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X801 - X803

11.12.31

PART EIGHT

ANTI-MONEY LAUNDERING REGULATIONS

Sec. X801 Declaration of Policy conducted in the head office. A bank and
The BSP adopts the policy of the State to its branches and offices shall be treated as
protect the integrity and confidentiality of one (1) unit.
bank accounts and to ensure that the Whenever local applicable laws and
Philippines in general and the covered regulations of a branch, office, subsidiary
institutions herein described in particular or affiliate based outside the Philippines
shall not be used respectively as a money prohibit the implementation of this Part or
laundering site and conduit for the proceeds any of the provisions of the AMLA, as
of an unlawful activity as hereto defined. amended, its RIRR, and the supervising
(Circular No. 706 dated 05 January 2011) authority in that foreign country issues a
directive forbidding said branch, office,
Sec. X802 Scope of Regulations. These subsidiary or affiliate, the covered
regulations shall apply to all covered institution shall notify the BSP of this
institutions supervised and regulated by the situation and furnish a copy of the
BSP. The term covered institution shall supervising authoritys directive.
refer to banks, OBUs, QBs, trust entities, (Circular No. 706 dated 05 January 2011)
NSSLAs, pawnshops, FX dealers, money
changers, remittance agents, electronic Sec. X803 Definitions of Terms. Except as
money issuers and other FIs which under otherwise defined herein, all terms used
special laws are subject to BSP supervision shall have the same meaning as those terms
and/or regulation, including their that are defined in the AMLA, as amended,
subsidiaries and affiliates as herein defined and its RIRR.
wherever they may be located: a. Money laundering is a crime
a. A subsidiary means an entity more whereby the proceeds of an unlawful
than fifty percent (50%) of the outstanding activity as herein defined are transacted,
voting stock of which is owned by a bank, thereby making them appear to have
QB, trust entity or any other institution originated from legitimate sources. It is
supervised and/or regulated by the BSP. committed by the following:
b. An affiliate means an entity the voting (1) Any person knowing that any
stock of which, to the extent of fifty percent monetary instrument or property represents,
(50%) or less, is owned by a bank, QB, trust involves, or relates to, the proceeds of any
entity, or any other institution supervised unlawful activity, transacts or attempts to
and/or regulated by the BSP. transact said monetary instrument or
Pursuant to Section 20 of the General property;
Banking Law of 2000, a bank authorized (2) Any person knowing that any
by BSP to establish branches or other monetary instrument or property involves
offices within or outside the Philippines the proceeds of any unlawful activity,
shall be responsible for all business performs or fails to perform any act as a
conducted in such branches and offices to result of which he facilitates the offense of
the same extent and in the same manner as money laundering referred to in paragraph
though such business had all been (1) above; and

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(3) Any person knowing that any trading orders, transaction tickets and
monetary instrument or property is required confirmations of sale or investments and
under the act to be disclosed and filed with money market instruments;
the Anti-Money Laundering Council, fails to (4) Contracts or policies of insurance,
do so. life or non-life, and contracts of suretyship;
b. Covered transaction (CT) is a and
transaction in cash or other equivalent (5) Other similar instruments where
monetary instrument involving a total title thereto passes to another by
amount in excess of P500,000 within one endorsement, assignment or delivery.
(1) banking day. e. Transaction refers to any act
c. Suspicious transactions (ST) are establishing any right or obligation or
transactions with covered institutions, giving rise to any contractual or legal
regardless of the amount involved, where relationship between the parties thereto. It
any of the following circumstances exist: also includes any movement of funds by any
(1) There is no underlying legal or means with a covered institution.
trade obligation, purpose or economic f. Unlawful activity refers to any act
justification; or omission or series or combination thereof
(2) The client is not properly identified; involving or having direct relation to the
(3) The amount involved is not following:
commensurate with the business or (1) Kidnapping for ransom under
financial capacity of the client; Article 267 of Act No. 3815, otherwise
(4) Taking into account all known known as the Revised Penal Code (RPC),
circumstances, it may be perceived that the as amended;
clients transaction is structured in order to (2) Sections 4, 5, 6, 8, 9, 10, 12, 13,
avoid being the subject of reporting 14, 15 and 16 of R.A. No. 9165, otherwise
requirements under the AMLA, as amended; known as the Comprehensive Dangerous
(5) Any circumstance relating to the Drug Act of 2002;
transaction which is observed to deviate (3) Section 3 paragraphs B, C, E,
from the profile of the client and/or clients G, H and I of R.A. No. 3019, as
past transactions with the covered amended, otherwise known as the
institutions; Anti-Graft and Corrupt Practices Act;
(6) The transaction is in any way related (4) Plunder under R.A. No. 7080, as
to an unlawful activity or any money amended;
laundering activity or offense under the (5) Robbery and extortion under
AMLA, as amended, that is about to be, is Articles 294, 295, 296, 299, 300, 301 and
being or has been committed; or 302 of the RPC, as amended;
(7) Any transaction that is similar or (6) Jueteng and Masiao punished as
analogous to any of the foregoing. illegal gambling under P.D. No. 1602;
d. Monetary instrument refers to: (7) Piracy on the high seas under the
(1) Coins or currency of legal tender of RPC, as amended, and P.D. No. 532;
the Philippines, or of any other country; (8) Qualified theft under Article 310 of
(2) Drafts, checks and notes; the RPC, as amended;
(3) Securities or negotiable instruments, (9) Swindling under Article 315 of the
bonds, commercial papers, deposit RPC, as amended;
certificates, trust certificates, custodial (10) Smuggling under R.A. Nos. 455
receipts or deposit substitute instruments, and 1937;

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(11) Violations under R.A. No. 8792 , (4) Is not subject to inspection by the
otherwise known as the Electronic authority that licensed it to conduct
Commerce Act of 2000; banking activities.
(12) Hijacking and other violations j. Beneficial owner refers to natural
under R.A. No. 6235; destructive arson and person(s) who ultimately owns or controls
murder, as defined under the RPC, as a customer and/or the person on whose
amended, including those perpetrated by behalf a transaction is being conducted.
terrorists against non-combatant persons It also incorporates those persons who
and similar targets; exercise ultimate effective control over a
(13) Fraudulent practices and other legal person or arrangement.
violations under R.A. No. 8799, otherwise k. Politically Exposed Person or PEP
known as the Securities Regulation Code refers to an individual who is or has been
of 2000; and entrusted with prominent public positions
(14) Felonies or offenses of a similar in the Philippines or in a foreign state,
nature that are punishable under the penal including heads of state or of government,
laws of other countries. senior politicians, senior national or local
g. Customer refers to any person or government, judicial or military officials,
entity that keeps an account, or otherwise senior executives of government or state
transacts business, with a covered -owned or -controlled corporations and
institution and any person or entity on important political party officials.
whose behalf an account is maintained or l. Correspondent banking refers to
a transaction is conducted, as well as the activities of one bank (the correspondent
beneficiary of said transactions. A customer bank) having direct connection or friendly
also includes the beneficiary of a trust, an service relations with another bank (the
investment fund, a pension fund or a respondent bank).
company or person whose assets are m. Fund/wire transfer refers to any
managed by an asset manager, or a grantor transaction carried out on behalf of an
of a trust. originator (both natural and juridical)
h. Shell company refers to a legal entity through an FI (Originating Institution) by
which has no business substance in its own electronic means with a view to making an
right but through which financial amount of money available to a beneficiary
transactions may be conducted. at another FI (Beneficiary Institution). The
i. Shell bank refers to a shell company originator person and the beneficiary person
incorporated as a bank or made to appear may be the same person.
to be incorporated as a bank but has no n. Cross border transfers refers to
physical presence and no affiliation with a any wire transfer where the originating and
regulated financial group. It can also be a beneficiary institutions are located in
bank that: different countries. It shall also refer to any
(1) Does not conduct business at a chain of wire transfer that has at least one
fixed address in a jurisdiction in which cross border element.
the shell bank is authorized to engage; o. Domestic transfer refers to any wire
(2) Does not employ one or more transfer where the originating and
individuals on a full time basis at this fixed beneficiary institutions are located in the
address; same country. It shall refer to any chain of
(3) Does not maintain operating wire transfer that takes place entirely within
records at this address; and the borders of a single country, even though

