Updated Anti-Money Laundering Rules and Regulations

Bangko Sentral ng PiliPinas

OFFICE OF THE GOVERNOR

CIRCULAR NO. 706

Series of 2011

Subject: UPDATED REGULATIONS ANTI-MONEY LAUNDERING RULES AND

By the authority vested to the Bangko Sentral ng Pilipinas (BSP) to issue guidelines and circulars on anti-money iaundering (AML) in order to Act No. 9194 (AMLA, as amended), under Rule 17.1 (b) of the Revised effectively implement the provisions of Republic Act No. 9160, otherwise known as the "Anti-Money Laundering Act of 2001", as amended by Republic

Resolution No. 1801 dated 16 December 2010, approved the adoption of this Implementing Rules and Regulations (RIRR), the Monetary Board, in its Updated Anti-Money Laundering Rules and Regulations and the amendment of Part Eight of the Manual of Regulations as well as the repeal of other BSP Circulars that are inconsistent herewith.

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 Section X801. Declaration of Policy- The BSP adopts the policy of

site and conduit for the proceeds of an unlawful activity as hereto defined.

to all covered institutions supervised and regulated by the BsP. The term "covered institution" shall refer to Banks, Offshore banking units, quasi-banks. trust entities, non-stock savings and loan associations, pawnshops, foreign exchange dealers, money changers, remittance agents, electronic money issuers and other financial institutions which under speciat laws are subject to BSP supervision and/or regulation, including their subsidiaries and affiliates as herein defined wherever they may be located: Section X802. Scope of Regulations- These regulations shall apply

( A subsidiary means an entity more than fifty percent (50%) of bank, trust entity or any other institution supervised and/or the outstanding voting stock of which is owned by a bank, quasi-

regulated by the Bsp.

b An affiliate means an entity the voting stock of which, to the bank, trust entity, or any other institution supervised and/or regulated by the BSP. extent of fifty percent (50%) or less, is owned by a bank, quasi-

authorized by BSP to establish branches or other offices within or outside the Pursuant to Section 20 of the General Banking Law of 2000, a bank

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Philippines shall be responsible for all business conducted in such branches business had atl been conducted in the head office. A bank and its branches and offices shall be treated as one unit. and offices to the same extent and in the same manner as though such

implementation of these Rules or any of the provisions of the AMLA, as issues a directive forbidding said branch, office, subsidiary or affiliate, the the supervising authority's directive. amended, its RIRR, and the supervising authority in that foreign country covered institution shall notify the BSP of this situation and furnish a copy of subsidiary or affiliate based outside the Philippinesprohibit the Whenever local applicable laws and regulations of a branch, office,

herein, all terms used shall have the same meaning as those terms that are defined in the AMLA, as amended, and its RIRR. Section X803. Definition of terms- Except as otherwise defined

have originated from legitimate sources. It is committed by the following: activity as herein defined are transacted, thereby making them appear to (A) Money laundering is a crime whereby the proceeds of an unlawful

instrument or property. property represents, involves, or relates to, the proceeds of any unlawful activity, transacts or attempts to transact said monetary (1) Any person knowing that any monetary instrument or

offense of money laundering referred to in paragraph (1) above faiis to perform any act as a result of which he facilitates the property involves the proceeds of any unlawful activity, performs or (2) Any person knowing that any monetary instrument or

Anti-Money Laundering Council, fails to do so. property is required under the act to be disclosed and filed with the (3) Any person knowing that any monetary instrument or

hundred thousand pesos (P500,000) within one banking day. equivalent monetary instrument involving a total amount in excess of five B} Covered transaction (CT) is a transaction in cash or other

institutions, regardless of the amount involved, where any of the following circumstances exist: (C} Suspicious transactions (ST) are transactions with covered

2 The client is not properly identified: economic justification; There is no underlying legal or trade obligation, purpose or

3 The amount involved is not commensurate with the business or

4 Taking into account all known circumstances, it may be financial capacity of the client:

perceived that the client's transaction is structured in order to

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5. Any circumstance relating to the transaction which is observed 6. The transaction is in any way related to an unlawful activity or avoid being the subject of reporting requirements under the AMLA, as amended; to deviate from the profile of the client and/or client's past transactions with the covered institution: any money laundering activity or offense under the AMLA, as amended, 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 (2) Drafts, checks, and notes; (3) Securities or negotiable instruments, bonds, commercial papers, country: substitute instruments, trading orders, transaction tickets and confirmations of sale or investments and money market deposit certificates, trust certificates, custodial receipts or deposit

(4) Contracts or policies of insurance, life or non-life, and contracts of (5) Other similar instruments where title thereto passes to another by endorsement assignment or delivery. suretyship; and instruments:

institution. It also includes any movement of funds by any means with a covered giving rise to any contractual or legal relationship between the parties thereto (E) Transaction refers to any act establishing any right or obligation or

combination thereof involving or having :direct relation to the following: (F) Unlawful activity refers to any act or omission or series or

6 1 3 4 5 Kidnapping for ransom under Articie 267 of Act No. 3815. Section 3 paragraphs B, C, E, G, H, and I of Republic Act No. Plunder under Republic Act No. 7080, as amended; Piracy on the high seas under the Revised Penal Code, as Sections 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, and 16 of Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Drugs Act of 2002; Robbery and extortion under Articles 294, 295, 296, 299, 300. 301, and 302 of the Revised Penal Code, as amended; Jueteng and masiao punished as illegal gambling under Presidential Decree No. 1602; amended and Presidential Decree No. 532: otherwise known as the Revised Penal Code, as amended: 3019. as amended; otherwise known as the Anti-Graft and Corrupt Practices Act:

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(8) Qualified theft under Article 310 of the Revised Penal Code, as (11) Violations under Republic Act No. 8792, otherwise known as the (14) Felonies or offenses of a similar nature that are punishable under ) (12) Hijacking and other violations under Repubtic Act No. 6235; (10) Smuggling under Republic Act Nos. 455 and 1937; (13) Fraudulent practices and other violations under Republic Act No Swindling under Article 310 of the Revised Penal Code, as Penal Code, as amended, including those perpetrated by terrorists against non-combatant persons and similar targets; 8799, otherwise known as the Securities Regulation Code of the penal laws of other countries. amended: amended: Electronic Commerce Act of 2000; destructive arson and murder, as defined under the Revised 2000:

entity on whose behalf an account is maintained or a transaction is includes the beneficiary of a trust, an investment fund, a pension fund or a company or person whose assets are managed by an asset manager, or a or otherwise transacts business, with a covered institution and any person or conducted, as well as the beneficiary of said transactions. A customer also grantor of a trust. G) Customer- refers to any person or entity that keeps an account.

substance in their own right but through which financial transactions may be conducted. H) Shell Company- Legal entities which have no business

at this address, and (d) is not subject to inspection by the authority that licensed it to conduct banking activities. bank is authorized to engage; (b) does not employ one or more individuals on appear to be incorporated as a bank but has no physical presence and nd affitiation with a regulated financial group. It can also be a bank that (a) does not conduct business at a fixed address in a jurisdiction in which the shell a full time basis at this fixed address: (c) does not maintain operating records Shell Bank- a Shell company incorporated as a bank or made to

effective control over a legal person or arrangement. is being conducted. It also incorporates those persons who exercise ultimate owns or controts-a customer-and/or the person'on whose behalf a transaction {J Beneficial Owner- refers to natural person(s) who ultimately

