BSP CIRCULAR 706 PDF

Circular No. Section X Declaration of Policy - The BSP adopts the policy of the State to protect the integrity and confidentiality of bank accounts and to ensure that the Philippines in general and the covered institutions herein described in particular shall not be used respectively as a money laundering site and conduit for the proceeds of an unlawful activity as hereto defined. Scope of Regulations - These regulations shall apply to all covered institutions supervised and regulated by the BSP. Pursuant to Section 20 of the General Banking Law of , a bank authorized by BSP to establish branches or other offices within or outside the Philippines shall be responsible for all business conducted in such branches and offices to the same extent and in the same manner as though such business had all been conducted in the head office. A bank and its branches and offices shall be treated as one unit.

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You are on page 1of 15 Search inside document Subject: Updated Anti-Money Laundering Rules and Regulations Declaration of Policy - The BSP adopts the policy of the State to protect the integrity and confidentiality of bank accounts and to ensure that the Philippines in general and the covered institutions herein described in particular shall not be used respectively as a money laundering site and conduit for the proceeds of an unlawful activity Section X Scope of Regulations - These regulations shall apply to all covered institutions supervised and regulated by the BSP.

Definition of terms A Money laundering- a crime whereby the proceeds of an unlawful activity are transacted, thereby making them appear to have originated from legitimate sources. It is committed by the following: 1 Any person knowing that any monetary instrument or property represents, involves, or relates to, the proceeds of any unlawful activity, transacts or attempts to transact said monetary instrument or property.

B Covered transaction CT - a transaction in cash or other equivalent monetary instrument involving a total amount in excess of P, within one banking day. C Suspicious transactions ST - transactions with covered institutions, regardless of the amount involved, where any of the following circumstances exist: 1.

There is no underlying legal or trade obligation, purpose or economic justification; 2. The client is not properly identified; 3. The amount involved is not commensurate with the business or financial capacity of the client; 4. Taking into account all known circumstances, it may be perceived that the clients transaction is structured in order to avoid being the subject of reporting requirements under the AMLA; 5.

The transaction is in any way related to an unlawful activity or any money laundering activity or offense under AMLA, that is about to be, is being or has been committed; or 7. Any transaction that is similar or analogous to any of the foregoing. D Monetary instrument refers to: 1 Coins or currency of legal tender of the Philippines, or of any other country; 2 Drafts, check, and notes; 3 Securities or negotiable instruments, bonds, commercial papers, deposit certificates, trust certificates, custodial receipts or deposit substitute instruments, trading orders, transaction tickets and confirmations of sale or investments and money market instruments; 4 Contracts or policies of insurance, life or non-life, and contracts of suretyship; and 5 Other similar instruments where title thereto passes to another by endorsement assignment or delivery.

E Transaction- refers to any act establishing any right or obligation or giving rise to any contractual or legal relationship between the parties thereto. G Customer - refers to any person or entity that keeps account, or otherwise transacts business with a covered institution and any person or entity on whose behalf an account is maintained or a transaction is conducted, as well as the beneficiary of said transactions.

H Shell Company - Legal entities which have no business substance in their own right but through which financial transactions may be conducted. I Shell Bank - a Shell company incorporated as a bank or made to appear to be incorporated as a bank but has no physical presence and no affiliation with a regulated financial group.

K Politically Exposed Person or PEP - an individual who is or has been entrusted with prominent public positions in the Philippines or in a foreign state, including heads of state or of government, senior politicians, senior national or local government, judicial or military officials, senior executives of government or state owned or controlled corporations and important political party officials.

L Correspondent banking- refers to activities of one bank the correspondent bank having direct connection or friendly service relations with another bank the respondent bank.

N Cross border transfer - any wire transfer where the originating and beneficiary institutions are located in different countries. O Domestic Transfer - any wire transfer where the originating and beneficiary institutions are located in the same country.