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X803 - X805
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the system used to effect the fund/wire Sec. X804 Basic Principles and Policies
transfer may be located in another to Combat Money Laundering. In line
country. with the declaration of policy, covered
p. Originating institution refers to the institutions shall apply the following
entity utilized by the originator to transfer principles:
funds to the beneficiary and can either a. Conduct business in conformity
be: with high ethical standards in order to
(1) A covered institution as specially protect its safety and soundness as well as
defined by this Part and as generally the integrity of the national banking and
defined by the AMLA, as amended, and its financial system;
RIRR; or b. Know sufficiently your customer at
(2) An FI operating outside the all times and ensure that the financially or
Philippines that is other than covered socially disadvantaged are not denied
institutions referred to in Item (1) but access to financial services while at the
conducts business operations and activities same time prevent suspicious individuals
similar to them. or entities from opening or maintaining an
q. Beneficiary institution refers to the account or transacting with the covered
entity that will pay out the money to the institution by himself or otherwise;
beneficiary and can either be: c. Adopt and effectively implement a
(1) A covered institution as specifically sound AML and terrorist financing risk
defined by this Part and as generally management system that identifies,
defined by the AMLA, as amended, and its assesses, monitors and controls risks
RIRR; or associated with money laundering and
(2) An FI operating outside the terrorist financing;
Philippines that is other than covered d. Comply fully with this Part and
institutions referred to in Item (1) but existing laws aimed at combating money
conducts business operations and activities laundering and terrorist financing by
similar to them. making sure that officers and employees are
r. Intermediary institution refers to the aware of their respective responsibilities and
entity utilized by the originating and carry them out in accordance with superior
beneficiary institutions where both have no and principled culture of compliance; and
correspondent banking relationship with e. Fully cooperate with Anti-Money
each other but have established relationship Laundering Council (AMLC) for the
with the intermediary institution. It can effective implementation and enforcement
either be: of the AMLA, as amended, and its RIRR.
(1) A covered institution as specifically (Circular No. 706 dated 05 January 2011)
defined by this Part and as generally
defined by the AMLA, as amended, and its A. RISK MANAGEMENT
RIRR; or
(2) An FI operating outside the Sec. X805 Risk Management. All covered
Philippines that is other than covered institutions shall develop sound risk
institutions referred to in Item (1) but management policies and practices to ensure
conducts business operations and activities that risks associated with money-laundering
similar to them. such as counterparty, reputational,
(Circular No. 706 dated 05 January 2011) operational, and compliance risks are

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X805 - X805.2
11.12.31

identified, assessed, monitored, mitigated (1) Ensure compliance by all


and controlled, as well as to ensure effective responsible officers and employees with this
implementation of this part, to the end that Part, the AMLA, as amended, the RIRR and
covered institutions shall not be used as a its own MLPP. It shall conduct periodic
vehicle to legitimize proceeds of unlawful compliance checking which covers, among
activity or to facilitate or finance terrorism. others, evaluation of existing processes,
The four (4) areas of sound risk policies and procedures including on-going
management practices are adequate and monitoring of performance by staff and
active board and senior management officers involved in money laundering and
oversight, acceptable policies and terrorist financing prevention, reporting
procedures embodied in a money channels, effectivity of the electronic money
laundering and terrorist financing laundering transaction monitoring system
prevention compliance program, and record retention system through sample
appropriate monitoring and Management testing and review of audit or examination
Information System and comprehensive reports. It shall also report compliance
internal controls and audit. findings to the board or any board-level
(Circular No. 706 dated 05 January 2011) committee;
(2) Ensure that infractions, discovered
X805.1 Board and senior either by internally initiated audits or by
management oversight. Notwithstanding special or regular examination conducted
the provisions specifying the duties and by the BSP, are immediately corrected;
responsibilities of the compliance office and (3) Inform all responsible officers and
internal audit, it shall be the ultimate employees of all resolutions, circulars and
responsibility of the board of directors to other issuances by the BSP and the AMLC
fully comply with the provisions of this Part, in relation to matters aimed at preventing
the AMLA, as amended, and its RIRR. For money laundering and terrorist financing;
this reason, it shall ensure that oversight on (4) Alert senior management, the board
the institutions compliance management is of directors, or the board-level or approved
adequate. committee if it believes that the institution
(Circular No. 706 dated 05 January 2011)
is failing to sensibly address anti-money
X805.1.a Compliance office laundering and terrorist financing issues;
Management of the implementation of the and
covered institutions Money Laundering and (5) Organize the timing and content of
Terrorist Financing Prevention Program AML training of officers and employees
(MLPP) shall be a primary task of the including regular refresher trainings as
compliance office. To ensure the stated in Sec. X809.
independence of the office, it shall have a (Circular No. 706 dated 05 January 2011)
direct reporting line to the board of
directors or any board-level or approved X805.2 Money laundering and
committee on all matters related to AML and terrorist financing prevention program. All
terrorist financing compliance and their risk covered institutions shall adopt a
management. It shall be principally comprehensive and risk-based MLPP geared
responsible for the following functions toward the promotion of high ethical and
among other functions that may be delegated professional standards and the prevention
by senior management and the board, to wit: of the bank being used, intentionally or

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X805.2
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unintentionally, for money laundering and transactions to the AMLC when their
terrorism financing. The MLPP shall be aggregated amounts breach the threshold.
consistent with the AMLA, as amended, and The ST reporting shall include a reporting
the provisions set out in this Part and chain under which a suspicious transaction
designed according to the covered will be processed and the designation of a
institutions corporate structure and risk board-level or approved committee who
profile. It shall be in writing, approved by will ultimately decide whether or not the
the board of directors or by the country/ covered institution should file a report to
regional head or its equivalent for local the AMLC. If the resources of the covered
branches of foreign banks, and well institution do not permit the designation of
disseminated to all officers and staff who a committee, it may designate the
are obligated by law and by their program compliance officer to perform this function
to implement the same. Where a covered instead: Provided, That the board of directors
institution has branches, subsidiaries, is informed of his decision.
affiliates or offices located within and/or b. An effective and continuous
outside the Philippines, it shall adopt an anti-money laundering and countering
institution-wide MLPP that shall be of terrorist financing training program for
implemented on a consolidated basis. all directors, and responsible officers and
The MLPP shall also be readily available employees, to enable them to fully comply
in user-friendly form, whether in hard or soft with their obligations and responsibilities
copy. The covered institution must put up a under this Part, the AMLA, as amended, its
procedure to ensure an audit trail evidencing RIRR and their internal policies and
dissemination process for new and amended procedures as embodied in the MLPP. The
policies and procedures. The program shall training program shall also include refresher
embody the following at a minimum: trainings to remind these individuals of their
a. Detailed procedures of the covered obligations and responsibilities as well as
institution's compliance and implementation update them of any changes in AML laws,
of the following major requirements of the rules and internal policies and procedures.
AMLA, as amended, its RIRR, and this Part, c. An adequate screening and
to wit: recruitment process to ensure that only
(1) Customer identification process qualified personnel who have no criminal
including acceptance policies and on-going record/s are employed to assume sensitive
monitoring processes; banking functions;
(2) Record keeping and retention; d. An internal audit system in
(3) Covered transaction reporting; and accordance with Subsec. X805.4;
(4) Suspicious transaction reporting e. An independent audit program with
including the adoption of a system, written scope of audit that will ensure the
electronic or manual, of flagging, completeness and accuracy of the
monitoring and reporting of transactions that information and identification documents
qualify as suspicious transactions, obtained from clients, the covered and
regardless of amount or that will raise a red suspicious transactions reports submitted to
flag for purposes of conducting further the AMLC, and the records retained in
verification or investigation, or transactions compliance with this Part as well as
involving amounts below the threshold to adequacy and effectiveness of the training
facilitate the process of aggregating them for program on the prevention of money
purposes of future reporting of such laundering and terrorism financing;

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X805.2 - X805.4
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f. A mechanism that ensures all X805.3 Monitoring and reporting


deficiencies noted during the audit and/or tools. All covered institutions shall adopt
BSP regular or special examination are an AML and terrorist financing monitoring
immediately corrected and acted upon; system that is appropriate for their
g. Cooperation with the AMLC; and risk-profile and business complexity and in
h. Designation of an AML compliance accordance with this Part. The system
officer, who shall at least be at senior should be capable of generating timely,
officer level, as the lead implementor of the accurate and complete reports to lessen the
program within an adequately staffed likelihood of any reputational and
compliance office. The AML compliance compliance risks, and to regularly apprise
officer may also be the liaison between the the board of directors and senior
covered institution, the BSP and the AMLC management on anti-money laundering and
in matters relating to the covered terrorist financing compliance.
institutions AML compliance. Where (Circular No. 706 dated 05 January 2011)
resources of the covered institution do not
permit the hiring of an AML compliance X805.3.a Electronic monitoring and
officer, the compliance officer shall also reporting systems for money laundering
assume the responsibility of the former. UBs and KBs shall adopt an electronic AML
(Circular No. 706 dated 05 January 2011) system capable of monitoring risks
associated with money-laundering and
X805.2.a Submission of the revised terrorist financing as well as generating
and updated MLPP1; Approval by the board timely reports for the guidance and
of directors or country head. Within 180 information of its board of directors and
days from 27 January 2011, all covered senior management in addition to the
institutions shall prepare and have available functionalities mentioned in Subsec.
for inspection an updated MLPP embodying X807.2.
(Circular No. 706 dated 05 January 2011)
the principles and provisions stated in this
Part. The compliance officer shall submit X805.3.b Manual monitoring. For
to the Anti-Money Laundering Specialist covered institutions other than UBs and
Group, SES I, a sworn certification that the KBs, it need not have an electronic system
revised MLPP had been prepared, duly but must ensure that it has the means of
noted and approved by the board of complying with Subsec. X805.3.
directors or the country head or its equivalent (Circular No. 706 dated 05 January 2011)
for local branches of foreign banks.
Henceforth, each MLPP shall be X805.4 Internal audit. The internal
regularly updated at least once every two audit function associated with money
(2) years to incorporate changes in AML laundering and terrorist financing should be
policies and procedures, latest trends in conducted by qualified personnel who are
money laundering and terrorist financing independent of the office being audited. It
typologies, and latest pertinent BSP must have the support of the board of
issuances. Any revision or update in the directors and senior management and have
MLPP shall likewise be approved by board a direct reporting line to the board or a board-
of directors or the country/regional head or its level audit committee.
equivalent for local branches of foreign banks. The internal audit shall, in addition to
(Circular No. 706 dated 05 January 2011 and M-2011-045 dated those specified by this Part, be responsible
16 August 2011) for the periodic and independent evaluation

1
RBs are given a three (3) months extension or up to 26 October 2011, within which to submit to the AMLSG
the Sworn Certification.

