Anti-Money Laundering Council (AMLC) Resolution No. 69 dated 17 August 2016

BAN@Ko SENTRAL NG PILIPINAS OFFICE OF THE DEPUTY GOVERNOR SUPERVISION AND EXAMINATION SECTOR ctRcuLAR TETTER NO. Ct-2016-075 To: All BSP-Supervised Financial Institutions Subject : Anti-Money Laundering Council (AMIC) Resolution No. 69 dated 17 August 2016 The AMLC, in its Resolution No. 69 dated 17 August 2Ot6, resolved to issue the attached Advisory to all covered persons relative to the proper implementation of the provisions of the Revised lmplementing Rules and Regulations (RlRRs), particularly Rules 9.a.9.a (Enhanced due diligence) and 9.a.15.a (Unusual or suspicious patterns of activity), and AMLC Resolution No. 54, Series of 2OL4 concerning high risk clients. For implementation and guidance. [-^.-<--L lesron A. ElPENrr O_Ji, September 2016 Att.: A/S

Republii of the Philippines Anti-Money Luundering Co uncil ADVISORY It would be recalled that the Financial Action Task Force's (FATF), in its Public Statement dated 27 June 2014, identified lran and North Korea as high-risk jurisdictions and requlred its mernbers and other jurisdictions "to apply counter-measures to protect the lnternational financial system from the on-going and substantial money laundering and terrorist financing (ML/FT) risks" emanating from these Jurisdictions. Thus, in compliance with the above requirement of the FATF and pursuant to its Recommendatlon 19 which requires countries "to apply countermeasures when called upon to do so by the FATF", the AMLC issued Resolution No. 64, Series of 20L4. The sald AMIC Resotutlon dlrects all covered persons to apply enhanced due dittgence relatlve to the jurlsdictions ldentified under the FATF Public Statement dated 27 lune 2Ot4. The application of enhanced due dillgence is one of the countermeasures under the lnterpretative Notes of the FATF Recommendation 19 which could be resorted to by jurisdictions insofar as identified high risk countries are concerned. However, in a recent development, the FATF, in its 24 June 2016 Public Statement against lran, suspended the lmposltlon of countermbasures agalnst lran BUT required furisdlctions to apply enhanced due dlllgence as follows: The FATF welcomes lran's adoption of, and high-level political commitment to, an Action Plan to address its strategic AML/CFT deficiencles, x x x, The FATF therefore has suspended counter-measures for twelve months in order to monitor lran's progress in implernenting the Action Plan. lf the FATF determines that lran has not demonstrated sufficlent progress in implementing the Action Plan at the end of that period, FATF's call for counter-measures will be reimposed, lf lran meets its commitments under the Action Plan in that tlme period, the FATF will consider next steps in this regard. tran will remain on the FATF Public Statement until the full Action Plan has been completed. x x x. The FATF, therefore, calls on lts members and urges all jurlsdictions to contlnue to advise thelr flnancial instltutions to apply enhanced due dlligence to buslness relationshlps and transactlons with natural and legal persons from lran, consistent with FATF Recommendation 19. x x x.l t http://www.fgJfget.oulpu.@:coop-eratiyplurisdjslb&ild#fiEftt/0tibflEo'on t't' E!ate_EsnUC!g?E[6.h3!0J. Accessed on 25 July 2016. MA.RHEA ,k%k*unoor^ .ltv/CScirriltl; ' 22 August 2016 File/Ref . No. AMLC-*-16--

