.

Committed to supporting local financial institutions, particularly rural banks, MDI Novare has kicked off a series of webinars to educate them on anti-money laundering and counter terrorism fighting activities as part of the government’s efforts to establish a clean financial sector.

MDI Novare’s webinar series aims to enhance rural banks’ technical and technological know-how to implement robust systems to fight financial crimes by equipping institutions with the needed skills on how to report on suspected money laundering activities and how to combat them.

The first webinar in the series entitled “A-L, An Introduction to Anti-Money Laundering Systems in the Philippines” was given by Atty. Rainier Dela Fuente, an accredited AML trainer and consultant, and a former financial investigator at the Anti-Money Laundering Council, where he eventually became part of the Council’s Office of the Executive Director.

Legal framework

Despite its current gray listing, the Philippines has been adopting and implementing legal measures to counter money laundering and terrorism financing, the most notable of which is the Anti-Money Laundering Act of 2001, as amended.

The AMLA aims to protect the integrity of bank accounts by ensuring that only accounts originating from legal sources are maintained and those linked to criminal activities are removed from the banking system. The AMLA also aims to prevent the country from being tagged as a money laundering destination. The law also bolsters its international commitment to prevent financial crimes by fulfilling its obligation through information exchanges with other countries and agencies.

Recent AMLA amendments include the enactment of Republic Act 11479 or the Anti-Terrorism Act, which became law in July 2020, and Republic Act 11521, approved in April last year. Under the latter, real estate developers, brokers, offshore gaming operators and service providers are included as covered persons under the AMLA.  

From the traditional definition of money laundering, the AMLA expands the scope of transaction subject to strict scrutiny. These include transacting, converting, transferring, posing, moving, concealing, or disguising transactions associated with money laundering. It further expanded to preparatory acts such as attempting or conspiring to commit money laundering; abetting, assisting, or counseling how to launder funds; facilitation by allowing criminals to use a financial institution or a business establishment; and intentional or deliberate failure to submit reports to the AMLC.

Under current laws, the owner of a sole proprietorship, partners, and the board of directors or trustees of a corporation are liable because they have the ultimate responsibility of complying with the AMLA and implementing its rules and regulations.

Compliance framework

Under the compliance framework of an effective AML system, business establishments and financial institutions like rural banks must identify and verify or validate the identity of its clients based on official documents. Customer profiling must also be done with due diligence using a risk-based approach. During client onboarding, institutions and businesses must implement a client and transaction screening mechanism to ensure that their clients have no criminal records and are not subject to financial sanctions. Records must be stored for a period not less than five years. Meanwhile, transaction reporting includes Covered Transaction Reports (CTR) and Suspicious Transaction Reports (STR). A CTR is triggered when a transaction goes beyond a certain amount, for example P500,000 for banks.

An STR, meanwhile, is generated depending on some red flags such as the client’s lack of underlying trade or legal obligation, linkage to a money laundering activity or if the amount transacted is not commensurate with the client’s profile or financial capacity. CTRs must be submitted to the AMLC within five working days, while STR on the next working day. Failure to submit reports has corresponding penalties and can be a basis of a money laundering complaint.

A comprehensive anti-money laundering solution

Rural banks and other financial institutions can avoid penalties and punishments by submitting timely reports required by the AMLC. Enabling rural banks to achieve this task, MDI Novare has introduced SIEVE AML Transaction Monitoring System, a comprehensive anti-money laundering solution that leverages data integration, analytics, alert/case management, and AMLC regulatory reporting. 

The new solution is built on a sophisticated, high-performance platform that supports the end-to-end process of combating financial crime and working with large volumes of data while automating the tasks as much as possible. The key features of SIEVE AML system include automated transaction monitoring, intelligent network analysis, 360-degree understanding of customers and their transactions, and a simple, highly configurable business user/investigator-centric interface.

SIEVE AML Transaction Monitoring System is built by MDI Novare. With more than 30 years of experience and expertise in the information technology industry, the company is a leading digital transformation enabler for telecommunication companies, financial institutions, manufacturing and BPO firms, and government agencies through next-generation technologies, automation processes, and other end-to-end solutions.

For more information about the webinar, visit https://mdinovare.com and http://www.sieve.com.ph. Interested participants may register via https://bit.ly/AMLWebinarSieve.

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