According to the Banking Supervision Annual Report 2021 the BoB released recently, penalties of nearly P86,000 were made against three banks for violations, while another bank was asked to show cause why a fine of P100,000 should not be levied against it.
The BoB did not name the banks involved.
Violations found by the BoB ranged from failing to submit audited financials and falling below the statutory capital adequacy requirement level. One bank was fined P68,400 for employing a director beyond the nine-year limit and then misleading the BoB about it.
The bank facing a P100,000 fine failed to report large cash transactions above the limit prescribed by the Financial Intelligence Agency (FIA).
The FIA requires banks to report suspicious transactions, large cash transactions, dealings involving prominent influential customers, and clarifying beneficial owners, among other requirements under the country’s money laundering and terrorism financing laws.
The BoB said banks expressed difficulties enforcing some of the requirements, during a consultative meeting last year.
“It was noted at the meetings that most banks were not able to identify all prominent influential persons in accordance with the Financial Intelligence Act,” the Banking Supervision Report reads. “Banks indicated that they could not identify all prominent persons because of the broadness of the definition. “Furthermore, the bank noted that there was inconsistency across the banking industry regarding the identification of ultimate beneficial owners. “Banks adopted different shareholding thresholds, ranging from five percent to 25%.”
The central bank has since issued guidelines on the identification of beneficial ownership.
Meanwhile, on-site examinations of one statutory bank and a "targeted" assessment of one commercial bank, found deficiencies in their application of money laundering and terrorism financing protocols.
The targeted on-site examination of the bank established that it had high inherent vulnerabilities due to significant online transactions, a large clientele base and customers who were involved in high-risk industries.
“Some products and services were offered without money laundering/terrorism financing risk assessment while some large-cash transactions were rejected by the system because of the inadequacy of customer due-diligence information required by the system. “The bank had not resolved some deficiencies raised by internal auditors during the 2018 and 2020 audits and the bank had not identified ultimate beneficiaries where the beneficiary of an account was a company. “The bank maintained business relationships with trust entities that had not registered with the Master of High Court and the bank violated Section 34(2) of the FI Act by not reporting all large-cash transactions to FIA. “The bank did not identify all prominent influential persons,” the BoB reported.
The commercial bank was given 12 months to rectify all supervisory concerns raised and is facing a P100,000 penalty for failing to report large cash transactions.
At the statutory bank, the BoB found that the organisation's money laundering and terrorism financing policy was deficient, that it did not report all large-cash transactions to the FIA, and also did not have a mechanism for allocating a risk score to customers.
“The bank did not identify and screen all company directors, senior management and ultimate beneficial owners for companies against sanction lists, and did not have an information-management system for monitoring suspicious transactions,” the BoB found. “The bank was directed to rectify the supervisory concerns raised in the examination report and the bank’s effort to address these will be confirmed through quarterly updates.”