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

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

Institution). The originator person and the beneficiary person may be the same person. behalf of an originator (both natural and juridical) through a financial institution (Originating Institution) by electronic means with a view to making an amount of money available to a beneficiary at another financiat institution (Beneficiary (M) Fund/wire transfer- refers to any transaction carried out on

to any chain of wire transfers that has at least one cross-border element. and beneficiary institutions are located in different countries. It shall also refer Cross border transfers- any wire transfer where the originating

beneficiary institutions are located in the same country. It shall refer to any located in another country. chain of wire transfers that takes place entirely within the borders of a single country, even though the system used to effect the fund/wire transfer may be O) Domestic Transfer- any wire transfer where the originating and

the AMLA, as amended, and its RIRR, or (b) a financial institution operating but conducts business operations and activities similar to them. originator to transfer funds to the beneficiary and can either be (a) a covered institution as specifically defined by these Rules and as generally defined by outside the Philippines that is other than covered institutions referred to in (a) P Originating institution- refers to the entity utilized by the

Philippines that is other than' covered institutions referred to in (a) but money to the beneficiary and can either be (a) a covered institution as specifically defined by these Rules and as generally defined by the AMLA, as amended, and its RiRR, or (b) a financial institution operating outside the conducts business operations and activities similar to them. Q Beneficiary institution- refers to the entity that will pay out the

defined by these Rules and as generally defined by the AMLA, as amended. is other than covered institutions referred to in (a) but conducts business intermediary institution. It can either be (a) a covered institution as specifically originating and beneficiary institutions where both have no correspondent banking relationship with each other but have established relationship with the and its RIRR, or (b) a financial institution operating outside the Philippines that operations and activities similar to them. (R) Intermediary institution- refers to the entity utilized by the

apply the following principles: Laundering - In line with the declaration of policy, covered institutions shall Section X804. Basic Principles and Policies to Combat Money

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 financiat system;

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2. Know sufficiently your customer at all times and ensure that the 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; financially or socially disadvantaged are not denied access to

3. Adopt and effectively implement a sound AML and terrorist terrorist financing; financing risk management system that identifies, assesses. monitors and controls risks associated with money laundering and

4. Comply fully with these rules and existing laws aimed at combating officers and employees are aware of their respective responsibilities and carry them out in accordance with superior and principled culture of compliance; and money laundering and terrorist financing by making sure that

5. Fully cooperate with the Anti-Money Laundering Council (AMLC) for amended, and its RIRR. the effective implementation and enforcement of the AMLA, as

A. RISK MANAGEMENT

proceeds of unlawful activity or to facilitate or finance terrorism. to the end that covered institutions shall not be used as a vehicle to iegitimize sound risk management policies and practices to ensure that risks associated compliance risks are identified, assessed, monitored, mitigated and controlled, as well as to ensure effective implementation of these regulations. with money-laundering such as counterparty, reputational, operational, and S X805. Risk Management - All covered institutions shall develop

active Board and Senior Management oversight, acceptable policies and prevention compliance program, appropriate monitoring and Management procedures embodied in a money iaundering and terrorist financing information System and comprehensive internal controis and audit. The four areas of sound risk management practices are adequate and

the Board of Directors to fully comply with the provisions of these rules, the oversight on the institution's compliance management is adequate. Notwithstanding the provisions specifying the duties and responsibilities of the AMLA, as amended, and its RIRR. For this reason, it shall ensure that Compliance Office and Internal Audit, it shall be the ultimate responsibitity of 5 X805.1. Board and Senior Management Oversight

to the Board of Directors or any Board-level or approved committee on ail of the covered institution's Money Laundering and Terrorist Financing Prevention Program (MLPP) shall be a primary task of the Compliance Office. To ensure the independence of the Office, it shall have a direct reporting line S Xs05.1.a. Compliance Office- Management of the implementation

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matters related to AMt. and terrorist financing compliance and their risk management. It shall be principally responsible for the following functions among other functions that may be delegated by Senior Management and the Board, to wit:

monitoring of performance by staff and officers involved in money laundering reports. It shall also report compliance findings to the Board or any Board- level committee; with these Rules, the AMLA, as amended, the RIRR and its own MLPP. It shall conduct periodic compliance checking which covers, among others evaluation of existing processes, policies and procedures including on-going and terrorist financing prevention, reporting channels, effectivity of the electronic money laundering transaction monitoring system and record retention system through sample testing and review of audit or examination Ensure compliance by all responsible officers and employees

2 Ensure that infractions, discovered either by internally initiated

immediately corrected; audits or by special or regular examination conducted by the BSP, are

circulars and other issuances by the BSP and the AMLC in relation to matters aimed at preventing money laundering and terrorist financing; 3 Inform all responsible officers and employees of all resolutions.

4 Alert senior management, the board of directors, or the Board.

sensibly address anti-money laundering and terrorist financing issues; and level or approved committee if it believes that the institution is failing to

5 Organize the timing and content of AML training of officers and employees including regular refresher trainings as stated in Section X809.

that shall be implemented on a consolidated basis. Program- All covered institutions shall adopt a comprehensive and risk based MLPP geared toward the promotion of high ethical and professional unintentionally, for money laundering and terrorism financing. The MLPP shall be consistent with the AMLA, as amended, and the provisions set out in these rules and designed according to the covered institution's corporate Directors or by the country/regional head or its equivalent for local branches of foreign banks, and well disseminated to all officers and staff who are obligated by law and by their program to implement the same. Where a covered institution has branches, subsidiaries, affiliates or offices located within and/or outside the Philippines, it shall adopt an institution-wide MLPP standards and the prevention of the bank being used, intentionally or structure and risk profile. it shall be in writing, approved by the Board of S X805.2. Money Laundering and Terrorist Financing Prevention

in hard or soft copy. The Covered institution must put up a procedure to ensure an audit trail evidencing dissemination process for new and amended policies and procedures. minimum: The MLPP shall also be readily available in user-friendly form, whether The program shall embody the following at a

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Rules, to wit: requirements of the AMLA, as amended, its RIRR, and these compliance M) and implementation of the following major Detailed procedures of the covered institution's

acceptance policies and on-going monitoring processes; a) Customer identification process including

b} Record keeping and retention;

C) Covered transaction reporting; and

designation of a Committee, it may designate the that the Board of Directors is informed of his decision. covered institution should file a report to the AMLC. if the resources of the covered institution do not permit the compliance officer to perform this function instead provided adoption of a system, electronic or manual, of flagging, suspicious transactions, regardless of amount or that will raise a "red flag" for purposes of conducting further transactions to the AMLC when their aggregated amounts breach the threshold. The ST reporting shall include a reporting chain under which a suspicious transaction will be Committee who will ultimately decide whether or not the monitoring and reporting of transactions that qualify as verificationor investigation, amounts below the threshold to facilitate the process of aggregating them for purposes of future reporting of such processed and the designation of a Board level or approved Suspicious transaction reporting including the or transactions involving

responsibilities as well as update them of any changes in AML laws, rules and internal policies and procedures. countering of terrorist financing training program for all directors, and their obligations and responsibilities under these rules, the AMLA, as amended, its RIRR and their internal policies and procedures as embodied in the MLPP. refresher trainings to remind these individuals of their obligations and responsible officers and employees, to enable them to fully comply with 2 An effective and continuous anti-money laundering and The training program shall also include

ensure that only qualified personnel who have no criminal record/s are employed to assume sensitive banking functions; 3} An adequate screening and recruitment process to

