After reading “How Can Money Laundering Be Prevented?”, read also “What Are Covered Transactions Under The Anti-Money Laundering Act?“
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Enhanced Due Diligence refers to the enhanced level of scrutiny intended to provide a more comprehensive understanding of the risks associated with the client, as well as confirmation of factual information provided by the client, to mitigate risks presented.
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Enhanced Due Diligence shall be applied to customers that are assessed by the covered institution as high risk for money laundering and terrorist financing.
To prevent money laundering, covered institutions shall establish and record the true identity of their clients based on official documents. A system of verifying the true identity of their clients shall be maintained. For corporate clients, covered institutions are required a system of verifying their legal existence and organizational structure, as well as the authority and identification of all persons purporting to act on their behalf. When dealing with customers who are acting as trustee, nominee, agent, or in any capacity for and on behalf of another, covered institutions shall verify, record, and establish the true and full identity of the persons on whose behalf a transaction is being conducted.
What are the minimum information/documents required for individual customers?
The law says:
Covered institutions shall require customers to produce original documents of identity issued by an official authority, bearing a photograph of the customer. Examples of such documents are identity cards and passports. The following minimum information/documents shall be obtained from individual customers:
- Name;
- Present address;
- Permanent address;
- Date and place of birth;
- Nationality;
- Nature of work and name of employer or nature of self-employment/business;
- Contact numbers;
- Tax identification number, Social Security System number or Government Service Insurance System number;
- Specimen signature;
- Source of funds; and
- Names of beneficiaries in case of insurance contracts and whenever applicable.
What are the minimum information/documents required for corporate and juridical entities?
The law says:
The following minimum information/documents shall be obtained from customers that are corporate or juridical entities:
- Certificates of Registration issued by the Department of Trade and Industry for single proprietors,
- or by the Securities and Exchange Commission for corporations and partnerships, and by the
- BSP for money changers/foreign exchange dealers and remittance agents;
- Articles of Incorporation/Partnership;
- Latest General Information Sheet which lists the names of directors/trustees/partners, principal stock holders owning at least twenty percent (20%) of the outstanding capital stock and primary officers such as the President and Treasurer;
- Beneficial owners and beneficiaries of the corporate and/or juridical entities;
- Board or Partners’ resolution duly certified by the Corporate/Partners’ Secretary authorizing the signatory to sign on behalf of the entity; and
- For entities registered outside of the Philippines, similar documents and/or information shall be obtained duly authenticated by the Philippine Consulate where said entities are registered.
For customers that are assessed to be high risk for money laundering and terrorist financing, Enhanced Due Diligence is applied to them. Enhanced Due Diligence involves obtaining senior management approval for establishing or continuing business relationships; taking reasonable measures to establish the source of wealth and source of funds; and conducting enhanced ongoing monitoring of the business relationship.
The law says:
When conducting Enhanced Due Diligence, covered persons shall perform the following:
- Gather documents to support the:
- Sources of wealth and fund;
- Nature of occupation and/or business;
- Reason for intended or performed transaction; and
- Other identification information, which the covered person deems necessary to verify the identity of the customer, and their agents and beneficial owners.
- Conduct additional validation procedures, such as:
- verifying volume of assets, information available through public databases, internet and other records;
- verifying the declared residence address and conducting face-to-face contact with the customers, and their agents and beneficial owners; and
- other modes of validation, which the covered person deems reliable and practical.
- Secure the approval of senior management to commence or continue transacting with the customer;
- Conduct enhanced ongoing monitoring, including more frequent or regular updating of identification information and identification documents;
- Require the first payment to be carried out through an account in the customer’s name with a bank subject to similar CDD standards, where applicable; and
- Such other measures as the covered persons may deem reasonable or necessary.
Who is a High-Risk Customer?
A High-risk customer is a customer from a country other than the Philippines that is:
- Recognized as having inadequate internationally accepted anti-money laundering standards, or
- Does not sufficiently apply regulatory supervision or the Financial Action Task Force (FATF) recommendations, or
- Presents greater risk for money laundering, its associated predicate offenses including corruption and terrorism financing
The AMLA likewise provides for preventive measures for specific transactions and activities. These specific transactions and activities include Politically-exposed persons; Correspondent Banking, Wire Transfers, Shell Bank, and Foreign Exchange Dealers, Money Changers and Remittance Agents.
A. Politically-exposed persons
Politically-exposed persons refer to individuals who are or have been entrusted with a prominent public position in (a) the Philippines with substantial authority over policy, operations, or the use or allocation of government-owned resources; (b) a foreign State; or (c) an international organization. In cases of higher risk business relationship with such Politically-exposed persons, covered institutions shall apply the Enhanced Due Diligence measures.
B. Correspondent Banking
Correspondent Banking refers to activities of one bank (the correspondent bank) having direct connection or friendly service relations with another bank (the respondent bank). Because of the risk associated with dealing with correspondent accounts where it may unknowingly facilitate the transmission or holding and management of proceeds of unlawful activities or funds intended to finance terrorist activities, a covered institution shall adopt policies and procedures for correspondent banking activities and designate an officer responsible in ensuring compliance with these policies and procedures. Correspondent banking customers presenting greater risk shall be subject to Enhanced Due Diligence.
C. Wire Transfers
Wire Transfer refers to any transaction carried out on behalf of an originator, through an originating/ordering financial institution, by electronic means, with a view to making an amount of funds available to a beneficiary at a beneficiary financial institution, irrespective of whether the originator and the beneficiary are the same person. Because of the risk associated with dealing with wire/fund transfers, where a covered institution may unknowingly transmit proceeds of unlawful activities or funds intended to finance terrorist activities, it shall establish policies and procedures designed to prevent it from being utilized for that purpose.
D. Shell Bank
Shell Bank refers to a bank that has no physical presence in the country in which it is incorporated and licensed, and which is unaffiliated with a regulated financial group that is subject to effective consolidated supervision. A covered institution shall undertake a business/banking relationship with a shell company with extreme caution and shall always apply Enhanced Due Diligence.
E. Foreign Exchange Dealers, Money Changers and Remittance Agents
Foreign exchange dealers, money changers, and remittance agents are financial institutions under the AMLA that are among those supervised and/or regulated by BSP, including their subsidiaries and affiliates. A covered institution shall require their customers which are foreign exchange dealers, money changers, and remittance agents to submit a copy of the certificate of registration issued to them by the BSP as part of their customer identification requirement. Such customers shall be subject to Enhanced Due Diligence.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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