AMLC Weighs Disciplinary Action for Improper STRs

The Philippine Anti-Money Laundering Council (AMLC) is weighing disciplinary action against entities who filed incorrect STRs, according to a statement made by the executive director of the regulatory body, Atty. Mel Georgie Racela.

Racela made the remark during an interview with Regulation Asia on May 24 in response to questions about the AMLC’s most recent STR quality review.

The review, the findings of which were made public on May 20, analyzed STRs from 2017-2020 and uncovered several issues with the filing practices of many regulated entities. Of particular note: in addition to identifying defensive STR filing behavior, the AMLC found that certain entities may have failed to classify suspicious transactions appropriately. Specifically, instead of connecting the suspicious transaction to one of five potential reasons or 34 predicate offenses, entities often defaulted to the option that merely states that “the transaction is similar, analogous or identical to any of the foregoing.”

Indeed, nearly 30% of all STRs from 2017-2020 were filed because of this catch-all reason — a reason intended to be used sparingly and only in cases where no other options fit. At the same time, the overwhelming majority of these STRS — 96% — came from 11 covered persons. So the problem, albeit severe, may not be widespread, and therefore, any disciplinary measures, which could include referrals to law enforcement, may be imposed on a relatively few entities.

Still, regulated entities would do well to ensure they’re following best practices when filing their own STRs — and take note that the overall number of suspicious transactions within the Philippines seems to be on the rise, indicating more needs to be done from a preventive (i.e., customer screening and due diligence) standpoint as well. 

The same report by the AMLC, for example, revealed that the number of STRs filed is up 60% year over year (from 623,000 in 2019 to 1.01 million in 2020), an increase that the AMLC attributes to an uptick in filings by pawnshops, money service businesses, and electronic money issuers. Further, 2020 also saw a surge in the number of STRs filed due to predicate offenses linked to the online sexual exploitation of children — an issue that, while not new, is likely exacerbated by the growing popularity of electronic banking and payment methods.

The Philippines isn’t alone in grappling with these challenges, of course. While the primary predicate offenses may vary, the ballooning problem of fraudulent and suspicious transactions has been felt regionally, too. In Singapore, for example, such transactions were up 450% last year, and there are no indications so far that 2021 will be any different. As more and more people bank and shop online, the pool of potential victims for cybercriminals will only continue to grow, and with it, the need for efficient, effective screening processes that prevent suspicious transactions before they’re executed.