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X805.4 - X806.1.a
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of the risk management, degree of this line, it shall formulate a risk-based


adherence to internal control mechanisms and tiered customer acceptance policy,
related to the customer identification customer retention policy and customer
process, such as the determination of the identification process that involves reduced
existence of customers and the completeness customer due diligence (CDD) for
of the minimum information and/or potentially low risk clients and enhanced
documents establishing the true and full CDD for higher risk accounts.
identity of, and the extent and standard of (Circular No. 706 dated 05 January 2011)
due diligence applied to, customers, CT and
ST reporting and record keeping and X806.1 Customer acceptance policy
retention, as well as the adequacy and Every covered institution shall develop clear,
effectiveness of other existing internal written and graduated acceptance policies
controls associated with money laundering and procedures that will ensure that the
and terrorist financing. financially or socially disadvantaged are not
For UBs and KBs with electronic money denied access to financial services while at
laundering transaction monitoring system, the same time prevent suspicious
in addition to the above, the internal audit individuals or entities from opening an
shall include determination of the efficiency account.
of the systems functionalities as required (Circular No. 706 dated 05 January 2011)
by Subsecs. X805.3 and X807.2.
The results of the internal audit shall X806.1.a Criteria for type of
be timely communicated to the board of customers: low, normal and high risk;
directors and shall be open for scrutiny standards for applying reduced, average
by BSP examiners in the course of the and enhanced due diligence. Covered
regular or special examination without institutions shall specify the criteria and
prejudice to the conduct of its own description of the types of customers that
evaluation whenever necessary. Results of are likely to pose low, normal or high risk
the audit shall likewise be promptly to their operations as well as the standards
communicated to the compliance office in applying reduced, average and enhanced
for its appropriate corrective action. The due diligence including a set of conditions
Compliance Office shall regularly submit for the denial of account opening.
reports to the board to inform them of Enhanced due diligence shall be applied
managements action to address to customers that are assessed by the
deficiencies noted in the audit. covered institution or by this Part as high
(Circular No. 706 dated 05 January 2011) risk for money laundering and terrorist
financing.
B.Customer Identification Process For customers assessed to be of low
risk such as an individual customer with
Sec. X806 Customer Identification regular employment or economically
A covered institution shall maintain a productive activity, small account balance
system of verifying the true identity of their and transactions, and a resident in the area
customers and, in case of corporate and of the covered institutions office or
juridical entities, require a system of branch, the covered institutions may
verifying their legal existence and apply reduced due diligence. Some entities
organizational structure as well as the may likewise be considered as low risk
authority and identification of all persons clients, i.e., banking institutions, trust
purporting to act on their behalf. Along entities and QBs authorized by the

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X806.1.a - X806.1.c
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BSP to operate as such, publicly-listed (a) In cases of individual customers,


companies subject to regulatory obtain a list of banks where the individual
disclosure requirements, government has maintained or is maintaining an
agencies including GOCCs. account, list of companies where he is a
In designing a customer acceptance director, officer or stockholder, and
policy, the following factors shall be taken banking services to be availed of.
into account: (b) For entities assessed as high risk
(1) Background and source of funds; customers, such as shell companies,
(2) Country of origin and residence or covered institutions shall, in addition to
operations; minimum information and/or documents
(3) Public or high profile position of the enumerated above, obtain additional
customer or its directors/trustees, information including, but not limited to, prior
stockholders, officers and/or authorized or existing bank references, the name, present
signatory; address, date and place of birth, nature of work,
(4) Linked accounts; nationality and source of funds of each of the
(5) Watchlist of individuals and primary officers (President, Treasurer and
entities engaged in illegal activities or authorized signatory/ies), stockholders
terrorist-related activities as circularized by owning at least 2% of the voting stock, and
BSP, AMLC, and other international directors/trustees/partners as well as their
entities or organizations, such as the Office respective identification documents.
of Foreign Assets Control (OFAC) of the (2) Conduct validation procedures on
U.S. Department of the Treasury and United any or all of the information provided in
Nations Sanctions List; accordance with Subsec. X806.1.c.
(6) Business activities; and (3) Obtain senior management approval
(7) Type of services/products/ for establishing business relationship.
transactions to be entered with the covered Where additional information cannot be
institution. obtained, or any information or document
In all instances, the covered institutions provided is false or falsified, or result of the
shall document how a specific customer validation process is unsatisfactory, the
was profiled (low, normal or high) and what covered institution shall deny banking
standard of CDD (reduced, average or relationship with the individual or entity
enhanced) was applied. without prejudice to the reporting of a
(Circular No. 706 dated 05 January 2011) suspicious transaction to the AMLC when
circumstances warrant.
X806.1.b Enhanced due diligence (Circular No. 706 dated 05 January 2011)
Whenever enhanced due diligence is
applied as required by this Part or by the X806.1.c Minimum validation
covered institutions customer acceptance procedures. Validation procedures for
policy, the covered institution shall, in individual customers shall include, but is
addition to profiling of customers and not limited to, the following:
monitoring of their transactions, do the (1) Confirming the date of birth from a
following: duly authenticated official document;
(1) Obtain additional information other (2) Verifying the permanent address
than the minimum information and/or through evaluation of utility bills, bank or
documents required for the conduct of credit card statement or other documents
average due diligence as enumerated showing permanent address or through
under Subsec. X806.2.a and X806.2.b. on-site visitation;

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X806.1.c - X806.1.e.1
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(3) Contacting the customer by phone, covered institution may open an account
email or letter (such as sending of thank under the official name of these entities with
you letters); and only no. 4 of those required under Subsec.
(4) Determining the authenticity of the X806.2.b (board resolution duly certified by
identification documents through validation the corporate secretary authorizing the
of its issuance by requesting a certification signatory to sign on behalf of the entity)
from the issuing authority or by any other obtained at the time of account opening.
means. (Circular No. 706 dated 05 January 2011)
For corporate or juridical entities,
validation procedures shall include, but not X806.1.e Face-to-face contact. No
limited to, the following: new accounts shall be opened and created
(1) Requiring the submission of audited without face-to-face contact and personal
financial statements conducted by a interview between the covered institutions
reputable accounting/auditing firm; duly authorized personnel and the
(2) Inquiring from the supervising potential customer except under Subsecs.
authority the status of the entity; X806.1.e.1 to e.3.
(3) Obtaining bank references; (Circular No. 706 dated 05 January 2011)
(4) On-site visitation of the company;
and X806.1.e.1 Account opened through
(5) Contacting the entity by phone, a trustee, agent, nominee, or intermediary
email or letter (such as thank you letters). Where the account is opened through a
(Circular No. 706 dated 05 January 2011) trustee, agent, nominee or intermediary, the
covered institution shall establish and
X806.1.d Reduced due diligence record the true and full identity and
Whenever reduced due diligence is applied existence of both the (a) trustee, nominee,
in accordance with the covered institutions agent or intermediary and (b) trustor,
customer acceptance policy, the following principal, beneficial owner, or person on
rules shall apply: whose behalf the account is being opened.
(1) For individual customers, a covered The covered institution shall determine the
institution may open an account under the true nature of the parties capacities and
true and full name of the account owner or duties by obtaining a copy of the written
owners and defer acceptance of the document evidencing their relationship and
minimum information. Deferred acceptance apply the same criteria for assessing the risk
of minimum information shall mean profile and determining the standard of due
obtaining information numbers 1 to 7 of diligence to be applied to both.
Subsec. X806.2.a at the time of account In cases of several trustors, principals,
opening while the rest, numbers 8 to 11, beneficial owners, or persons on whose
may be obtained within a reasonable time behalf the account is being opened where
but not exceeding ninety (90) days from the trustee, nominee, agent or intermediary
account opening. opens a single account but keeps therein
(2) For corporate, partnership, and sole sub-accounts that may be attributable to
proprietorship entities, and other entities each trustor, principal, beneficial owner, or
such as banking institutions, trust entities person on whose behalf the account is
and QBs authorized by the BSP to operate being opened, the covered institution shall,
as such, publicly listed companies subject at the minimum, obtain the true and full
to regulatory disclosure requirements, name, place and date of birth or date of
government agencies including GOCCs, a registration, as the case may be, present

