BSP to propose law vs illegal money service firms

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is set to propose legislation against illegally operating money service businesses (MSBs) and nonbank financial institutions (NBFIs) who are not registered with the central bank.

“To accelerate efforts to strengthen surveillance measures and the imposition of proportionate, dissuasive sanctions against illegally operating MSBs, the BSP is looking to propose legislation for the possible imposition of administrative sanctions even against NBFIs not registered with the BSP,” the central bank said.

The imposition of administrative sanctions would be without prejudice to existing criminal sanctions under relevant sections of the New Central Bank Act, as amended, the BSP said.

The central bank’s Financial Supervision Sector (FSS) led by BSP Deputy Governor Chuchi Fonacier has also started creating a centralized live surveillance system that uses data analytics to pinpoint illegally operating MSBs.

According to the regulator, MSBs are inherently vulnerable to money laundering and terrorism financing given their cash-intensive business, use of agents, small-value remittances, customer diversity and large geographical scope.

“Hence, it is imperative that only those registered with the BSP as MSBs are allowed to operate as such, and that appropriate sanctions be imposed against unauthorized MSB operators and activities,” it said.

Money service business entities include remittance agent and sub-agent, remittance platform provider, electronic or e-money issuer, as well as money changer or foreign exchange dealer.

The number of registered money service businesses operating nationwide stood at 7,368 as of end 2023. This consisted of 5,213 head offices and branches.

As part of the BSP’s intensified campaign against illegal money service businesses in the country, the central bank convicted four illegal MSB operators and disqualified 28 unauthorized firms from securing registration and licenses to operate.

“The concerted actions of the BSP demonstrate sustainable and effective supervision of MSBs, mainly addressing the deficiencies noted in the Report of the Asia Pacific Joint Group to the International Cooperation Review Group (ICRG),” the BSP said.

The Monetary Board issued a marching order in January 2021 to ensure the NBFIs cannot operate without BSP registration.

To carry this order, the FSS established a technical working group to explore closer coordination with local government units in October 2021. It is mandated to propose strategies and approaches for effective surveillance of NBFIs in the regions to weed out all illegally operating MSBs.

In July 2021, the FSS also adopted guidelines on handling unregistered entities to effectively implement the ICRG action plan.

The guidelines are currently under review to reflect the effective practices acquired and the latest legal opinions on handling unregistered entities.