Money changers, forex dealers now subject to BSP inspection

Like banks and other financial institutions, the Bangko Sentral ng Pilipinas (BSP) said registered money changers, remittance agents and foreign exchange dealers will now be subject to visitations by government examiners.

The BSP said yesterday that the examination of financial institutions will now cover money changers, remittance agents and foreign exchange dealers.

BSP deputy governor Alberto V. Reyes said the BSP is likely to limit the regular visitation to the top 20 moneychanging franchises in the country but smaller operators would also be randomly checked.

"It’ll be a big job," Reyes said.

Under pressure from the Financial Action Task Force (FATF), the BSP is now requiring money changers, remittance agents and foreign exchange dealers to register and report their transactions.

The BSP required the registration of non-bank institutions engaged in money changing or remittances in an attempt to calm FATF’s fears that these channels are being used to finance criminal and terrorist activities.

The circular was approved by the Monetary Board after months of resisting the huge job of registering and monitoring some 30,000 to 50,000 money changers and remittance agents.

Once registered, Reyes said these agents and dealers would be compelled to comply with the provisions of the Anti-Money Laundering Act and report all transactions that were specified by the law, including suspicious transactions that could indicate money laundering.

Reyes told reporters that the BSP is requiring the registration for the first time to enable its examiners to monitor these activities.

Covered in the registration requirement are money changers or foreign exchange dealers regularly engaged in the business of buying or selling foreign currencies.

"We will be working with local government units and our own regional offices in order to handle the registration process," Reyes said.

The circular also covered remittance agents referring to persons or entities engaged in remittance, transfer or transmission of money on behalf of any person to another person or entity.

Reyes said these include cash couriers, money transmission agents, remittance companies and the like.

"Agents and dealers that already operate before the issuance of this circular can still operate but they are required to apply for registration within 90 days," Reyes said.

Reyes said that although money changers are under the BSP, they do not exercise the same regulatory powers over them as they do over banks and other non-bank financial institutions.

"We don’t even have any idea how big this industry is or how many there are and how big their transactions are," Reyes said. "This is one of the baseline studies that we have to conduct."

Unlike banks whose transactions create a paper trail that are relatively easy for the BSP to follow and examine, money changers are more informal and, until now, are not required to report to the BSP.

Reyes said the BSP wants to include money changers in the AMLA net to ensure that the tightening of bank reportorial requirements would not result in the exploitation of these unregulated operations.

The Philippines has been struggling to comply with the requirements of the FATF but developed countries have expressed growing concern over other non-bank channels for fund such as money changers, door-to-door courier services and the so-called "hawala" system.