4) An internal audit system in accordance with s X805.4;

that will ensure the completeness and accuracy of the information and identification documents obtained from clients, the covered and 5 An independent audit program with written scope of audit

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suspicious transaction reports submitted to the AMLC, and the records laundering and terrorism financing: retained in compliance with these rules as well as adequacy and effectiveness of the training program on the prevention of money

the audit and/or BSP regular or special examination are immediately corrected and acted upon; 6) A mechanism that ensures all deficiencies noted during

) Cooperation with the AMLC; and

and the AMLC in matters relating to the covered institution's AML least be at senior officer level, as the lead implementor of the program officer may also be the liaison between the covered institution, the BSP within an adequately staffed Compliance Office. The AML compliance ) Designation of an AML compliance officer, who shail at

compliance. Where resources of the covered institution do not permit also assume the responsibility of the former. the hiring of an AML compliance officer, the Compliance Officer shall

Approval by the Board of Directors or Country Head - Within one hundred S X805.2.a. Submission of the Revised and Updated MLPP.

MLPP had been prepared, duly noted and approved by the Board of Directors or the Country Head or its equivalent for local branches of foreign banks. shall prepare and have available for inspection an updated MLPP embodying the principles and provisions stated in these rules. The Compliance Officer eighty days (180) days from effectivity of these Rules, all covered institutions shall submit to the Anti-Money Laundering Specialist Group, Supervision and Examination Subsector I of the BSP a sworn certification that the revised

trends in money iaundering and terrorist financing typotogies, and latest pertinent BSP issuances. Any revision or update in the MLPP shall likewise be approved by Board of Directors or the country/regional head or its two years to incorporate changes in AML policies and procedures, latest Henceforth, each MLPP shall be regularly updated at least once every

equivalent for local branches of foreign banks.

with these Rules. The system should be capable of generating timely shall adopt an AML and terrorist' financing monitoring system that is accurate and complete reports to lessen the likelihood of any reputational and appropriate for their risk-profile and business complexity and in accordance & X805.3. Monitoring and Reporting Tools - All covered institutions

Management on anti-money laundering and terrorist financing compliance. compliance risks, and to regularly apprise the Board of Directors and Senior

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 in addition to the functionalities mentioned in s X807.2. S X805.3.a. Electronic Monitoring and Reporting Systems for

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UBs and KBs, it need not have an electronic system but must ensure that it has the means of complying with s X805.3. & X805.3.b. Manual monitoring- For covered institutions other than

reporting line to the Board or a Board level Audit Committee. support of the Board of Directors and Senior Management and have a direct money laundering and terrorist financing should be conducted by qualified personnel who are independent of the office being audited. It must have the S X805.4. Internal Audit - The Internal Audit function associated with

the customer identification process, such as the determination of the be responsible for the periodic and independent evaluation of the risk record keeping and retention,as well as the adequacy and effectiveness of other existing internal controls associated with money laundering and terrorist financing. management, degree of adherence to internal control mechanisms related to existence of customers and the completeness of the minimum information and/or documents establishing the true and full identity of, and the extent and standard of due diligence applied to, customers, CT and ST reporting and The Internal Audit shall, in addition to those specified by these rules.

determination of the efficiency of the system's functionalities as required by s X805.3 and S X807.2. monitoring system, in addition to the above, the internal audit shall include For UBs and KBs with electronic money laundering transaction

Board to inform them of management's action to address deficiencies noted in the audit. of its own evaluation whenever necessary. Resuits of the audit shall likewise Board of Directors and shall be open for scrutiny by BSP examiners in the be promptly communicated to the Compliance Office for its appropriate corrective action. The Compliance Office shall regularly submit reports to the course of the regular or special examination without prejudice to the conduct The results of the internal audit shall be timely communicated to the

B. CUSTOMER IDENTIFICATION PROCESS

risk accounts. Diligence (CDD) for potentially low risk clients and enhanced CDD for higher juridical entities, require a system of verifying their legal existence and and customer identification process that involves reduced Customer Due verifying the true identity of their customers and, in case of corporate and organizational structure as well as the authority and identification of all persons purporting to act on their behalf. Along this line, it shall formulate a risk-based and tiered customer acceptance policy, customer retention policy Section x806. A covered institution shall maintain a system of

shall develop clear, written and graduated acceptance policies and s X806.1. Customer acceptance policy- Every covered institution

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suspicious individuals or entities from opening an account. not denied access to financiai services while at the same time prevent procedures that will ensure that the financially or socially disadvantaged are

types of customers that are likely to pose low, normal or high risk to their operations as well as the standards in applying reduced, average and enhanced due diligence including a set of conditions for the denial of account risk; Standards for applying reduced, average and enhanced due diligence- Covered institutions shall specify the criteria and description of the s X806.1.a. Criteria for type of customers: low, normal and high

opening.

Iaundering and terrorist financing. assessed by the covered institution or by these Rules as high risk for money Enhanced due diligence shall be applied to customers that are

customer with regular empioyment or economically productive activity, smatl institution's office or branch, the covered institutions may apply reduced due diligence. Some entities may likewise be considered as low risk clients, these account balance and transactions, and a resident in the area of the covered For customers assessed to be of low risk such as an individual

disclosure requirements, government agencies including government owned BSP to operate as such, publicly listed companies subject to regulatory are: Banking institutions, trust entities and quasi-banks authorized by the and controlted corporations (GOcCs).

be taken into account: In designing a customer acceptance policy, the fotlowing factors shall

1. 2 3. Public' or high profile position ' of the ' customer Background and source of funds; Country of origin and residence or operations; Qr its directors/trustees, stockholders, officers and/or authorized signatory: 5 A Watch list of individuals and entities engaged in illegal activities Linked accounts;

or terrorist related activities as circularized by BSP, AMLC, and other international entities or organizations such as the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury and United Nations Sanctions List; 7 O Type of services/products/transactions to be entered with the Business activities; and

covered institution.

customer was profiled (low, normal or high) and what standard of CDD (reduced, average or enhanced) was applied. In all instances, the covered institution shall document how a specific

diligence is applied as required by these Rules or by the covered institution's customer acceptance policy, the covered institution shall, in addition to S X806.1.b. Enhanced Due Diligence- Whenever enhanced due

profiling of customers and monitoring of their transactions, do the following:

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M Obtain additional information other than the minimum information and/or documents required for the conduct of average due diligence as enumerated under s X806.2.a and s X806.2.b;

stockholder, and banking services to be availed of. where the individual has. maintained or is maintaining an account, list of companies where he is a director, officer or In cases of individual customers, obtain a list of banks

each of the primary officers (President, Treasurer and authorized signatory/ies), stockholders owning at least 2% of the respective identification documents. existing bank references, the Name, present address, date and voting stock, and directors/trustees/partners as well as their (b) For entities assessed as high risk customers, such as shell companies, covered institutions shall, in addition to the minimum information and/or documents enumerated abovej place of birth, nature of work, nationality and source of funds of obtain additional information including but not limited to prior or

provided in accordance with s x806.1.c. Conduct validation procedures on any or afl of the information

relationship. 3 Obtain senior management approval for establishing business

individual or entity without prejudice to the reporting of a suspicious transaction to the AMLC when circumstances warrant. unsatisfactory. the covered institution shall deny banking relationship with the document provided is false or falsified, or result of the validation process is Where additional information cannot be obtained, or any information or

for individual customers shall include but is not limited to the following: $ X806.1.c. Minimum Validation Procedures- Validation procedures

through validation of its issuance by requesting a certification from the issuing authority or by any other means. bills, bank or credit card statement or other documents showing permanent address or through on-site visitation: sending of "thank you letters"); and document; 2 3 A Contacting the customer by phone, email or letter (such as Confirming the date of birth from a duly authenticated official Verifying the permanent address through evaluation of utility Determining the authenticity of the identification documents

but is not limited to the following: For corporate or juridical entities, validation procedures shall include