P Originating institution - refers to the entity utilized by the originator to transfer funds to the beneficiary and can either be a a covered institution, or b a financial institution operating outside the Philippines Q Beneficiary institution - refers to the entity that will pay out the money to the beneficiary and can either be a a covered institution, or b a financial institution operating outside the Philippines R Intermediary institution - refers to the entity utilized by the originating and beneficiary institutions where both have no correspondent banking relationship with the intermediary institution.

It can either be a a covered institution, or b a financial institution operating outside the Philippines Basic Principles and Policies to Combat Money Laundering : 1. Conduct business in conformity with high ethical standards in order to protect its safety and soundness as well as the integrity of the national banking and financial system: 2.

Know sufficiently your customer at all times and ensure that the financially or socially disadvantaged are not denied access to financial services while at the same time prevent suspicious individuals or entities from opening or maintaining an account or transacting with the covered institution by himself or otherwise: 3. Adopt and effectively implement a sound AML and terrorist financing risk management system that identifies, assesses, monitors and controls risks associated with money laundering and terrorist financing; 4.

Comply fully with these rules and existing laws aimed at combating money laundering and terrorist financing by making sure that officers and employee are aware of their respective responsibilities and carry them out in accordance with superior and principled culture of compliance; and 5. RISK MANAGEMENT Risk Management - All covered institutions shall develop sound risk management policies and practices to ensure that risks associated with money-laundering such as counterparty, reputational, operational, and compliance risks are identified, assessed, monitored, mitigated and controlled, as well as to ensure effective implementation of these regulations, to the end that covered institutions shall not be used as a vehicle to legitimize proceeds of unlawful activity or to facilitate or finance terrorism.

Ensure that infractions, discovered either by internally initiated audits or by special or regular examination conducted by the BSP, are immediately corrected; 3.

Inform all responsible officers and employee of all resolutions, circulars and other issuance by the BSP and the AMLC in relation to matters aimed at preventing money laundering and terrorist financing; 4. Alert senior management, the board of directors, or the Board-level or approved committee if it believes that the institution is falling to sensibly address anti money laundering and terrorist financing issues; and 5. Organize the timing and content of AML training of officers and employees including regular refresher trainings Money Laundering and Terrorist Financing Prevention Program - All covered institutions shall adopt a comprehensive and risk-based MLPP geared toward the promotion of high ethical and professional standards and the prevention of the bank being used, intentionally or unintentionally, for money laundering and terrorism financing.

The program shall embody the following at a minimum: 1. An effective and continuous anti-money laundering and countering of terrorist financing training program for all directors, and responsible officers and employee, to enable them to fully comply with their obligations and responsibilities under these rules, the AMLA, as amended, its RIRR and their internal policies and procedures as embodied in the MLPP.

An internal audit system; 5. An independent audit program with written scope of audit that will ensure the completeness and accuracy of the information and identification documents obtained from clients, the covered and suspicious transactions reports submitted to the AMLC, and the records retained in compliance with these rules as well as adequacy and effectiveness of the training program on the prevention of money laundering and terrorism financing; 6.

Cooperation with the AMLC; and 8. Designation of an AML compliance officer who shall at least be at senior officer level, as the lead implementor of the program within an adequately staffed Compliance Office. Approval by the Board of Directors or Country Head - Within days from effectivity of these Rules, all covered institutions shall prepare and have available for inspection an updated MLPP embodying the principles and provisions stated in these rules. Monitoring and Reporting Tools - All covered institutions shall adopt an AML and terrorist financing monitoring system that is appropriate for their risk-profile and business complexity Electronic monitoring and reporting System for Money Laundering - Universal Banks UBs and Commercial Banks Kbs shall adopt an electronic AML system capable of monitoring risks associated with money-laundering and terrorist financing as well as generating timely reports for the guidance and information of its Board of Directors and Senior Management Manual monitoring - For covered institutions other than UBs and KBs, it need not have an electronic system but must ensure that it has the means of complying Internal Audit - The Internal Audit function associated with money laundering and terrorist financing should be conducted by qualified personnel who are independent of the Board of Directors and Senior Management and have a direct reporting line to the Board or a Board level Audit Committee.