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X806.1.e.1 - X806.2.a
13.12.31

address, nature of work or business, and Subsec. X806.2.e.1 has already conducted
source of funds as if the account was opened the requisite face-to-face contact on its own
by them separately. Where the covered customer who was referred to a covered
institution is required to report a CT or the institution, the latter may rely on the
circumstances warrant the filing of an ST, it representation of the third party that it has
shall obtain such other information on every already conducted face-to-face contact:
trustor, principal, beneficial owner, or Provided, That the pertinent requirements
person on whose behalf the account is in Subsec. X806.2.e.1 are also met.
being opened in order that a complete and (Circular No. 706 dated 05 January 2011)
accurate report may be filed with the AMLC.
In case a covered institution entertains X806.2 Customer identification
doubts that the trustee, nominee, agent or Covered institutions shall establish and
intermediary is being used as a dummy in record the true identity of its customers
circumvention of existing laws, it shall apply based on valid identification1 document/s
enhanced due diligence in accordance with specified in Subsec. X806.2.c2.
(Circular No. 706 dated 05 January 2011, as amended by
Subsec. X806.1.b. M-2013-052 dated 22 November 2013)
(Circular No. 706 dated 05 January 2011)
X806.2.a New individual customers
X806.1.e.2 Outsourcing Covered institutions shall develop a
arrangement. Subject to existing rules on systematic procedure for establishing the
outsourcing of specified banking activities, true and full identity of new individual
a covered institution, without prior customers and shall open and maintain the
Monetary Board approval, may outsource account only in the true and full name of
to a counterparty the conduct of the the account owner or owners.
requisite face-to-face contact: Provided, That Unless otherwise stated in this Part,
such arrangement is formally documented average due diligence requires that the
and: Provided, further, That the conditions covered institution obtain, at the time of
under Subsec. X806.2.d are met. account opening, all the following
If the counterparty is an entity other than minimum information and confirming these
a covered institution as herein defined, information with the valid identification
covered institutions shall ensure that the documents stated in Subsec. X806.2.c from
employees or representatives of the individual customers and authorized
counterparty conducting the face-to-face signatory/ies of corporate and juridical entities:
contact undergo equivalent training (1) Name;
program as that of its frontliners undertaking (2) Present address;
a similar activity. Covered institutions shall (3) Date and place of birth;
likewise monitor and review annually the (4) Nature of work, name of employer
performance of the counterparty to assist or nature of self-employment/business;
them in determining whether or not to (5) Contact details;
continue with the arrangement. (6) Specimen signature;
(Circular No. 706 dated 05 January 2011) (7) Source of funds;
(8) Permanent address;
X806.1.e.3 Third party reliance
(9) Nationality;
Where a third party as defined under
(10) Tax identification number (TIN),

1
Temporarily relaxed until 31 December 2013 for the victims of Super Typhoon Yolanda for transactions
P50,000 and below and subject to conditions prescribed under Memorandum No. 2013-052 dated
22 November 2013.
2
With additional special regulatory relief in areas affected by Tropical Depression Yolanda as provided
under Appendix 89a (Circular No. 820 dated 06 December 2013).

Manual of Regulations for Banks Part VIII - Page 11


X806.2.a - X806.2.c
12.12.31

SSS number or GSIS number, if any; and (7) Source of funds and nature of
(11) Name, present address, date and business;
place of birth, nature of work and source of (8) Name, present address, date and
funds of beneficial owner or beneficiary, place of birth, nature of work and source of
whenever applicable. funds of beneficial owner or beneficiary, if
(Circular No. 706 dated 05 January 2011) applicable; and
(9) For entities registered outside the
X806.2.b New corporate and juridical Philippines, similar documents and/or
entities. Covered institutions shall develop information shall be obtained, duly
a systematic procedure for identifying authenticated by the Philippine Consulate
corporate, partnership and sole where said entities are registered.
proprietorship entities as well as the (Circular No. 706 dated 05 January 2011)
stockholders/partners/owners, directors,
officers and authorized signatories of these X806.2.c Valid identification
entities. It shall open and maintain accounts documents. The following guidelines govern
only in the true and full name of the entity the acceptance of valid ID cards for all types
and shall have primary responsibility to of financial transaction by a customer and
ensure that the entity has not been, or is not the authorized signatory/ies of a corporate
in the process of being dissolved, struck-off, or juridical entity, including financial
wound-up, terminated, or otherwise placed transactions involving Overseas Filipino
under receivership or liquidation. Workers (OFWs), in order to promote
Unless otherwise stated in this Part, access of Filipinos to services offered by
average due diligence requires that the formal FIs, particularly those residing in the
covered institution obtain the following remote areas, as well as to encourage and
minimum information and/or documents facilitate remittances of OFWs through the
before establishing business relationships: banking system:
(1) Certificates of Registration issued by (1) Customers and the authorized
the Department of Trade and Industry for signatory/ies of a corporate or juridical
single proprietors, or by the SEC for entity who engage in a financial transaction
corporations and partnerships, and by the with covered institutions for the first time
Bangko Sentral for money changers/foreign shall be required to present the original and
exchange dealers and remittance agents; submit a clear copy of at least one (1) valid
(2) Articles of Incorporation or photo bearing ID document issued by an
Association and By-Laws; official authority.
(3) Principal business address; For this purpose, the term official
(4) Board or Partners Resolution duly authority shall refer to any of the following:
certified by the Corporate/Partners Secretary (a) Government of the Republic of the
authorizing the signatory to sign on behalf Philippines;
of the entity; (b) Its political subdivisions and
(5) Latest General Information Sheet instrumentalities;
which lists the names of directors/trustees/ (c) GOCCs; and
partners, principal, stockholders owning at (d) Private entities or institutions
least twenty percent (20%) of the outstanding registered with or supervised or regulated
capital stock and primary officers such as either by the Bangko Sentral, SEC or IC.
the President and Treasurer; Valid IDs include the following:
(6) Contact numbers of the entity and 1. Passport including those issued by
authorized signatory/ies; foreign governments;

Part VIII - Page 12 Manual of Regulations for Banks


X806.2.c - X806.2.d
13.12.31

2. Drivers license; (5) A covered institution may classify


3. PRC ID; identification documents based on its
4. NBI clearance; reliability and ability to validate the
5. Police clearance; information indicated in the identification
6. Postal ID; document with that provided by the customer.
7. Voters ID; (6) Whenever it deems necessary, a
8. TIN; covered institution may accept other IDs not
9. Barangay certification; enumerated in this Subsection: Provided,
10. GSIS e-Card; That it shall not be the sole means of
11. SSS card; identification.
12. Senior Citizen card; (7) In case the identification documents
13. Overseas Workers Welfare mentioned above or other identification
Administration ID; documents acceptable to the covered
14. OFW ID; institution do not bear any photo of the
15. Seamans book; customer or authorized signatory, or the
16. Alien Certificate of Registration/ photo-bearing ID or a copy thereof does not
Immigrant Certificate of Registration; clearly show the face of the customer or
17. Government office and GOCC ID authorized signatory, a covered institution
(e.g., AFP, HDMF IDs); may utilize its own technology to take the
18. ID issued by the National Council photo of the customer or authorized signatory.
on Disability Affairs; (Circular No. 706 dated 05 January 2011, as amended by Circular
19. DSWD certification; No. 792 dated 03 May 2013 and M-2012-21 dated 27 April
2012)
20. IBP ID;
21. Company IDs issued by private X806.2.d Outsourcing of the
entities or institutions registered with or gathering of minimum information and/or
supervised or regulated either by the Bangko documents. Except for deposit taking, which
Sentral, SEC or IC; and is an inherent banking function that cannot
22. PhilHealth Health Insurance Card be outsourced and subject to existing rules
ng Bayan. on outsourcing of specified banking
(2) Students who are beneficiaries of activities, a covered institution may, without
remittances/fund transfers and who are not prior Monetary Board approval, outsource
yet of voting age, may be allowed to present to a counterparty, which may or may not
the original and submit a clear copy of one be a covered institution as herein defined,
(1) valid photo-bearing school ID duly signed the gathering of the minimum information
by the principal or head of the school. and/or documents required to be obtained
(3) Where the customer or authorized by this Part: Provided, That the ultimate
signatory is a non-Philippine resident, responsibility for knowing the customer
similar IDs duly issued by the foreign and for keeping the identification documents
government where the customer is a shall lie with the covered institution
resident or a citizen may be presented. and compliance with the following
(4) A covered institution shall require conditions:
their customers or authorized signatory to For covered institution counterparty:
submit a clear copy of one (1) valid ID on a (1) There is a written service level
one (1)-time basis only at the agreement approved by the board of
commencement of business relationship. directors of both covered institutions;
They shall require their clients to submit (2) The counterparty has a reliable and
an updated photo and other relevant acceptable customer identification system
information on the basis of risk and materiality.

Manual of Regulations for Banks Part VIII - Page 13


X806.2.d - X806.2.e.1.a
11.12.31

and training program in place; and to both.


