In November 2018, the Philippines underwent its third mutual peer review to assess its levels of compliance with international anti-money laundering and combating the financing of terrorism (AML/CFT) standards. These peer reviews are referred to as “mutual evaluations” (ME).
To prepare for the mutual evaluations, the financial regulators issued and amended a number of AML/CFT regulations. One of the AML/CFT regulations is the Securities and Exchange Commission (“SEC”) Circular No. 15, series of 2018 entitled “Guidelines for the Protection of SEC Registered Non-Profit Organization from Money Laundering and Terrorist Financing Abuse (“NPO Guidelines”).
The NPO Guidelines requires SEC Registered Non-Profit Organization (“NPO”) to complete and submit a six-page disclosure form to identify, among others, the objectives and purpose of the NPO, the identity of the person(s) who own or control its activities and the source of its funds. The form aims to assist the SEC to obtain the necessary information on NPOs for regulatory and risk assessment, and to provide additional measures to ensure that NPOs are not misused by money launderers and terrorist organizations.
Further, the NPO Guidelines requires NPOs to establish a good governance system and an internal audit system to promote its accountability and integrity.
The NPO Guidelines further requires all NPOs to submit a mandatory disclosure form on or before May 23, 2019, which is six (6) months from the effectivity of the circular. The deadline was extended to July 31, 2019. However, on July 4, 2019, SEC published an exposure draft circular that will amend the NPO Guidelines.
The exposure draft circular did not vary greatly from the NPO Guidelines, and this indicates that SEC’s requirements targeting NPO will not go away. In fact, it is expected that the NPO Guidelines is just the beginning, given that the recent Philippines National Risk Assessment on Money Laundering and Terrorist Financing provides that “(i)ntelligence information shows that NPOs are being used in financing terrorist activities. Furthermore, no uniform regulation governing the operations of no-profit organizations is in place, necessitating an in-depth study to determine extent of vulnerability of the sector to money laundering and terrorist financing. Considering the foregoing, the threat rating for NPO is HIGH.”
Thus, at this stage, NPOs are encouraged to comply with the NPO Guidelines, and to ensure that NPOs avoid the penalties provided in both the original and exposure draft of the circular.
If you wish to know more information on AML/CFT compliance or any related concerns, please send your email to [email protected].