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you letters" conducted by a reputable accounting/auditing firm; 3. 5 2 4 Requiring the submission of audited financial statements On-site visitation of the company; and Contacting the entity by phone, email or letter (such as "thank Inguiring from the supervising authority the status of the entity: Obtaining bank references;

S X806.1.d. Reduced Due Diligence. Whenever reduced due diligence is applied in accordance with the covered institution's customer acceptance policy, the following rules shall apply:

For individual customers, a covered institution may open an account under the true and full name of the account owner or owners and

minimum information shall mean obtaining information numbers 1 to 7 of s defer acceptance of the minimum information. Deferred acceptance of

X806.2.a at the time of account opening while the rest, numbers 8 to 11, may be obtained within a reasonable time but not exceeding ninety (90) days from account opening.

b For corporate, partnership, and sole proprietorship entities, and other entities such as banking institutions, trust entities and quasi-banks authorized by the BSP to operate as such, publicly listed companies subject to regulatory disclosure requirements, government agencies including GOcCs, a covered institution may open an account under the official name of these entities with only no. 4 of those required under s X806.2.b (Board Resolution duly certified by the Corporate Secretary authorizing the signatory to sign on behalf of the entity)- obtained at the time of account opening.

S X806.1.e. Face-to-face contact- No new accounts shall be opened and created without face-to-face contact and personal interview between the covered institution's duly authorized personnel and the potential customer except under the following arrangements:

S X806.1.e.1. Account opened through a trustee, agent, nominee, or intermediary- Where the account is opened through a trustee, agent. nominee or intermediary, the covered institution shall establish and record the true and full identity and existence of both the (a) trustee, nominee, agent or intermediary and (b) trustor, principal, beneficial owner, or person on whose behalf the account is being opened. The covered institution shall determine the true nature of the parties' capacities and duties by obtaining a copy of the written document evidencing their relationship and apply the same criteria for assessing the risk profile and determining the standard of due diligence to be applied to both.

In case of several trustors, principals, beneficial owners, or persons on whose behalf the account are being opened where the trustee, nominee, agent or intermediary opens a single account but keeps therein sub-accounts

the minimum, obtain the true and full name, place and date of birth or date of on whose behalf the account is being opened, the covered institution shall, at that may be attributable to each trustor, principal, beneficial owner, or person

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beneficiai owner, or person on whose behalf the account is being opened in order that a complete and accurate report may be filed with the AMLC. and source of funds as if the account was opened by them separately. Where the covered institution is required to report a CT or circumstances warrant the filing of an ST, it shall obtain such other information on every trustor, principal registration, as the case may be, present address, nature of work or business,l

nominee, agent or intermediary is being used as a dummy in circumvention of X806.1.b. existing laws, it shali apply enhanced due diligence in accordance with s In case a covered institution entertains doubts that the trustee

rules on outsourcing of specified banking activities, a covered institution without prior Monetary Board approval, may outsource to a counter-party the is formally documented and provided further that the conditions under s X806.2.d. are met. conduct of the requisite face-to-face contact provided that such arrangement $ X806.1.e.2. Outsourcing arrangement- Subject to existing

annually the performance of the counter-party to assist it in determining herein defined, covered institutions shall ensure that the employees or undergo equivalent training program as that of its front-liners undertaking a similar activity. Covered institutions shall likewise monitor and review whether or not to continue with the arrangement. representatives of the counter-party conducting the face-to-face contact If the counter party is an entity other than a covered institution as

X806.2.e.1. are also met. conducted face-to-face contact provided that the pertinent requirements in s contact on its own customer who was referred to a covered institution, the Iatter may rely on the representation of the third party that it has already defined under s X806.2.e.1. has already conducted the requisite face-to-face S X806.1.e.3. Third party reliance- Where a third party as

establish and record the true identity of its customers based on vatid identification document/s specified in s X806.2.c. SX806.2. Customer Identification- Covered institutions shall

true and full name of the account owner or owners. 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 S X806.2.a. New Individual Customers- Covered institutions shall

following minimum information and confirming these information with the valid authorized signatory/ies of corporate and juridical entities: that the covered institution obtain at the time of account opening ali the identification documents stated in s X806.2.c. from individual customers and Unless otherwise stated in these Rules, average due diligence requires

1. 2 Name: Present address:

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4 3. Date and place of birth; Nature of work, name of employer or nature of self- employment/business; Government Service Insurance Number, if any; and 5 9 6 1 10 Tax identification number, Social Security System number or Contact details; Specimen signature; Source of funds. Permanent address; Nationality:

11. Name, present address, date and place of birth, nature of work and source of funds of beneficial owner or beneficiary, whenever applicable.

S X806.2.b. New Corporate and Juridical Entities- Covered

these entities. It shall open and maintain accounts oniy in the true and full institutions shall develop a systematic procedure for identifying corporate. name of the entity and shall have primary responsibility to ensure that the stockholders/partners/owners, directors, officers and authorized signatory of partnership and sole proprietorship entities as well as the

entity has not been, or is not in the process of being, dissolved, struck-off, wound-up, terminated, or otherwise placed under receivership or liquidation.

that the covered institution obtain the following minimum information and/or documents before establishing business relationships: Unless otherwise stated in these Rules, average due diligence requires

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;

Corporate/Partners' Secretary authorizing the signatory to sign on behalf of the entity: directors/trustees/partners, principal stockholders owning at least twenty percent (20%) of the outstanding capital stock and primary officers such as 2 3 4 5 Board or Partners' Resolution duly certified by the Articles of incorporation or Association and By-taws: Latest General Information Sheet which lists the names of Principal business address;

the President and Treasurer; 6 7 8 Name, present address, date and place of birth, nature of work Contact numbers of the entity and authorized signatory/ies; Source of funds and nature of business:

and source of funds of beneficial owner or beneficiary, if applicable; and and/or information shall be obtained duly authenticated by the Philippine Consulate where said entities are registered. 9. For entities registered outside the Philippines, similar documents

juridical entity, including financial transactions involving Overseas Filipino guidelines goverm the acceptance of valid ID cards for all types of financial transaction by a customer and the authorized signatory/ies of a corporate or $ X806.2.c.Valid Identification documents- Thefollowing

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as well as to encourage and facilitate remittances of OFWs through the banking system: Workers (OFWs), in order to promote access of Filipinos to services offered by formal financial institutions, particularly those residing in the remote areas

for the first time shall be required to present the original and submit a clear copy of at least one (1) valid photo-bearing tD document issued by an official juridical entity who engage in a financial transaction with covered institutions authority. (1 Customers and the authorized signatory/ies of a corporate or

following: For this purpose, the term official authority shatl refer to any of the

a. Government of the Republic of the Philippines: b. Its political subdivisions and instrumentalities; d. Private entities or institutions registered with or supervised or c. GOCCs; and regulated either by the BSP, SEC or IC.

