BSP completes third Sectoral Risk Assessment

The Bangko Sentral ng Pilipinas (BSP) completed the 3rd sectoral Money Laundering (ML), Terrorist Financing (TF) and Proliferation Financing (PF) risk assessment[1] (SRA) of banks and other BSP-supervised financial institutions (BSFIs)[2] (the sector) and released the report that presents the overall ML/TF/PF threats and vulnerabilities of the sector.

The SRA aims to further enhance and update the stakeholders’ understanding of the extent of proceeds of unlawful activities being coursed through BSFIs and the BSFIs’ vulnerabilities to be used as channels or conduits for these proceeds.

Based on the report, the net ML/TF/PF risk exposure of the sector is “medium” except for pawning operations with “low risk”.

Financial inclusion products likewise have “low risk” except for e-money and remittance services of pawnshops which were assessed as “medium risk”.

BSP Governor Benjamin E. Diokno said that “The SRA showed us the results of the hard work not only of the BSP, but also of BSP-supervised financial institutions and our partner agencies in our fight against money laundering and terrorist financing.

But we should also use the results of this exercise as a reminder to remain vigilant to the threats that undermine the integrity of the Philippine financial system.”

The SRA disclosed that in terms of criminal activities, corruption; drug trafficking; investment fraud and swindling, and violations of the Electronic Commerce Act of 2000 and cybercrimes, pose the highest level of threat to the sector.

This is in view of the high number of incidents of varied typologies and schemes, the significant amount of criminal proceeds they generate, and materiality of impact to the sector.

The BSP expects BSFIs to consider the results of the SRA in their enterprise-wide risk assessment and to use these as inputs in enhancing their risk mitigation policies and strategies.

The SRA was conducted in coordination with the Anti-Money Laundering Council (AMLC) and other relevant agencies or institutions, in line with the National Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Strategy of the Philippines that calls for a whole-of-government approach to strategically respond to the identified ML/TF/PF risks.

[1] The results of the first phase of the SRA was released under Memorandum M-2021-005 dated 13 January 2021 covering the risk assessment of cash, cross-border, and cross sector transactions of banks and other BSFIs.

[2] Other BSFIs include non-bank financial institutions (NBFIs) namely, trust entities, non-stock savings and loan associations (NSSLAs), non-bank electronic money (e-money) issuers (EMIs), virtual currency exchanges (VCEs)/virtual assets service providers (VASPs), pawnshops and operators of payment systems. Risk assessment of money service businesses (MSBs) was conducted separately by the Anti-Money Laundering Council (AMLC), in coordination with the BSP.