(3) In line with requirement no.1 above, In case it entertains doubts as to
all identification information and/or whether the trustee, nominee, agent or
documents shall be turned over within a intermediary is being used as a dummy in
period not exceeding ninety (90) calendar circumvention of existing laws, it shall apply
days to the covered institution, which shall enhanced due diligence in accordance with
carefully review the documents and conduct Subsec. X806.1.b.
the necessary risk assessment of the (Circular No. 706 dated 05 January 2011)
customer.
For non-covered institution counterparty: X806.2.e.1 Where the customer
(1) All conditions required for covered transacts through a trustee, nominee, agent
institutions counterparty; or intermediary which is a third party as
(2) The covered institution outsourcing herein defined (Third Party Reliance). A
the activity shall likewise ensure that the covered institution may rely on the customer
employees or representatives of the identification process undertaken by a third
counterparty establishing the true and full party. For purposes of this Subsection, the
identity of the customer undergo equivalent third party shall refer to a:
training program as that of the covered (a) covered institution as herein
institution's own employees undertaking a specifically defined and as generally defined
similar activity; and by AMLA, as amended, and its RIRR; or
(3) Annual monitoring and review by the (b) an FI operating outside the
covered institution of the performance of the Philippines that is covered by equivalent
counterparty to assist it in determining customer identification requirements.
whether or not to continue with the A Bangko Sentral-accredited custodian
arrangement. may likewise rely in accordance with this
(Circular No. 706 dated 05 January 2011) Part on the face-to-face contact and
gathering of minimum information to
X806.2.e Trustee, nominee, agent or establish the existence and full identity of
intermediary account. Where any the customer conducted by the seller or
transaction is conducted by a trustee, issuer of securities or by the global
nominee, agent or intermediary, either as an custodian provided the latter has an
individual or through a fiduciary relationship, equivalent customer identification
a corporate vehicle or partnership, on behalf requirements.
of a trustor, principal, beneficial owner or (Circular No. 706 dated 05 January 2011)
person on whose behalf a transaction is
X806.2.e.1.a Third party is a covered
being conducted, covered institutions shall
institution specifically defined by this Part
establish and record the true and full identity
and as generally defined by AMLA, as
and existence of both the (1) trustee,
amended, and its RIRR. A covered institution
nominee, agent or intermediary and the
may rely on the identification process
(2) trustor, principal, beneficial owner or
conducted by a third party: Provided, That the
person on whose behalf the transaction is
covered institution shall obtain from the third
being conducted. The covered institution
party a written sworn certification containing
shall determine the true nature of the parties
the following:
capacities and duties by obtaining a copy of
(1) The third party has conducted the
the written document evidencing their
requisite customer identification
relationship and apply the same standards
requirements in accordance with this Part
for assessing the risk profile and determining
and its own MLPP including the face-to-face
the standard of due diligence to be applied

Part VIII - Page 14 Manual of Regulations for Banks


X806.2.e.1.a - X806.2.h
11.12.31

contact requirement to establish the if the customer identification process is not


existence of the ultimate customer and has diligently followed. Covered institutions
in its custody all the minimum information therefore shall endeavor to establish and
and/or documents required to be obtained record the true and full identity of these
from the customer; and customers and establish a policy on what
(2) The relying covered institution shall standard of due diligence will apply to them.
have the ability to obtain identification They shall also require approval by a senior
documents from the third party upon request officer other than the private banking/wealth
without delay. management/similar activity relationship
(Circular No. 706 dated 05 January 2011) officer or the like for acceptance of
customers of private banking, wealth
X806.2.e.1.b Third party is an FI management and similar activities.
operating outside the Philippines that is (Circular No. 706 dated 05 January 2011)
other than covered institutions referred to
in Subsec. X806.2.e.1.a but conducts X806.2.g Politically exposed person
business operations and activities similar A covered institution shall endeavor to
to them. All the contents required in the establish and record the true and full
sworn certification mentioned in Subsec. identity of PEPs as well as their immediate
X806.2.e.1.a shall apply with the additional family members and the entities related to
requirement that the laws of the country them and establish a policy on what
where the third party is operating has equal standard of due diligence will apply to them
or more stringent customer identification taking into consideration their position and
process requirement and that it has not been the risks attendant thereto.
cited in violation thereof. It shall, in (Circular No. 706 dated 05 January 2011)
addition to performing normal due diligence
measures, do the following: X806.2.h Correspondent banking
(1) Gather sufficient information about Because of the risk associated with dealing
the third party and the group to which it with correspondent accounts where it may
belongs to understand fully the nature of its unknowingly facilitate the transmission, or
business and to determine from publicly holding and management of proceeds of
available information the reputation of the unlawful activities or funds intended to
institution and the quality of supervision, finance terrorist activities, covered
including whether it has been subject to institutions shall adopt policies and
money laundering or terrorist financing procedures for correspondent banking
investigation or regulatory action; activities and designate an officer
(2) Document the respective responsible in ensuring compliance with
responsibilities of each institution; and these policies and procedures. A covered
(3) Obtain approval from senior institution may rely on the customer
management at inception of relationship identification process undertaken by the
before relying on the third party. respondent bank. In such case, it shall
(Circular No. 706 dated 05 January 2011) apply the rules on third party reliance
under Subsec. X806.2.e.1, treating the
X806.2.f Private banking/wealth respondent bank as the third party as
management operations. These services, defined therein. In addition, the
which by their nature involve high measure correspondent bank shall:
of client confidentiality, are more open to (1) Gather sufficient information about
the elements of reputational risk especially the respondent institution to understand fully

Manual of Regulations for Banks Part VIII - Page 15


X806.2.h - X806.2.i
11.12.31

the nature of the respondents business and same person, the beneficiary institution may
to determine from publicly available rely on the customer due diligence
information the reputation of the institution conducted by the originating institution
and the quality of supervision, including provided the rules on third party reliance
whether it has been subject to money under Subsec. X806.2.e.1 are met, treating
laundering or terrorist financing the originating institution as third party as
investigation or regulatory action. therein defined.
(2) Assess the respondent institutions (2) The originating institution shall not
anti-money laundering and terrorist accept instructions to fund/wire transfer
financing controls. from a non-customer originator, unless it
(3) Obtain approval from senior has conducted the necessary customer due
management before establishing diligence to establish the true and full
correspondent relationships. identity and existence of said originator.
(4) Document the respective (3) In cross border transfers, if the
responsibilities of each institution. originator is a high risk customer as herein
(5) With respect to payable-through described, the beneficiary institution shall
accounts, be satisfied that the respondent conduct enhanced due diligence on the
bank has verified the identity of, and beneficiary and the originator. Where
performed on-going due diligence on, the additional information cannot be obtained, or
customers having direct access accounts of any information or document provided is false
the correspondent and that it is able to or falsified, or result of the validation process
provide relevant customer identification data is unsatisfactory, the beneficiary institution
upon request by the correspondent bank. shall refuse to effect the fund/wire transfer or
Correspondent banking customers the pay-out of funds without prejudice to the
presenting greater risk, including shell reporting of a suspicious transaction to the
companies, shall be subject to enhanced due AMLC when circumstances warrant.
diligence. (4) Whenever possible, manually
(Circular No. 706 dated 05 January 2011) initiated fund transfer (MIFT) instructions
should not be the primary delivery method.
X806.2.i Fund/Wire transfer Every effort shall be made to provide client
Because of the risk associated with dealing with an electronic banking solution.
with fund/wire transfers, where a covered However, where MIFT is utilized, the
institution may unknowingly transmit following validation procedures shall apply:
proceeds of unlawful activities or funds (i) Prior to the bank accepting from a
intended to finance terrorist activities, it customer a manually initiated funds
shall establish policies and procedures transfer request, the customer must
designed to prevent it from being utilized execute and sign an agreement which
for that purpose which shall include, but preferably is part of the account opening
not limited to, the following: documentation, wherein are outlined the
(1) The beneficiary institution shall not manual instruction procedures with
accept instructions to pay-out fund transfers related security procedures including
to non-customer beneficiary, unless it has customer agreement to accept
conducted the necessary customer due responsibility for fraudulent or erroneous
diligence to establish the true and full instructions provided the bank has
identity and existence of said beneficiary. complied with the stated security
Should the originator and beneficiary be the procedures.

Part VIII - Page 16 Manual of Regulations for Banks


X806.2.i - X806.2.j
11.12.31

(ii) It is mandatory that written MIFT designated by the customer in the MIFT
instructions are signature verified. In agreement. The party called is to be
addition, one (1) of the following primary documented on the instructions. The callback
security procedures must be applied: a must be made by someone other than (a) the
recorded callback to the customer to confirm person receiving the original instructions and
the transaction instructions, or testword (b) effecting the signature verification.
arrangement/ verification. The callback or (5)1 Cross border and domestic fund/
test word requirement may be substituted wire transfers and related message
by any of the following validity checks: use amounting to P50,000 or more or its
of a controlled PIN or other pre-established equivalent shall include accurate and
code; sequential numbering control of meaningful originator information. The
messages; pre-established verifiable forms; following are the originator information that
same as prior transmissions; standing/pre- shall remain with the transfer or related
defined instructions; or value for value message through the payment chain:
transactions. (a) Name of the originator;
(iii) It is mandatory that faxed MIFT (b) Address or in its absence the national
instructions are signature verified and the identity number or date and place of birth
fax machine be located in a secured of the originator; and
environment with limited and controlled (c) Account number of the originator or
staff access which permits visual in its absence, a unique reference number
monitoring. If monitoring is not possible, must be included.
the equipment must be secured or (6) Should any wire transfer amounting
programmed to receive messages into a to P50,000 or more or its equivalent be
password protected memory. unaccompanied by the required originator
Faxed MIFT transactions below a certain information, the beneficiary institution shall
threshold (approved by the President/ exert all efforts to establish the true and full
Country Manager (for branches of foreign identity and existence of the originator by
banks) or Business Risk Manager) may be requiring additional information from the
processed with the mandatory procedure originating institution or intermediary
described above and an enhanced security institution. It shall likewise apply enhanced
procedure such as (a) a recorded callback due diligence to establish the true and full
to the customer to confirm the transaction identity and existence of the beneficiary.
instructions and/or (b) test word Where additional information cannot be
arrangement/verification, and/or (c) obtained, or any information or document
utilization of secured forms that incorporate provided is false or falsified, or result of the
verifiable security procedures such as validation process is unsatisfactory, the
watermarks or codes, and/or (d) beneficiary institution shall refuse to effect
transmission encryption. the fund/wire transfer or the pay-out of funds
(iv) Telephone callback numbers and without prejudice to the reporting of a
contacts must be securely controlled. The suspicious transaction to the AMLC when
confirmation callback is to be recorded and circumstances warrant.
made to the signatory/(ies) of the customers (Circular No. 706 dated 05 January 2011)
individual account(s). For commercial and
company accounts the callback will be X806.2.j Buyers of cashiers,
made to the signatory/(ies) of the account managers or certified checks. A covered
or, if so authorized, another person institution may sell cashiers, managers or