Valid IDs include the following.

Y Passport including those issued by foreign governments

21. Company IDs issued by private entities or institutions registered 16. Alien Certification of Registration/Immigrant Certificate of 17.Government office and GOCC ID (e.g., AFP, HDMF IDs) 20. IBP ID; and 9. Barangay certification 18. Certification from the NCWDP 19. DSWD certification 8. Tax Identification Number 14.OFW ID 15. Seaman's book 4.NBI clearance 5. Police clearance 11.SsS card 12. Senior Citizen card 13.OWWA ID 3. PRC !D 6. Postal ID 10. GSIS e-Card 7 2 with or supervised or regulated either by the BSP, SEC or IC. Voter's ID Registration Driver's license

who are not yet of voting age, may be allowed to present the original and submit a clear copy of one (1) valid photo-bearing school ID duly signed by the principal or head of the school. (2) Students who are beneficiaries of remittances/fund transfers and

Page 17 of 30

customer is a resident or a citizen may be presented. resident, similar IDs duly issued by the foreign government where the (3) Where the customer or authorized signatory is a non-Philippine

4 A covered institution snall reguire their customers or authorized

to submit an updated photo and other relevant information on the basis of risk the commencement of business relationship. They shall require their clients and materiality. signatory to submit a clear copy of one (1) valid ID on a one-time basis oniy at

based on its reliability and ability to validate the information indicated in the identification document with that provided by the customer. 5 A covered institution may classify identification documents

other tDs not enumerated above provided that it shall not be the sole means of identification. 0 Whenever it deems necessary, a covered institution may accept

photo of the customer or authorized signatory. copy thereof does not clearly show the face of the customer or authorized signatory, a covered institution may utilize its own technology to take the photo of the customer or authorized signatory, or the photo bearing ID or a identification documents acceptabie to the covered institution do not bear any In case the identification documents mentioned above or other

for keeping the identification documents shail lie with the covered institution information and/or documents- Except for deposit taking, which is an inherent banking function that cannot be outsourced and subject to existing rules on outsourcing of specified banking activities, a covered institution may. without prior Monetary Board approval, outsource to a counter-party, which may or may not be a covered institution as herein defined, the gathering of the minimum information and/or documents required to be obtained by these Rules provided that the ultimate responsibility for knowing the customer and and compliance with the following conditions: g X806.2.d.Outsourcing of the gathering of minimum

For covered institution counter-party:

board of directors of both covered institutions: identification system and training program in place; and documents and conduct the necessary risk assessment of the customer. documents shall be turned over within a period not exceeding ninety days (90) calendar days to the covered institution, which shall carefully review the 2 3 A There is a written service ievel agreement approved by the The counter-party has a reliable and acceptable customer In line with requirement no. 1, all identification information and/or

For non-covered institution counter-party:

1. All conditions required for covered institution counter-party;

Page 18 of 30

ensure that the employees or representatives of the counter-party establishing the true and full identity of the customer undergo equivalent training program 2. The covered institution outsourcing the activity shall likewise

activity. as that of the covered institution's own employees undertaking a similar

performance of the counter-party to assist it in determining whether or not to 3 Annual monitoring and review by the covered institution of the

continue with the arrangement.

intermediary, either as an individual or through a fiduciary relationship, a Where any transaction is conducted by a trustee, nominee, agent or corporate vehicle or partnership, on behalf of a trustor, principal, beneficial S X806.2.e. Trustee, Nominee, Agent or Intermediary account-

owner or person on whose behalf a transaction is being conducted, covered

both the (1) trustee, nominee, agent or intermediary and the (2) trustor, institutions shall establish and record the true and full identity and existence of parties' capacities and duties by obtaining a copy of the written document principal, beneficial owner or person on whose behalf the transaction is being conducted. The covered institution shall determine the true nature of the risk profile and determining the standard of due diligence to be applied to both. evidencing their relationship and apply the same standards for assessing the

or intermediary is being used as a dummy in circumvention of existing laws, it shall apply enhanced due diligence in accordance with s X806.1.b. In case it entertains doubts as to whether the trustee, nominee, agent.

(Third Party Reliance)- A covered institution may rely on the customer covered by equivalent customer identification requirements. Nominee, Agent or intermediary which is a Third Party as herein defined identification process undertaken by a third party. For purposes of this Subsection, the "third party" shall refer to a (1) covered institution as herein specifically defined and as generally defined by AMLA, as amended, and its RIRR, or (2) a financial institution operating outside the Philippines that is S X806.2.e.1. Where the Customer Transacts Through a Trustee, A BSP.

face-to-face contact and gathering of minimum information to establish the accredited custodian may likewise rely in accordance with these Rules on the existence and full identity of the customer conducted by the seller or issuer of securities or by the global custodian provided the latter has an equivalent customer identification reguirements.

and its RIRR - A covered institution may rely on the identification process conducted by this third party provided that the covered institution shail obtain defined by these Rules and as generally defined by AMLA, as amended. S X806.2.e.1.a. Third Party is a covered institution specifically

from the third party a written sworn certification containing the following:

identification requirements in accordance with these Rules and its own MLPF The Third Party has conducted the requisite customer

including the face-to-face contact requirement to establish the existence of the

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documents required to be obtained from the customer; and ultimate customer and has in its custody all the minimum information and/or

identification documents from the Third Party upon request without delay. 2 The relying covered institution shall have the ability to obtain

in S X806.2.e.1.a. but conducts business operations and activities similar to them - All the contents required in the sworn certification mentioned in s X806.2.e.1.a. shall apply with the additional requirement that the laws of the country where the third party is operating has equal or more stringent customer identification process requirement and that it has not been diligence measures, do the following: outside the Philippines that is other than covered institutions referred to cited in violation thereof. It shall, in addition to performing normal due S X806.2.e.1.b.Third Party is a financial institution operating

to which it belongs to understand fully the nature of its business and to laundering or terrorist financing investigation or regulatory action: determine from publicly available information the reputation of the institution and the quality of supervision, including whether it has been subject to money (a Gather sufficient information about the third party and the group

b Document the respective responsibilities of each institution; and

relationship before relying on the third party. Obtain approval from senior management at inception of

wealth management and similar activities. confidentiality, are more open to the elements of reputational risk especially if the customer identification process is not diligently followed. institutions therefore shall endeavor to establish and record the true and full identity of these customers and establish a policy on what standard of due relationship officer or the like for acceptance of customers of private banking, These services, which by their nature involve high measure of client diligence will apply to them. They shall also require approval by a senior officer other than the private banking/ wealth management/ similar activity S X806.2.f. Private bankingl Wealth Management operations. Coverec

consideration their position and the risks attendant thereto. endeavor to establish and record the true and full identity of PEPs as well as their immediate family members and the entities related to them and establish a policy on what standard of due diligence will appiy to them taking into S X806.2.g. Politically Exposed Person- A covered institution shall

with these policies and procedures. A covered institution may. rely on the associated with dealing -with correspondent accounts where it may covered institutions shall adopt policies and procedures for correspondent banking activities and designate an officer responsible in ensuring compliance unknowingly facilitate the transmission, or holding and management of proceeds of unlawful activities or funds intended to finance terrorist activities. S X806.2.h. Correspondent banking- Because of the risk

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customer identification process undertaken by the respondent bank. In such case, it shall apply the rules on Third Party retiance under s x806.2.e.1.. treating the respondent bank as the Third Party as defined therein. In addition, the correspondent bank shall:

understand fully the nature of the respondent's business and to determine from publicly available information the reputation of the institution and the quality of supervision, including whether it has been subject to money Iaundering or terrorist financing investigation or regulatory action. a Gather sufficient information about the respondent institution to

terrorist financing controls. b} Assess the respondent institution's anti-money laundering and

correspondent relationships. () Obtain approval from senior management before establishing

() Document the respective responsibilities of each institution.

respondent bank has verified the identity of, and performed on-going due correspondent and that it is able to provide relevant customer identification diligence on, the customers having direct access accounts of the With respect to "payable-through accounts", be satisfied that the

data upon request by the correspondent bank.

