Law Summary

Introduction

This summary outlines the guidelines set forth in BSP Circular No. 251 issued on July 7, 2000, by the Bangko Sentral ng Pilipinas (BSP) to combat money laundering among banks and non-bank financial institutions (NBFIs).

Client Identification

• Legal Principle: Banks/NBFIs must establish and record the true identity of clients when initiating business relations or conducting transactions.
• Key Definitions:
  • "Client" refers to individuals or entities engaging in transactions with financial institutions.
• Requirements:
  • Verification of identity should be based on reliable documents.
  • For corporate clients, verification of legal existence, structure, and authority of representatives is necessary.
• Procedures:
  • Obtain proof of incorporation and necessary corporate documents.
  • Validate the identity and authority of individuals acting on behalf of clients.

Due Diligence for Doubtful Situations

• Legal Principle: Banks/NBFIs must take measures to ascertain the true identity of clients when there is doubt regarding their representation.
• Requirements:
  • Conduct thorough inquiries to identify individuals behind accounts or transactions.

Account Management

• Legal Principle: The maintenance of anonymous or fictitious accounts is prohibited.
• Important Requirements:
  • Numbered accounts are allowed only if clients are identified through official documents.

Client Identity Renewal

• Legal Principle: Client identities must be updated regularly.
• Timeframes:
  • Identity verification should occur at least every two years.

Record Keeping

• Legal Principle: Banks/NBFIs must maintain transaction records for accountability.
• Requirements:
  • Maintain records for at least five years post-transaction.
  • Ensure records are sufficient to reconstruct transactions for potential legal scrutiny.

Monitoring Transactions

• Legal Principle: Special attention is required for unusual or large transactions.
• Requirements:
  • Document the background and purpose of such transactions.
  • Report any transactions suspected to involve proceeds from illegal activities to authorities.
• Consequences:
  • If funds are suspected to be from criminal activities, accounts must be closed.

Reporting Suspicious Transactions

• Legal Principle: Banks/NBFIs must report suspicious transactions to competent authorities.
• Requirements:
  • All transactions deemed suspicious should be reported, regardless of deposit status.

Anti-Money Laundering Programs

• Legal Principle: Institutions should develop comprehensive anti-money laundering programs.
• Key Components:
  • Establish internal policies and designate compliance officers.
  • Implement ongoing employee training programs.
  • Conduct audits to test compliance systems.

Implementation

• Effective Date: This circular takes effect immediately upon adoption on July 7, 2000.

Key Takeaways

• Banks/NBFIs are mandated to verify client identities and maintain comprehensive records.
• Strict measures are in place against anonymous accounts and suspicious transactions.
• Regular updates of client information and robust anti-money laundering programs are essential.
• Violations of these guidelines could lead to significant legal liabilities and penalties.