1
The implementation of the originator information requirement is deferred for one (1) year, or until 26 July 2012
(M-2011-049 dated 07 September 2011)

Manual of Regulations for Banks Part VIII - Page 17


X806.2.j - X806.2.k
11.12.31

certified checks only to its existing acceptance and identification policies and
customers and shall maintain a register of as required under Subsecs. X806.2.j and
said checks indicating the following X806.2.j.1 of this Part;
information: (3) A register of said checks indicating
(1) True and full name of the buyer or all the information required under Subsec.
the applicant if buying on behalf of an X806.2.j shall be maintained;
entity; (4) A covered institution which issues
(2) Account number; as well as those which accepts as deposits,
(3) Date of issuance and the number of said cashiers, managers or certified checks
the check; or other similar instruments issued in blank
(4) Name of the payee; or payable to cash, bearer or numbered
(5) Amount; and account shall take such measure(s) as may
(6) Purpose of such transaction. be necessary to ensure that said instruments
(Circular No. 706 dated 05 January 2011) are not being used/resorted to by the buyer
or depositor in furtherance of a money
X806.2.j.1 Buyers of cashiers, laundering activity;
managers or certified checks other than (5) The deposit of said instruments shall
an existing customer. Where an be subject to the same requirements of
individual or an entity other than an scrutiny applicable to cash deposits; and
existing customer applies for the issuance (6) Transactions involving said
of cashiers, managers or certified checks, instruments should be accordingly reported
the covered institution shall, in addition to to the AMLC if there is reasonable ground
the information required in Subsec. to suspect that said transactions are being
X806.2.j, obtain all the identification used to launder funds of illegitimate origin.
documents and minimum information (Circular No. 706 dated 05 January 2011)
required by this Part to establish the true
and full identity and existence of the X806.2.k Second-endorsed checks. A
applicant. In no case shall reduced due covered institution shall enforce stricter
diligence be applied to the applicant and, guidelines in the acceptance of second
where circumstances warrant, enhanced -endorsed checks including the application
due diligence should be applied. of enhanced due diligence to ensure that
(Circular No. 706 dated 05 January 2011)
they are not being used as instruments for
X806.2.j.2 Buyers of cashiers, money laundering or other illegal activities.
managers or certified checks in blank or For this purpose, a covered institution shall
payable to cash, bearer or numbered limit the acceptance of second-endorsed
account. A covered institution may issue checks from properly identified customers
cashiers, managers or certified checks or and only after establishing that the nature
other similar instruments in blank or payable of the business of said customer justifies, or
to cash, bearer or numbered account subject at least makes practical, the deposit of second-
to the following conditions: endorsed checks. In case of isolated
(1) The amount of each check shall not transactions involving deposits of second-
exceed P10,000; endorsed checks by customers who are not
(2) The buyer of the check is properly engaged in trade or business, the true and full
identified in accordance with its customer identity of the first endorser shall be established

Part VIII - Page 18 Manual of Regulations for Banks


X806.2.k - X806.2.m
11.12.31

and the record of the identification shall also the Financial Action Task Force (FATF)
be kept for five (5) years. recommendations, or presents greater risk
(Circular No. 706 dated 05 January 2011) for crime, corruption or terrorist financing
is considered a high risk customer.
X806.2.l Foreign exchange dealers/ Information relative to these are publicly
money changers/remittance agents available such as in the websites of FATF,
A covered institution shall require their FATF Style Regional Bodies (FSRB) like the
customers, who are foreign exchange Asia Pacific Group on Money Laundering
dealers, money changers and remittance and the Egmont Group, national authorities
agents, to submit a copy of the certificate of like the OFAC of the U.S. Department of
registration issued to them by the Bangko the Treasury, or other reliable third parties
Sentral as part of their customer such as regulators or exchanges, which shall
identification document. The certificate of be a component of a covered institutions
registration shall be for each head office, customer identification process.
branch agent, sub-agent, extension office or When dealing with high risk customers,
business outlet of foreign exchange dealers, a covered institution should take extreme
money changers and remittance agents. caution and vigilance. In no case shall
Foreign exchange dealers, money reduced diligence be applied to high risk
changers and remittance agents customers customers. On the other hand, in case the
presenting greater risk, such as shell covered institution determines, based on its
companies shall be subject to enhanced due standards, that dealing with the high risk
diligence. customer calls for, or this Part requires, the
(Circular No. 706 dated 05 January 2011)
application of enhanced due diligence, it
X806.2.m High risk customer shall apply the minimum requirements for
A customer from a country that is enhanced due diligence in accordance with
recognized as having inadequate Subsec. X806.1.b. In all instances of
internationally accepted anti-money acceptance of a high risk customer, approval
laundering standards, or does not of the covered institutions senior officer
sufficiently apply regulatory supervision or shall be necessary.
(Circular No. 706 dated 05 January 2011)

(Next page is Part VIII - Page 19)

Manual of Regulations for Banks Part VIII - Page 18a


X806.2.n - X806.3.a
11.12.31

X806.2.n Shell company/shell bank X806.3 On-going monitoring of


A covered institution shall undertake customers, accounts and transactions
banking relationship with a shell company Covered institutions shall ensure that they
with extreme caution and always apply have established the true and full identity
enhanced due diligence on both the entity of their customers and shall update all
and its beneficial owner/s. identification information and documents
Because of the dubious nature of shell required to be obtained by the AMLA, as
banks, no shell bank shall be allowed to amended, its RIRR and this Part, of existing
operate or be established in the Philippines. customers on the basis of materiality and
A covered institution shall refuse to enter risk.
into, or continue, correspondent banking With respect to monitoring of
relationship with them. It shall likewise transactions, in order that a covered
guard against establishing relations with institution may be able to control and reduce
foreign FIs that permit their accounts to be risk associated with money laundering and
used by shell banks. terrorist financing, it is necessary that it has
(Circular No. 706 dated 05 January 2011) a system that will enable it to understand
the normal and reasonable account activity
X806.2.o Numbered accounts of customers and detect unusual or
No peso and foreign currency non-checking suspicious patterns of account activity.
numbered accounts shall be allowed Thus, a risk and materiality based on-going
without establishing the true and full identity monitoring of customers accounts and
and existence of customers and applying transactions should be part of a covered
enhanced due diligence in accordance with institutions customer due diligence.
Subsec. X806.1.b. (Circular No. 706 dated 05 January 2011)
Peso and foreign currency non-checking
numbered accounts existing prior to X806.3.a Enhanced due diligence
17 October 2001 shall continue to exist but Covered institutions shall apply enhanced
the covered institution shall establish the true due diligence on its customer in accordance
and full identity and existence of the with Subsec. X806.1.b if it acquires
beneficial owners of such accounts and information in the course of its customer
applying enhanced due diligence in account or transaction monitoring that:
accordance with Subsec. X806.1.b. (1) Raises doubt as to the accuracy of
(Circular No. 706 dated 05 January 2011) any information or document provided or
the ownership of the entity;
X806.2.p Prohibited accounts (2) Justifies re-classification of the
A covered institution shall maintain customer from low or normal risk to
accounts only in the true and full name of high-risk pursuant to this Part or by its own
the account owner. The provisions of criteria; or
existing law to the contrary notwithstanding, (3) Any of the circumstances for the
anonymous accounts, accounts under filing of a suspicious transaction exists such
fictitious names, numbered checking as but not limited to the following:
accounts, and all other similar accounts shall (a) Transacting without any underlying
be absolutely prohibited. legal or trade obligation, purpose or
(Circular No. 706 dated 05 January 2011)
economic justification;