Correspondent banking customers presenting greater risk, including shell companies, shall be subject to enhanced due diligence.

transmit proceeds of unlawful activities or funds intended to finance terrorist dealing with fund/wire transfers, where a covered institution may unknowingly s X806.2.i. Fund/Wire transfer- Because of the risk associated with

activities, it shall establish policies and procedures designed to prevent it from

following: being utilized for that purpose which shall include, but not limited to, the

out fund transfers to non-customer beneficiary, unless it has conducted the () The beneficiary institution shall not accept instructions to pay

existence of said beneficiary. Should the originator and beneficiary be the same person, the beneficiary institution may rely on the customer due as Third Party as therein defined; necessary customer due diligence to establish the true and full identity and diligence conducted by the originating institution provided the rules on Third Party reliance under s x806.2.e.1. are met, treating the originating institution

existence of said originator: fund/wire transfer from a non-customer originator, unless it has conducted the necessary customer due diligence to establish the true and full identity and b} The originating institution shall not accept instructions to

as herein described, the beneficiary institution shall conduct enhanced due (() In cross border transfers, if the originator is a high risk customer

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diligence on the beneficiary and the originator. Where additional information cannot be obtained, or any information or document provided is false or falsified, or resuit of the validation process is unsatisfactory, the beneficiary institution shall refuse to effect the fund/wire transfer or the pay-out of funds without prejudice to the reporting of a suspicious transaction to the AMLC when circumstances warrant;

instructions should not be the primary delivery method. Every effort shall be d) Whenever possible, manuaily initiated fund transfer (MIFT)

made to provide client with an electronic banking solution. However, where MIFT is utilized, the existing rules on vatidation procedures as prescribed by Circular No. 436 dated 18 June 2004 shall apply:

Cross border and domestic fund/wire transfers and related message amounting to P50,000 or more or its equivalent shall include accurate and meaningful originator information. originator information that shali remain with the transfer or related message The following are the

through the payment chain:

2 t Name of the originator: Address or in its absence the national identity number or date and place of birth of the originator; and 3 Account number of the originator or in its absence, a unique reference number must be included.

beneficiary institution shall exert all efforts to establish the true and full identity equivalent be unaccompanied by the reguired originator information, the ( Should any wire transfer amounting to P50,000 or more or its

and existence of the originator by requiring additional information from the originating institution or intermediary institution. It shall likewise apply information or document provided is false or falsified, or result of the validation enhanced due diligence to establish the true and full identity and existence of the beneficiary. Where additional information cannot be obtained, or any

process is unsatisfactory, the beneficiary institution shall refuse to effect the fund/wire transfer or the pay-out of funds without prejudice to the reporting of a suspicious transaction to the AMLC when circumstances warrant.

covered institution may sell Cashier's, Manager's or Certified Checks only to the following information: its existing customers and shall maintain a register of said checks indicating S X806.2.j. Buyers of Cashier's, Manager's or Certified Checks- A

behalf of an entity: 4. 2 c 1 True and full name of the buyer or the applicant if buying on Name of the payee; Account number; Date of issuance and the number of the check;

5. 6. Purpose of such transaction. Amount; and

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Other than its existing Customer- Where an individual or an entity other than an existing customer applies for the issuance of Cashier's, Manager's or required in s X806.2.j., obtain all the identification documents and minimum Certified Checks, the covered institution shall, in addition to the information S X806.2.j.1. Buyers of Cashier's, Manager's or Certified Checks

information required by these rules to establish the true and full identity and existence of the applicant. In no case shall reduced due diligence be applied to the applicant and, where circumstances warrant, enhanced due diligence should be applied.

in Blank or Payable to Cash, Bearer or Numbered Account- A covered $ X806.2.j.2. Buyers of Cashier's, Manager's or Certified Checks

institution may issue cashier's, manager's or certified checks or other similar instruments in blank or payable to cash, bearer or numbered account subject to the foflowing conditions:

1 The amount of each check shall not exceed P10,000;

its customer acceptance and identification policies and as required under s 2 The buyer of the check is properly identified in accordance with

X806.2.j. and s X806.2.j.1. of these Rules;

uder S X806.2.. 3 A register of said checks indicating all the information required

accepts as deposits, said cashier's, manager's or certified checks or other 4 A covered institution which issues as well as those which

similar instruments issued in blank or payable to cash, bearer or numbered account shall take such measure(s) as may be necessary to ensure that said instruments are not being used / resorted to by the buyer or depositor in furtherance of a money laundering activity;

5 The deposit of said instruments shall be subject to the samel requirements of scrutiny applicable to cash deposits; and

transactions are being used to launder funds of illegitimate origin. reported to the AMLC if there is reasonable ground to suspect that said 6. Transactions involving said instruments should be accordingly

enforce stricter guidelines in the acceptance of second-endorsed checks including the appication of enhanced due diligence to ensure that they are not being used as instruments for money laundering or other illegal activities. s X806.2.k. Second-Endorsed Checks- A covered institution shall

least makes practical, the deposit of second-endorsed check. tn case of establishing that the nature of the business of said customer justifies, or at isolated transactions involving deposits of second-endorsed checks by second-endorsed checks from properly identified customers and only after customer who are not engaged in trade or business, the true and full identity For this purpose, a covered institution shall limit the acceptance of

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shall also be kept for five (5) years. of the first endorser shall be established and the record of the identification

Remittance Agents- A covered institution shall require their customers who 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 document. The certificate of registration business outlet of foreign exchange dealers, money changers and remittance shall be for each head office, branch, agent, sub-agent, extension office or agents. SX806.2.I. Foreign Exchange Dealers/ Money Changers!

enhanced due diligence. customers presenting greater risk, such as shell companies shall be subject to Foreign exchange dealers, money changers and remittance agents

Treasury, or other reliable third parties such as regulators or exchanges, which shall be a component of a covered institution's customer identification 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 crime, corruption or terrorist financing is considered a high risk customer. Information relative to these are available from publiciy available information such as the websites of FATF, FATF Style Regional Bodies (FSRB) like the Asia Pacific Group on Money Laundering and the Egmont Group, national authorities like the OFAC of the U.S. Department of the process. $ X806.2.m. High Risk Customer- A customer from a country that is

in accordance with s x806.1.b. In all instances of acceptance of a high risk necessary. take extreme caution and vigilance. In no case shall reduced diligence be customer, approval of the covered institution's senior officer shall be applied to high risk customers. On the other hand, in case the covered institution determines, based on its standards, that dealing with the high risk customer calls for, or these rules require, the application of enhanced due diligence, it shall apply the minimum reguirements for enhanced due diligence When dealing with high risk customers, a covered institution should

always apply enhanced due' diligence on both the entity and its beneficiat undertake banking relationship with a shell company with extreme caution and owner/s. S X806.2.n. Shell Companyl Shell Bank- A covered institution shall

them. It shall likewise guard against establishing relations with foreign financial institutions that permit their accounts to be used by shell banks. allowed to operate or be established in the Philippines. A covered institution shall refuse to enter into, or continue, correspondent banking relationship with Because of the dubious nature of shell banks, no shell bank shall be

