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Shield citizens against financial crimes

IN June 2021, the Philippines found itself added to the gray list by the Financial Action Task Force (FATF), an international body dedicated to combating money laundering and terrorist financing. The gray list comprises nations that are actively engaged with the FATF to improve their anti-money laundering and counter-terrorist financing (AML/CTF) efforts. As of October 2023, there are 23 countries on the gray list, including the Philippines.


This designation carries significant implications for the nation's economy and financial system as it imposes constraints on cross-border transactions, particularly remittances from overseas Filipino workers. As a result, obtaining credit becomes more difficult, and inward foreign investments can be limited. To be removed from the gray list, one critical area the Philippines must prioritize is enhancing the oversight of designated non-financial businesses and professions (DNFBPs).


DNFBPs are entities or individuals that participate in activities susceptible to money laundering and terrorist financing risks but are not part of the traditional financial industries. It includes various sectors such as lawyers, accountants, real estate agents, dealers in precious metals and stones, as well as trust and company service providers.


These covered persons shall have the duty to cooperate with the Anti-Money Laundering Council (AMLC) to safeguard their businesses or professions against involvement in money laundering and terrorist financing activities.


It is not surprising that accountants and lawyers have been included among DNFBPs. The expert knowledge of these "gatekeepers" has been considered by criminals as a secure way to obscure the illegal source of their illicit funds. The esteemed reputation and credibility of these professions lend an air of legitimacy to their activities, making it less likely for their actions to arouse suspicion. However, it is important to take note that lawyers, accountants, and other professionals are considered covered persons only if they perform covered services, which includes the following:


1. Management of client money, securities or other assets;

2. Management of bank, savings, securities or other assets;

3. Organization of contributions for the creation, operation or management of companies; and

4. Creation, operation or management of juridical persons or arrangements, and buying and selling of business entities.


Amendments to 2021 AML/CTF guidelines for DNFBPs have been implemented through AMLC Regulatory Issuance (ARI) 2, Series of 2023, further clarifying that independent legal or accounting professionals working in a private firm or as a sole practitioner who, by way of business or occupation, provides purely legal or accounting services to their clients, are not required to file covered transactions and suspicious transaction reports.


This clarification serves to streamline compliance procedures and alleviate reporting burdens for such professionals. By doing so, they can continue to provide essential services without unnecessary regulatory impediments. Aside from reporting covered and suspicious transactions, one of the responsibilities of DNFBPs is to establish, implement, monitor, and maintain an effective Money Laundering and Terrorism Financing Prevention Program (MTPP). The primary goal of MTPP is to establish a system of controls and procedures within financial institutions and businesses to detect, prevent, and mitigate the risks associated with money laundering and terrorism financing. The MTPP's provisions must include at least the following:


1. Detailed procedures of the covered person's compliance and implementation of the following major requirements of the AMLA:

a. customer identification process, including acceptance policies and an ongoing monitoring process;

b. record keeping and retention;

c. covered transaction reporting; and

d. suspicious transaction reporting.

2. An effective and continuous AML/CTF training program for all directors, and responsible officers and employees;

3. An adequate risk-based screening and recruitment process to ensure that only qualified and competent personnel with no criminal record or integrity-related issues are employed or contracted by DNFBPs;

4. An internal audit system and an independent audit program that will ensure the completeness and accuracy of information obtained from customers;

5. A mechanism that ensures all deficiencies noted during the onsite or offsite compliance checking are immediately corrected and acted upon;

6. Cooperation with the AMLC;

7. Designation of a compliance officer, who shall, at least, be of senior management level, as the lead implementer of the DNFBP's compliance program; and

8. The identification, assessment and mitigation of money laundering and terrorism financing risks that may arise from new business practices, services, technologies and products.


Effective implementation of MTPP requires the development of a comprehensive strategy tailored to the specific needs and risks profiles of individual organizations. Training and education initiatives are essential to ensure that stakeholders understand their roles and responsibilities in preventing financial crimes. By taking a proactive approach to MTPP implementation, DNFBPs can enhance their resilience against financial crimes and contribute to a more trustworthy financial system. In conclusion, the role of DNFBPs goes beyond mere compliance; they are the gatekeepers and frontline warriors in the battle against financial crimes. Much like a skilled blacksmith meticulously crafts armor to fit the contours of a warrior's body, the MTPP is tailored to safeguard and empower these DNFBPs. Together, they form a formidable defense against the insidious threats of money laundering and terrorist financing.

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Emmanuel A. Dorongon, CPA, CTT, is a tax supervisor at Paguio, Dumayas and Associates, CPAs (PDAC)-PrimeGlobal Philippines (an institutional member of ACPAPP). The views and opinions expressed in this article are solely those of the author and do not reflect the opinion of these institutions.



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