It should be emphasized that while the FATF suspended the imposition of countermeasures against lran, it st!!l requlres the conduc! of enhanced due dillgence pCrsons from lran, agalnst business relatlonship and transactionj witn naiurai and iega[ which is the least countermeasures under the FATF Recommendatlon 19, and is actually being required under AMLC Resolutlon No. 64, Series of 2014. Thus, AMLC Resolution ruo. 6A, Series of ZO!4, is still valid and relevant and should not be suspended' Covered persons should continue to apply enhance due diligence against high risk clients. In addition to the foregoing, the following provlsions of the Revised lmplementing (AMLA)' as arnended, Rules and Regulatlons (RtRRs) of Anti-Money_Laundering Act of 2001 would shed light in the treatment of high risk2 customers: a. "Rule 9.a.9.a. Enhanced Due Diligence. - Enhanced due diligence shall be applied to customers that are assessed by the covered institution or these Rules as high risk for money laundering and terrorist financing, which enhanced due diligence, at a minimum, should observe the following measures: l. obtain senlor managernent approval for establishing or continuing (for existing customers) such business relationships; ii, Take reasonable measures to establish the source of wealth and source of funds; and iii. Conduct enhanced on-going monitoring of the business relationshiP'" b. ,,Rule 9.a,15.a. Unusual or susplcious patterns of account actlvity. - A covered institution shall apply enhanced due diligence under Rule 9.a.9.a. on its customers if it acquires information in the course of its customer account or transaction monitoring that: 1. xxx; 2. Justifies re-classification of the customer frorn low or normal risk to high-risk pursuant to these Rules or by its own criteria; 3, xxx; "Where additional information cannot be obtained, or any Informatlon or document provided ls false or falsified, or result of the validatlon process ls unsatlsfactory, the covered instltutlon shall termlnate and refrain fnom further conductlng buslness relatlonship with the customer the Philipplnes that ls ' Rule 9.a.9.b. deflnes high rlsk customer as one who ls "from a country other thanstandards, or does not reco3nlzed as havlng lnadequate lnternationally accepted antl'money launderlng sufficlently apply regulatory supervlslon or the Financial Actlon Task Force (FATF) recommendatlons, or presents greater risk for money laundering, its associated predicate offens€$tlhdftttllfr1c6li'untlonFUnU terrorfsm flnancin8 x x x." "..WU unoozr M A. RHEA srryh'<i5-trr AMLC Sccrciary 22 Angrst 2016

to the without prefudlce to the reporting of a susptclous transaction AMLC when circumstances warrant'" passes the enhanced due Thus, it is a reasonable expectation, that once a cllent the client should be accepted' diligence tests under Rules 9.a.9.a. and 9.a.15'a' above, subject to some restrictions or limitation to control the risk based on the covered person's risk assessment. |tbearsstressingthatwhileacustomerisconsideredhlghriskpursuanttothe persons should not definition provided ,nd., Rule 9.a.9,b of the RlRRs, covered the close the account Wlthout automatically impose any restriction of services or wgrst, prior conduct of appropriate due dlllgence' under Rule 9'a'15'a' Termination of account or relationship, however, is allowed RlRRs, i'e'' only after a conduct (Unusual or suspicious patterns of account activity) of the cannot be obtained' or any of enhanced due diligence, and when additional information result of the validation process is information or docurient provided is false or falsified, or unsatisfactorY. Statement (black Therefore, mere inclusion of one's jurisdlction in the FATF Public of banking services or list) would not justify imposition of any restriction or limitation rneasures' Termination of closure of account wiihout performlng enhanced due diligence enhanced due diligence' account can be resorted to only when there is a failure of following provision More importantly, covered persons should be reminded of the of Section la (e) of the AMLA, as amended: in a "The provision of this law shall not be construed or implemented such manner that will discriminate against certaln customer types, as polltically-exposed persons, as well as their relatives, or against a certaln proflles when rellgion, race or ethnlc origin, or such other attrtbutes or used as the only baSis to deny these persons access to the servlces providedbythecoveredpersons.Wheneverabank,orquasi-bank, financial institutlon or whenever any person or entity commits said discriminatory act, the person or persons responsible for such violation shall be subject to sanctions as may be deemed appropriate by their respective regulators" (emphasis supplied) Certified Tru€ CoPy of Records on Fil€ I -t MA. RHFA $(T#rr*onrn A,\lI('secrrtoly 22 August 2016