Customer acceptance policy - Every covered institution shall develop clear, written and graduated acceptance policies and procedures that will ensure that the financially or socially disadvantaged are not denied access to financial services while at the same time prevent suspicious individuals or entities from opening an account. Criteria for type of customers: low, normal and high risk In designing a customer acceptance policy, the following factors shall be taken into account: 1.

Background and source of funds; 2. Country of origin and residence or operations; 3. Linked accounts; 5. Business activities; and 7. In all instances, the covered institution shall document how a specific customer was profiled low, normal or high and what standard of CDD reduced, average or enhanced was applied. Enhanced due Diligence - Whenever enhanced due diligence is applied, the covered institution shall, in addition to profiling of customers and monitoring of their transactions, do the following: 1.

Conduct validation procedures on any or all of the information 3. Obtain senior management approval for establishing business relationship. Where additional information cannot be obtained, or any information or document provided is false or falsified, or result of the validation process is unsatisfactory, the covered institution shall deny banking relationship with the individual or entity without prejudice to the reporting of a suspicious transaction to the AMLC when circumstances warrant.

Minimum validation procedures -: 1. Confirming the date of birth from a duly authenticated official document; 2. Verifying the permanent address through evaluation of utility bills, bank or credit card statement or other documents showing permanent address or through onsite visitation; 3. Contacting the customer by phone, email or letter such as sending of "thank you letters" ; and 4.

Determining the authenticity of the identification documents through validation of its issuance by requesting a certification from the issuing authority or by any other means. For corporate or juridical entities, validation procedures shall include but is not limited to be the following: 1.

Inquiring from the supervising authority the status of the entity; 3. Obtaining bank references; 4. On-site visitation of the company; and 5. Contacting the entity by phone, email or letter such as "thank you letters".

Reduced due diligence: a. For individual customers, a covered institution may open an account under the true and full name of the account owner or owners and defer acceptance of the minimum information. Outsourcing arrangement - Subject to existing rules on outsourcing of specified banking activities, a covered institution, without prior Monetary Board approval, may outsource to a counter-party the conduct of the requisite face-to-face contact provided that such arrangement is formally documented.

New individual customers - Covered institutions shall develop a systematic procedure for establishing the true and full identity of new individual customers and shall open and maintain the account only in the true and full name of the account owner or owners. Name; 2. Present address; 3. Date and place of birth; 4. Contact details; 6. Specimen signature; 7. Source of funds; 8.

Permanent address; 9. Nationality; Name, present address, date and place of birth, nature of work and source of funds of beneficial owner or beneficiary, whenever applicable. Articles of Incorporation or Association and By-Laws; 3.

Principal business address; 4. Source of funds and nature of business; 8. Name, present address, date and place of birth, nature of work and source of funds of beneficial owner or beneficiary, if applicable; and 9. For this purpose, the term official authority shall refer to any of the following: a. Government of the Republic of the Philippines; b. Its political subdivisions and instrumentalities; c. GOCCs; and d. Valid Ids include the following: 1. Passport including those issued by foreign governments 2.

Drivers license 3. PRC ID 4. NBI clearance 5. Police clearance 6. Postal ID 7. Voters ID 8. Tax Identification Number 9. Barangay certification GSIS e-Card SSS card Senior Citizen card OFW ID Seamans book DSWD certification IBP ID; and

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Fenrilrajas Regulations The counter-party has a reliable and acceptable customer identification system and training program in place; and 3. Country of origin and residence or operations; 3. It shall conduct periodic compliance checking circcular covers, among others, evaluation of existing processes, policies and procedures including on-going monitoring of performances by staff and officers involved in money laundering and terrorist financing prevention, reporting channels, effectivity of the electronic money laundering transactions monitoring system and record retention system through sample testing and review of audit or examination reports. An effective and continuous anti-money laundering and countering of terrorist cidcular training program for all directors, circukar responsible officers and employee, to enable them to fully comply with their obligations and responsibilities under these rules, the AMLA, as amended, its RIRR and their internal policies and procedures as embodied in the MLPP. The amount involved is not commensurate with the business or financial capacity of the client.

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