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non-checking numbered accounts shall be allowed without establishing the true and full identity and existence of customers and applying enhanced due diligence in accordance with s X806.1.b. S X806.2.o. Numbered Accounts- No peso and foreign currency

prior to 17 October 2001 shall continue to exist but the covered institution Peso and foreign currency non-checking numbered accounts existing

of such accounts and applying enhanced due diligence in accordance with s shall establish the true and full identity and existence of the beneficial owners X806.1.b.

maintain accounts only in the true and full name of the account owner. The provisions of existing law to the contrary notwithstanding, anonymous accounts, accounts under fictitious names, numbered checking accounts, and S X806.2.p. Prohibited accounts- A covered institution shall

all other similar accounts shall be absolutely prohibited.

true and full identity of their customers and shall update atl identification information and documents required to be obtained by the AMLA, as materiality and risk. transactions- Covered institutions shall ensure that they have established the amended, its RIRR and these Rules of existing customers on the basis of s X806.3.On-going monitoring of customers, accounts and

institution may be able to control and reduce risk associated with money Iaundering and terrorist financing, it is necessary that it has a system that will due diligence. enable it to understand the normal and reasonable account activity of customers and detect unusual or suspicious patterns of account activity Thus, a risk-and-materiality-based on-going monitoring of customer's accounts and transactions should be part of a covered institution's customer With respect to monitoring of transactions, in order that a covered

enhanced due diligence on its customer in accordance with s X806.1.b. if it acquires information in the course of its customer account or transaction monitoring that: X806.3.a. Enhanced due diligence- Covered institution shall apply

T Raises doubt as to the accuracy of any information or document provided or the ownership of the entity:

2 Justifies re-classification of the customer from low or normal risk to high-risk pursuant to these Rules or by its own criteria; or

exists such as but not limited to the foilowing: 3 Any of the circumstance for the filing of a suspicious transaction

purpose or economic justification; a. Transacting without any underlying legal or trade obligation,

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his profile c. Structuring of transactions in order to avoid being the subject d. Knowing that a customer was or is engaged or engaging in b. Transacting an amount that is not commensurate with the business or financial capacity of the customer or deviates from of covered transaction reporting; or any unlawful activity as herein defined.

unsatisfactory, the covered institution shall immediately close the account and refrain from further conducting business relationship with the customer without prejudice to the reporting of a suspicious transaction to the AMLC when circumstances warrant. document provided is false or falsified, or result of the validation process is Where additional information cannot be obtained, or any information or

C. COVERED AND SUSPICIOUS TRANSACTION REPORTING

transactions within ten (10) working days from occurrence thereof. Covered institutions shall report to the AMLC all covered and suspicious Section X807. Covered and Suspicious Transaction Reporting-

suspicious transaction, the covered institution shati be required to report the same as a suspicious transaction. Should a transaction be determined to be both a covered and

Pursuant to AMLC Resolution No. 58 dated 25 June 2005 as amended by as "non-cash, no/low risk covered transactions" the reporting of which to the AMLC are deferred: AMLC Resolution No. 24 dated 18 March 2009, the following are considered $ X807.1. Deferred reporting of certain covered transactions

2 3 1 4 Transactions between banks operating in the Philippines: Internal operating expenses of banks; Transactions involving transfer of funds. from one deposit Transactions between banks and the BSP:

account to another deposit account of the same person within the same bank: deposit account maintained with the lending bank. 5 6 Loan/Interest principal payment debited against borrower's Roll-overs of placements of time deposit; and

that pass through them are deemed suspicious. to file CTRs and Suspicious Transaction Reports (STRs).The Philippine instruments (other than checks) or properties. Due to the nature of the Stock Exchange, Phitippine Central Depository (PCD), Securities Clearing Corporation of the Philippines (SCCP) and transfer agents are exempt from filing CTRs. They are however required to file STRs when the transactions 2003, covered institutions, other than banks, shall file covered transaction reports (CTRs) on transactions in cash or foreign currency or other monetary transactions in the stock exchange, only the brokers- dealers shall be required In addition, pursuant to AMLC Resolution No. 292 dated 24 October

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transactions" and propose to the AMLC that they be likewise subject to The BSP may consider other transactions as "no/low risk covered

deferred reporting by covered institutions.

transaction monitoring system which at the minimum shall detect and raise to the bank's attention, transactions and / or accounts that qualify either as CTs UBs and KBs are required to adopt an electronic money laundering S X8o7.2. Electronic Monitoring Systems for Money Laundering

or STs as herein defined.

The system must have at least the following automated functionalities:

1. Covered and suspicious transaction monitoring -- performs statistical analysis, profiling and abie to detect unusual patterns of

2. Watch list monitoring -- checks transfer parties (originator, 3. Investigation - checks for given names throughout the history of beneficiary, and narrative fields) and the existing customer Can generate all the CTRs of the covered institution accurately and account activity: database for any listed undesirable individual or corporation; payment stored in the system;

6. 5 Capable of aggregating activities of a customer with multiple Must provide a complete audit trail; completely with all the mandatory field properly fiiled up;

accounts on a consolidated basis for monitoring and reporting purposes; and 7. Has the capability to record all STs and support the investigation of AMLC. alerts generated by the system and brought to the attention of Senior Management whether or not a report was filed with the

to be fully compliant with functionalities as those required herein. For this purpose, they shall be given ninety (90) days from effectivity of this Circular transactions already in piace shall ensure that their existing system is updated within which to make their system fully operational and automated with all the functionalities stated above. UBs and KBs with existing electronic system of fiagging and monitoring

monitoring transactions but shall ensure that it has the means of flagging and monitoring the transactions mentioned in s X807.2. It shall maintain a register of all STs that have been brought to the attention of Senior Management whether or not the same was reported to the AMLC. UBs and KBs, it need not have an electronic system of flagging and S X8o7.3. Manual monitoring- For covered institutions other than

mandatory fields required in the report. In order to provide accurate shall be submitted to the AMLC in a secured manner, in electronic form and in covered institutions shali provide complete and accurate information of all the accordance with the reporting procedures prescribed by the AMLC. The $ X807.4.Electronic Submission of reports- The CTR and STR

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identification information at least once every three (3) years. information, the covered institution shall regularly update customer

All covered institutions that have previously registered need not re-register. institutions shall register with the AMLC within ninety (90) days from effectivity of this Circular by directly coordinating with that office for the proper assignment of their institution code and facilitation of the reporting process. For the purpose of reporting in a secured manner, all covered