Manual of Regulations for Banks Part VIII - Page 19


X806.3.a - X807.1
11.12.31

(b) Transacting an amount that is not 18 March 2009, the following are
commensurate with the business or financial considered as non-cash, no/low risk
capacity of the customer or deviates from covered transactions the reporting of
his profile; which to the AMLC are deferred:
(c) Structuring of transactions in order a. Transactions between banks and the
to avoid being the subject of covered Bangko Sentral;
transaction reporting; or b. Transactions between banks
(d) Knowing that a customer was or is operating in the Philippines;
engaged or engaging in any unlawful activity c. Internal operating expenses of banks;
as herein defined. d. Transactions involving transfer of
Where additional information cannot be funds from one deposit account to another
obtained, or any information or document deposit account of the same person within
provided is false or falsified, or result of the the same bank;
validation process is unsatisfactory, the e. Roll-overs of placements of time
covered institution shall immediately close deposit; and
the account and refrain from further f. Loan/Interest principal payment
conducting business relationship with the debited against borrowers deposit account
customer without prejudice to the reporting maintained with the lending bank.
of a suspicious transaction to the AMLC In addition, pursuant to AMLC
when circumstances warrant. Resolution No. 292 dated 24 October
(Circular No. 706 dated 05 January 2011) 2003, covered institutions, other than
banks, shall file CTRs on transactions in
C. Covered and Suspicious
cash or foreign currency or other monetary
Transaction Reporting
instruments (other than checks) or
properties. Due to the nature of the
Sec. X807 Covered and Suspicious
transactions in the stock exchange, only the
Transaction Reporting 1 . Covered
brokers-dealers shall be required to file
institutions shall report to the AMLC all
CTRs and STRs2.
covered and suspicious transactions within
The Philippine Stock Exchange,
ten (10) working days from occurrence
Philippine Central Depository (PCD),
thereof.
Securities Clearing Corporation of the
Should a transaction be determined to
Philippines (SCCP) and transfer agents are
be both a covered and suspicious
exempt from filing CTRs. They are however
transaction, the covered institution shall be
required to file STRs when the transactions
required to report the same as a suspicious
that pass through them are deemed
transaction.
suspicious.
(Circular No. 706 dated 05 January 2011)
The Bangko Sentral may consider other
X807.1 Deferred reporting of certain transactions as no/low risk covered
covered transactions. Pursuant to AMLC transactions and propose to the AMLC that
Resolution No. 58 dated 25 June 2005 as they be likewise subject to deferred
amended by AMLC Resolution No. 24 dated reporting by covered institutions.
(Circular No. 706 dated 05 January 2011; CL-2011-035 dated
25 May 2011)

1
Submission of the hard copies of the STRs to the AMLC is deferred until further advice.
2
The filing of a CTR by a broker is deferred when the mode of payment is by checks or if the settlement between
brokers/dealers and their customers is made through fund transfers or debiting and crediting of their respective
accounts.

Part VIII - Page 20 Manual of Regulations for Banks


X807.2 - X807.4
11.12.31

X807.2 Electronic monitoring system X807.3 Manual monitoring


for money laundering. UBs and KBs are Covered institutions, other than UBs and
required to adopt an electronic money KBs, need not have an electronic system
laundering transaction monitoring system of flagging and monitoring transactions
which at the minimum shall detect and raise but shall ensure that the system has the
to the banks attention, transactions and/or means of flagging and monitoring the
accounts that qualify either as CTs or STs transactions mentioned in Subsec.
as herein defined. X807.2. They shall maintain a register of
The system must have at least the all STs that have been brought to the
following automated functionalities: attention of senior management whether
a. Covered and suspicious transaction or not the same was reported to the
monitoring performs statistical analysis, AMLC.
profiling and able to detect unusual patterns (Circular No. 706 dated 05 January 2011)
of account activity;
b. Watch list monitoring checks X807.4 Electronic submission of
transfer parties (originator, beneficiary, and reports. The CTR and STR shall be
narrative fields) and the existing customer submitted to the AMLC in a secured
database for any listed undesirable manner, in electronic form and in
individual or corporation; accordance with the reporting procedures
c. Investigation checks for given prescribed by the AMLC. The covered
names throughout the history of payment institutions shall provide complete and
stored in the system; accurate information of all the mandatory
d. Can generate all the CTRs of the fields required in the report. In order to
covered institution accurately and provide accurate information, the covered
completely with all the mandatory field institution shall regularly update customer
properly filled up; identification information at least once
e. Must provide a complete audit trail; every three (3) years.
f. Capable of aggregating activities of For the purpose of reporting in a
a customer with multiple accounts on a secured manner, all covered institutions
consolidated basis for monitoring and shall register with the AMLC within ninety
reporting purposes; and (90) days from 27 January 2011 by directly
g. Has the capability to record all STs coordinating with that office for the
and support the investigation of alerts proper assignment of their institution code
generated by the system and brought to the and facilitation of the reporting process.
attention of senior management whether or All covered institutions that have
not a report was filed with the AMLC. previously registered need not re-register.
UBs and KBs with existing electronic Only their respective compliance
system of flagging and monitoring officers or duly authorized officers shall
transactions already in place shall ensure electronically sign their covered
that their existing system is updated to be transaction reports and suspicious
fully compliant with functionalities as those transaction reports.
required herein. For this purpose, they shall Electronic copies of CTRs and STRs shall
be given ninety (90) days from 27 January be preserved and safely stored for at least
2011 within which to make their system for at least five (5) years from the dates the
fully operational and automated with all the same were reported to the AMLC.
functionalities stated above. (Circular No. 706 dated 05 January 2011, as amended by
(Circular No. 706 dated 05 January 2011) CL-2011-078 dated 11 October 2011)

Manual of Regulations for Banks Part VIII - Page 21


X807.5 - X808
11.12.31

X807.5 Exemption from Bank Secrecy D. Record Keeping and Retention


Laws. When reporting covered or
suspicious transactions to the AMLC, Sec. X808 Record Keeping. All customer
covered institutions and their officers and identification records of covered institutions
employees shall not be deemed to have shall be maintained and safely stored as long
violated R.A. No. 1405, as amended, R.A. as the account exists. All transaction
No. 6426, as amended, R.A. No. 8791 and records, including all unusual or suspicious
other similar laws, but are prohibited from patterns of account activity, whether or not
communicating, directly or indirectly, in any an STR was filed with the AMLC, of covered
manner or by any means, to any person, the institutions shall be maintained and safely
fact that a covered or suspicious transaction stored for five (5) years from the date of
report was made, the contents thereof, or transaction.
any other information in relation thereto. In Said records and files shall contain the
case of violation thereof, the concerned full and true identity of the owners or
officer and employee of the covered holders of the accounts involved in the
institution shall be criminally liable in transactions such as the ID card and
accordance with the provision of the AMLA, photo of individual customers and the
as amended. documents mentioned in Subsec.
(Circular No. 706 dated 05 January 2011) X806.2.b for entities, customer
information file, signature card of
X807.6 Confidentiality provision authorized signatory/ies, and all other
When reporting CTs and STs to the AMLC, pertinent customer identification
covered institutions, their directors, officers documents as well as all factual
and employees are prohibited from circumstances and records involved in the
communicating directly or indirectly, in any transaction. Covered institutions shall
manner or by any means, to any person or undertake the necessary adequate security
entity, the media, the fact that a covered or measures to ensure the confidentiality of
suspicious transaction report was made, the such file. Covered institutions shall
contents thereof, or any other information prepare and maintain documentation, in
in relation thereto. Neither may such accordance with the aforementioned
reporting be published or aired in any client identification requirements, on their
manner or form by the mass media, customer accounts relationships and
electronic mail, or other similar devices. In transactions such that any account,
case of violation thereof, the concerned relationship or transaction can be
officer and employee of the covered reconstructed as to enable the AMLC, and/
institution and media shall be held or the courts to establish an audit trail for
criminally liable. money laundering.
(Circular No. 706 dated 05 January 2011)
Whenever a bank engaged in
X807.7 Safe harbor provision microfinance operations has tagged a
No administrative, criminal or civil microfinance client, as defined under BSP
proceedings shall lie against any person for regulations, as low risk in accordance with
having made a CTR or an STR in the regular Subsec. X806.1.a, the customers
performance of his duties in good faith, identification and transaction records shall
whether or not such reporting results in any be retained for five (5) years except that said
criminal prosecution under the AMLA, as retention period may be reduced to three
amended, its RIRR or any other law. (3) years provided that sufficient documents
(Circular No. 706 dated 05 January 2011) duly support the low risk profile of said

Part VIII - Page 22 Manual of Regulations for Banks


X808 - X809
11.12.31

customer and the covered institutions keep E. Training Program


a record of the names of these low risk
customers after the lapse of three (3) years. This Sec. X809 AML Training Program
provision is subject to Subsec. X808.2 when a Covered institutions shall formulate an
money laundering case is filed in court. annual AML training program aimed at
(Circular No. 706 dated 05 January 2011) providing all their responsible officers and
personnel with efficient, adequate and
X808.1 Closed accounts. With respect continuous education program to enable
to closed accounts, the records on customer them to fully and consistently comply with
identification, account files and business all their obligations under this Part, the
correspondences shall be preserved and AMLA, as amended, and its RIRR.
safely stored for at least five (5) years from Trainings of officers and employees shall
the date of closure. include awareness of their respective duties
(Circular No. 706 dated 05 January 2011)
and responsibilities under the MLPP
X808.2 Retention of records in case particularly in relation to the customer
a money laundering case has been filed in identification process, record keeping
court. If a money laundering case, based requirements and CT and ST reporting and
on any report kept by the covered institution ample understanding of the internal
concerned, has been filed in court, said file processes including the chain of command
must be retained beyond the five (5) year for the reporting and investigation of
retention period and until it is confirmed suspicious and money laundering activities.
that the case has been finally resolved or The program shall be designed in a
terminated by the court. manner that will comprise of various
(Circular No. 706 dated 05 January 2011) focuses for new staff, front-line staff,
compliance office staff, internal audit staff,
X808.3 Safekeeping of records and officers, senior management, directors and
documents. The covered institution shall stockholders. Regular refresher trainings
designate at least two (2) officers who will shall likewise be provided in order to
be jointly responsible and accountable in guarantee that officers and staff are informed
the safekeeping of all records and of new developments and issuances related
documents required to be retained by the to the prevention of money laundering and
AMLA, as amended, its RIRR and this Part. terrorism financing as well as reminded of
They shall have the obligation to make these their respective responsibilities vis--vis the
documents and records readily available covered institutions processes, policies and
without delay during Bangko Sentral regular procedures.
or special examinations. Covered institutions annual AML
(Circular No. 706 dated 05 January 2011) training program and records of all AML
seminars and trainings conducted by the
X808.4 Form of records. Records covered institution and/or attended by its
shall be retained as originals or copies in personnel (internal or external), including
such form as are admissible in court copies of AML seminar/training materials,
pursuant to existing laws, such as the shall be appropriately kept by the
E-Commerce Act and its implementing rules compliance office/unit/department, and
and regulations, and the applicable rules should be made available during periodic
promulgated by the Supreme Court. or special Bangko Sentral examination.
(Circular No. 706 dated 05 January 2011) (Circular No. 706 dated 05 January 2011)

