BSP: Banks bear ‘ultimate responsibility’ in avoiding dirty money

MANILA, Philippines – With the Philippines capturing the world’s attention in the fallout of the $81-million Bangladesh Bank fund heist, the country’s central bank reminded all local banks that it is their “ultimate responsibility” to ensure the financial system is not being used as channel for money laundering and terrorist financing activities.

The Bangko Sentral ng Pilipinas (BSP) on Wednesday, April 6 issued a memorandum to all banking institutions, ordering them to “take extra caution and vigilance and perform enhanced due diligence” when transacting with foreign exchange dealers, money changers and remittance agents.

“When dealing with remittance agents…the banks have the ultimate responsibility for conducting appropriate due diligence necessary to the relationship to ensure that it will not be used as channel for money laundering and terrorist financing activities,” the memorandum said.

In early February, the $81-million stolen money from Bangladesh Bank’s account at the Federal Reserve Bank of New York was deposited into fictitious accounts with Rizal Commercial Banking Corporation (RCBC). 

From the fake accounts, the stolen funds were converted into untraceable gambling chips in Solaire Resort and Casino as well as Midas Hotel and Casino. It was into these casinos that money remittance firm PhilRem Service Corporation moved about $63 million of the stolen funds, delivering most of it in cold cash. 

A casino junket agent named Kam Sin “Kim” Wong told Philippine senators that the remaining $17 million of the Bangladesh Bank is still with the money transfer firm. This was denied by the owners of PhilRem.

Although RCBC denied any knowledge of the biggest documented money laundering scam in the Philippine history, BSP’s memorandum said it may be held accountable for being remiss in its “due diligence” duties and failing to take extra caution when dealing with such transactions. (READ: How Bangladesh Bank dirty money easily got into PH)

“Banks’ Money Laundering and Terrorist Financing Prevention Program should contain appropriate risk management practices to ensure that money laundering and terrorist financing risks arising from dealings with foreign exchange dealers, money changers and remittance agents are effectively identified, assessed, monitored, mitigated and controlled,” BSP Deputy Governor Nestor Espenilla Jr said in the memorandum. (READ: How to safeguard the Philippines from dirty money)

The memo said banks should practice the following measures when dealing with foreign exchange dealers, money changers and remittance agents: 

• Banks shall only deal with those who are registered with the BSP;
• When dealing with remittance agents as remittance partners, the banks have the ultimate responsibility for conducting appropriate due diligence necessary to the relationship to ensure that it will not be used as channel for money laundering and terrorist financing;
• Conduct risk assessment of the remittance agents’ customers, considering relevant factors such as business operations, types of customers, product/service availed, distribution channel, jurisdictions they are exposed to and expected account activity;
• Obtain proof of registration with the BSP and periodically update registration status;
• Review the anti-money laundering and combating the financing of terrorism measures adopted by the remittance agent;
• Require submission of proof of registration with the Anti-Money Laundering Council to comply with the reporting requirements;
• Obtain senior management approval for establishing business relationship in accordance with the bank’s risk management policy, among others. (READ: TIMELINE: Tracing the $81-million stolen fund from Bangladesh Bank)