No. 8791 and other similar laws, but are prohibited from communicating. thereof, the concerned officer and employee of the covered institution shall be covered or suspicious transactions to the AMLC, covered institutions and their No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act that a covered or suspicious transaction report was made, the contents thereof, or any other information in reiation thereto. in case of violation criminally liable in accordance with the provisions of the AMLA, as amended. officers and employees shall not be deemed to have violated Republic Act directly or indirectly, in any manner or by any means, to any person, the fact 5 X807.5. Exemption from Bank Secrecy Laws- When reporting

employee of the covered institution and media shall be held criminally liable. the AMLc, covered institutions, their directors, officers and employees are prohibited from communicating directly or indirectly, in any manner or by any suspicious transaction report was made, the contents thereof, or any other information in relation thereto. Neither may such reporting be published or aired in any manner or form by the mass media, electronic mail, or other similar devices. In case of violation thereof, the concerned officer and means, to any person or entity, the media, the fact that a covered or S X807.6. Confidentiality Provision- When reporting CTs and STs to

proceedings, shall lie against any person for having made a CTR or an STR in the regular performance of his duties in good faith, whether or not such reporting results in any criminal prosecution under the AMLA, as amended, its RiRR or any other !aw. S X807.7. Safe Harbor Provision- No administrative, criminal or civil

D. RECORD KEEPING AND RETENTION

from the date of transaction. of covered institutions shall be maintained and safely stored as long as the account exists. All transaction records, including all unusual or suspicious patterns of account activity whether or not an STR was filed with the AMLC. of covered institutions shall be maintained and safely stored for five (5) years Section X808. Record Keeping- All customer identification records

authorized signatory/ies, and ail other pertinent customer identification card and photo of individual customers and the documents mentioned in Section X806.2.b. for entities, customer information file, signature card of owners or holders of the accounts involved in the transactions such as the ID Said records and files shall contain the full and true identity of the

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documents as well as all factual circumstances and records involved in the transaction. Covered institutions shall undertake the necessary adequate security measures to ensure the confidentiality of such file. Covered institutions shall prepare and maintain documentation, in accordance with the aforementioned client identification reguirements, on their customer accounts. relationships and transactions such that any account, reiationship or transaction can be reconstructed as to enable the AMLC, and / or the courts to establish an audit trail for money laundering.

micro-finance client, as defined under BSP regulations, as low risk in Whenever a bank engaged in micro-finance operations has tagged a

accordance with $ x8o6.1.a, the customer's identification and transaction records shall be retained for five (5) years except that said retention period may be reduced to three years provided that sufficient documents duly a record of the names of these low risk customers after the lapse of three (3) years. This provision is subject to s X808.2. when a money laundering case is filed in court. support the low risk profile of.said customer and the covered institutions keep

S X8o8.1 Closed Accounts- With respect to closed accounts, the records oncustomer identification, account files and business correspondences, shall be preserved and safely stored for at least five (5) years from the date of closure.

S X808.2. Retention of Records in Case a Money Laundering Case has been filed in Court - If a money laundering case based on any report kept by the covered institution concerned has been .filed in court, said file must be retained beyond the five (5) year retention period and until it is confirmed that the case has been finally resolved or terminated by the court.

institution shall designate at least two (2) officers who will be jointly S X808.3. Safekeeping of records and documents- The covered

responsible and accountable in the safekeeping of all records and documents required to be retained by the AMLA, as amended, its RIRR and these Rules They shall have the obligation to make these documents and records readily available without delay during BsP regular or special examinations.

S X808.4. Form of Records- Records shall be retained as originals or copies in such forms as are admissible in court pursuant to existing laws such as the e-commerce act and its implementing rules and regulations, and the applicable rules promulgated by the Supreme Court.

E. TRAINING PROGRAM

Section X809. AML Training Program- Covered institutions shall

their obligations under these Rules, the AMLA, as amended, and its RIRR. formulate an annual AML training program aimed at providing all their responsible officers and personnel with efficient, adequate and continuous education program to enable them to fully and consistently comply with all

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the chain of command for the reporting and investigation of suspicious and to the customer identification process, record keeping requirements and cT money laundering activities. respective duties and responsibilities under the MLPP particularly in relation and ST reporting and ample understanding of the internal processes including Trainings of officers and employees shall inciude awareness of their

the prevention of money laundering and terrorism financing as well as reminded of their respective responsibilities vis-a-vis the covered institution's processes, policies and procedures. various focuses for new staff, front-line staff, compliance office staff, internai audit staff, officers, senior management, directors and stockholders. Regular refresher trainings shall likewise be provided in order to guarantee that officers and staff are informed of new developments and issuances related to The program shall be designed in a manner that will comprise of

seminar / training materials, shall be appropriately kept by the compliance AML seminars and trainings conducted by the covered institution and / or office / unit / department, and should be made available during periodic or special BSP examination. attended by its personnel (internal or external), including copies of AML Covered institution's annual AML training prograrn and records of all

F. BSP AUTHORITY AND ENFORCEMENT ACTIONS

in the course of a periodic or special examination, in accordance with the investments; additional exception to the Bank Secrecy Act; annual testing of numbered accounts. To ensure compliance with the AMLA, as amended, its RIRR, and these Rules, the BSP may inquire into or examine any deposit or investment with any banking institution or non-bank financial institution and their subsidiaries and affiliates when the examination is made Rules of Examination of the BSP. SectionX810. BSp Authority to examine deposits and

and similar accounts. determination of the existence and true identity of the owners of numbered The BSP may likewise conduct annual testing solely limited to the

Rules, the covered institutions, their officers and employees and the BSP shall not be deemed to have violated the provisions of Republic Act No. 1405] as amended, Republic Act No. 6426, as amended, Republic Act No. 8791 relative to covered and suspicious transaction reports filed with the AMLC. complying with the provisions of the AMLA, as amended, its RIRR, and these and other similar laws and s X807.6. when disciosing information to BSP In the course of the periodic and special examination for purposes of

the integrity of the national banking and financial systern, violation of these ensuring that covered institutions maintain high anti-money laundering standards in order to protect its safety and soundness as well as protecting) Section X811. Sanctions and Penalties. In line with the objective of

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Rules shall constitute a maior violation subiect to the following enforcement actions against the Board of Directors, Senior Management and line officers, not necessarily according to priority:

M Written reprimand;

hoiding; and/or 2 Suspension or removal from the office they are currently

institution. 3. Disqualification from holding any position in any covered

impose monetary penalties computed in accordance with existing regulations and in coordination with the Anti-Money Laundering Council. In addition to the non-monetary sanctions stated above, BSP may also

assessment of the covered institution's AML risk management system Whenever a covered institution's AML compliance system is found to be Enforcement actions shall be imposed on the basis of the over-al

grossly inadequate, this may be considered as unsafe and unsound banking practice that may warrant initiation of prompt corrective action.

No. 302 dated 11 October 2001 and all other BSP issuances and/or sections/appendices of the Manual of Regulations for Banks (MORB) and Non-Bank Financial institutions (MORNBFI) that are inconsistent with the Section X812. Repealing Clause- The provisions of BSP Circular

provisions of this Circular are hereby repealed/amended accordingly.

other provisions or sections of this Circular, and the application of such Circuiar, or its application to any person or circumstance is held invalid, the Section X813. Separability Clause- If any provision, section of this

thereby. provision or section to other persons or circumstance shall not be affected

general circulation in the Philippines. days following its publication in the official gazette or in any newspaper of Section X814. Effectivity. This Circular shall take effect fifteen (15)

FOR THE MONETARY BOARD:

M AMANDO/M. TETANGCO, JR.

January 2011 Governor