BSP eases rules on dollar purchases of money changers

The Bangko Sentral ng Pilipinas (BSP) has decided to ease part of its regulations on the dollar purchases of money changers to make it easier for them to comply with new reporting requirements.

The BSPapproved the policy waiving the notarization requirement for foreign exchange purchases over $5,000 by money changers.

According to BSP Governor Amando M. Tetangco Jr., the policy was approved in order to simplify the regulations on money changers but he stressed that violations of all other rules would still be subject to penalties.

Tetangco explained that under existing rules, moneychangers are required to submit documents when they apply for foreign exchange purchases and have these documents notarized.

"Just to simplify the documentary requirements, they don’t need to have those documents notarized anymore," he said. "This will be applicable to all their dollar purchases over $5000."

Under pressure from the Financial Action Task Force (FATF), the BSP had started to require the country’s over 50,000 money changers, remittance agents and foreign exchange dealers to register and report their transactions.

The BSP had also begun discussions with local government units to expedite the registration of these companies and to facilitate their regular reporting once they have registered.

"There are structures already in place in local governments that we can utilize to make it easier for these operations to register," Tetangco said. "Right now, they have to go to BSP offices to register. We want to make it easier."

Despite its initial reluctance to take on over 50,000 money changers and remittance agents, the BSP had decided it had no choice but to require their registration in an attempt to calm FATF’s fears that these channels are being used to finance criminal and terrorist activities.

Once registered, the BSP also required these agents and dealers to comply with the provisions of the Anti-Money Laundering Act (AMLA) and report all transactions that were specified by the law, including suspicious transactions that could indicate money-laundering.

Tetangco said the BSP was 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.

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.

Under the BSP’s circular, agents and dealers that already operate before the issuance of this circular could still operate but they are required to apply for registration within 90 days.

The BSP said that although money changers were under the BSP, they did 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," Tetangco 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, were not required to report to the BSP.

The BSP wanted 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.