AMLC pushes initiatives to closely monitor pawnshops, MSBs

MANILA, Philippines — The Anti Money Laundering Council (AMLC) is pushing several initiatives to curb the use of non-banks, particularly pawnshops and money service businesses (MSBs), as conduit for money laundering and terrorist financing.

In its latest strategic analysis report titled “An assessment of the development of anti-money laundering compliance of the pawnshop and MSB industry,” AMLC said there is a need to effectively regulate the pawnshop and MSB industry especially after the $81 million cyber heist wherein the funds of Bangladesh Bank where stolen by hackers three years ago.

“Bangladesh Bank heist has led to strong enforcement actions and the establishment of a more stringent and streamlined regulatory framework, which have resulted in improved and more widespread anti money laundering compliance by the industry as entities have developed a deeper understanding of the importance of their role in maintaining the integrity of the financial system and shielding it from money laundering and terrorist financing threats,” it said.

AMLC said there is a need to deepen the public-private partnership (PPP) program with large-scale financial services providers including Western Union and MoneyGram as well as local network providers such as LBC Express, Cebuana Lhuillier, Palawan Pawnshop, and M. Lhuillier, electronic money issuers, and virtual currency exchanges to provide valuable intelligence and alerts with regard to the financial transactions that pass through its platform and clients who avail of its services.

Furthermore, AMLC is urging for a closer coordination with the Bangko Sentral ng Pilipinas (BSP) in monitoring the registration and compliance of pawnshops and MSBs and pursue a “synchronized” registration process.

The agency also intends to capitalize on technologies that enable streamlined, real-time monitoring and reporting of suspicious activities and push for the establishment of industry associations where entities could exchange best practices in anti money laundering monitoring and in their broader operations.

Similar to the banking industry, AMLC is also encouraging consolidation to lessen industry fragmentation and in turn foster effective competition and more sustainable growth.

It would also pursue further educational programs especially for smaller players in the industry that have limited access to new anti money laundering tools and technologies as well as emerging money laundering and terrorist financing typologies.

AMLC said the pawnshop and MSB industry should be placed within the ambit of the central bank’s supervisory authority through the amendment of the BSP charter, giving it the authority to examine the broader operations of all the players.

“This big-picture view may be crucial in safeguarding the industry against unscrupulous business practices that may taint the integrity of the financial system,” AMLC said.

The combined network of pawnshops and MSBs has reached 16,853 offices as of end-September, with 11,563 of these engaged in the pawnshop business and 14,906 engaged in MSB functions. In addition, there were 1,677 remittance sub-agents to perform part of their remittance business and 25,702 cash agents tapped by non-bank affiliated e-money issuers.

“While pawnshops and MSBs contribute to the promotion of financial inclusion and expansion of the formal financial system, the cash-intensive nature of their business and transactional (as opposed to long-term) relationship with clients have been exploited by criminals aiming to launder funds from their illicit activities,” AMLC said.