Manual of Regulations for Banks Part VIII - Page 23


X810 - X811
12.12.31

F. Bangko Sentral Authority and line officers, not necessarily according to


Enforcement Actions priority:
a. Written reprimand;
Sec. X810 Bangko Sentral Authority to b. Suspension or removal from the
Examine Deposits and Investments; office they are currently holding; and/or
Additional Exception to the Bank Secrecy c. Disqualification from holding any
Act; Annual Testing of Numbered position in any covered institution.
Accounts. To ensure compliance with the In addition to the non-monetary
AMLA, as amended, its RIRR, and this Part, sanctions stated above, the Bangko Sentral
the Bangko Sentral may inquire into or may also impose monetary penalties
examine any deposit or investment with any computed in accordance with existing
banking institution or NBFI and their regulations and in coordination with the
subsidiaries and affiliates when the AMLC.
examination is made in the course of a Enforcement actions shall be imposed
periodic or special examination, in on the basis of the overall assessment of
accordance with the Rules of Examination the covered institutions AML risk
of the Bangko Sentral. management system. Whenever a covered
The Bangko Sentral may likewise institutions AML compliance system is
conduct annual testing solely limited to the found to be grossly inadequate, this may
determination of the existence and true be considered as unsafe and unsound
identity of the owners of numbered and banking practice that may warrant
similar accounts. initiation of prompt corrective action.
In the course of the periodic and special To implement the enforcement action
examination for purposes of complying with provision of this Part along with the AML
the provisions of the AMLA, as amended, Risk Rating System (ARRS), the following
its RIRR, and this Part, the covered rules shall apply:
institutions, their officers and employees, and 1. An AML Composite rating of 4 and
the Bangko Sentral, shall not be deemed to 3 will require no enforcement action.
have violated the provisions of R. A. No. 2. An AML composite rating of 2 to 1
1405, as amended, R.A. No. 6426, as will require submission by the covered
amended, R.A. No. 8791 and other similar institution to the AMLSG, SES, of a written
laws, and Subsec.X807.6 when disclosing action plan duly approved by the BOD
information to Bangko Sentral relative to aimed at correcting the noted inefficiency
covered and suspicious transaction reports in BOD and SM oversight, inadequacy in
filed with the AMLC. AML and TF policies and procedures,
(Circular No. 706 dated 05 January 2011)
weakness in internal controls and audit,
and/or ineffective implementation within a
Sec. X811 Enforcement Action. In line with
reasonable period of time.
the objective of ensuring that covered
The AMLSG shall assess the viability
institutions maintain high anti-money
of the plan and shall monitor the covered
laundering standards in order to protect its
institutions performance.
safety and soundness as well as protecting
In the event of non-submission of an
the integrity of the national banking and
acceptable plan within the deadline or
financial system, violation of these Rules
failure to implement its action plan, AMLSG
shall constitute a major violation subject to
shall recommend appropriate enforcement
the following enforcement actions against the
actions on the covered institution and its
board of directors, senior management and

Part VIII - Page 24 Manual of Regulations for Banks


X811
12.12.31

responsible officers including monetary penalties computed on a daily and


penalties to be computed on a daily basis continuing basis from the time the covered
until improvements are satisfactorily institutions is notified until corrective
implemented. measures are satisfactorily effected. The
3. An AML rating of 1 shall also be penalty may be imposed on the covered
considered as an unsafe and unsound institution itself or directly on the Board of
banking practice. For this reason, prompt Directors as a body, or the individual
corrective action shall also be automatically directors who have direct oversight, or the
initiated on the covered institution. line officers involved in the management of
Monetary penalty guidelines. These money laundering and terrorist financing
guidelines are divided into three (3) parts. prevention.
Part I Monetary penalty matrices. The Part III Aggravating and mitigating
monetary penalty matrices, where monetary factors.
penalties are categorized based on the (1) a. Aggravating factors
Composite rating and (2) Asset size of the (1) Frequency of the commissions or
Bangko Sentral covered institution. omissions of specific violation- Majority of
Part II Guiding principles. the following violations were noted:
1. The first step is to determine the (a) Deficient Know Your Customer
over-all risk rating of the Bangko Sentral process
covered institution for purposes of (b) Unsatisfactory Covered Transaction
identifying which penalty matrix will be reporting system
used. If the Composite rating is 1 or 2, (c) Non-reporting of and Improper
penalty matrix A or B, respectively shall be Suspicious Transaction reporting
used. If the over-all rating is 3 and 4, no (d) Non-compliance with the Record
monetary penalty shall be imposed. keeping requirement
2. Second step is to establish the asset (e) Inadequate AML Training Program
size of the Bangko Sentral covered (f) Deficient AML Electronic system
institution as of the cut-off period of (2) Duration of violations prior to
examination; notification- This pertains to the length of
3. Third step is to identify the time prior to the latest notification on the
violation. Violations that have been
aggravating and mitigating factors. If the
existing for a long time before it was
aggravating factors are more than the
revealed/discovered in the examination or
mitigating factors, then the maximum range
are under the evaluation for a long time due
shall be used. On the other hand, if the
to pending requests or correspondences
mitigating factors are more than the
from covered institutions on whether a
aggravating factors, then the minimum range
violation has actually occurred shall be dealt
shall be applied. In case there are no
with through this criterion. Violations
aggravating and mitigating factors or there
outstanding for more than one (1) year prior
is a tie, the medium range shall be used.
to notification, at the minimum, will
4. For Composite ratings of 1 and 2
qualify as violations outstanding for a long
where the covered institution concerned
time.
was required to submit within a reasonable (3) Continuation of offense or omission
period of time an acceptance plan, non- after notification- This pertains to the
submission of the plan within the deadline persistence of an act or omission after the
or failure to implement the action plan shall latest notification on the existence of the
be a basis for imposition of monetary violation, either from the appropriate SES

Manual of Regulations for Banks Part VIII - Page 25


X811 - X899
12.12.31

Group, Department or from the Monetary individual/entity.


Board and/or Deputy Governor, in cases (2) Full cooperation- covered
where the violation has been elevated institutions personnel or the covered
accordingly. This covers the period after the institution immediately took action to
final notification of the existence of the correct the violation after it is brought to its
violation until such time that the violation attention either verbally or in writing.
has been corrected and/or remedied. The (3) With positive measures- covered
corrective action shall be reckoned with institutions personnel or the covered
from the date of notification. institution commits to undertake concrete
(4) Concealment- This factor pertains to action to correct the violation but is being
the cover up of a violation. In evaluating this restrained by valid reasons to take
factor, one shall consider the intention of immediate action.
the party/ies involved and whether (4) Voluntary disclosure of offense-
pecuniary benefit may accrue accordingly. covered institutions personnel or the
The act of concealing an act or omission covered institution disclosed the violation
constituting the violation carries with it the before it is discovered in the course of a
intention to defraud regulators. Moreover, regular or special examination or off-site
the amount of pecuniary benefit, which may monitoring.
or may not accrue from the offense or (Circular No. 706 dated 05 January 2011 as amended by
omission, shall also be considered under this M-2012-017 dated 04 April 2012)
factor.
Concealment may be apparent when a Sec. X812 (Reserved)
covered institutions personnel purposely
complicate the transaction to make it Sec. X813 Separability Clause. If any
difficult to uncover or refuse to provide provisions, sections of this Part, or its
information and/or document that would application to any person or circumstance
support the violation/offense committed. is held invalid, the other provisions or
(5) Loss or risk of loss to bank- In sections of this Part, and the application of
asserting this factor, potential loss refers such provisions or section to other persons
to any time at which the covered institution or circumstance shall not be affected
was in danger of sustaining a loss. thereby.
b. Mitigating factors (Circular No. 706 dated 05 January 2011)
(1) Good faith - is the absence of
intention to violate on the part of the erring Secs. X814 - X899 (Reserved)

Part VIII - Page 26 Manual of Regulations for Banks