Philippines: BSP Reminds All BSP-Supervised Financial Institutions of the Analysis of Suspicious Transaction Reports with Possible Links to Tax Crimes and Real Estate Sector
On 15 October 2021, the Bangko Sentral ng Pilipinas (“BSP”) issued Circular Letter No. CL-2021-078 which seeks to remind all BSP-Supervised Financial Institutions (“BSPI”) regarding the reports issued by the Anti-Money Laundering Council (“AMLC”), entitled “Analysis of Suspicious Transaction Reports (STR) with Possible Links to Tax Crimes” and “Real Estate Sector: A Money Laundering/Terrorism Financing/Proliferation Financing (ML/TF/PF Assessment”).
With respect to the Analysis of STRs with Possible Links to Tax Crimes, the BSP highlighted the following salient points:
- From among the Suspicious Indicators (“SI”) recognized by the AMLC, SI Nos. 1 (i.e., there is no underlying legal or trade obligation, purpose or economic justification [for the transaction]), 3 (i.e., the amount involved is not commensurate with the business or financial capacity of the client), and 6 (i.e., the transaction is similar, analogous, or identify to any of the foregoing) were shown to be the dominant indicators in the STRs containing tax-related keywords.
- Corruption-related and fraud-related predicate crimes emerged as the top reason for filing STRs with possible links to tax crimes.
- In terms of transaction types, cash transactions (e.g., cash deposits, withdrawals) take the lead among those deemed suspicious, which is attributed to its tendency to obscure audit measures.
- The AMLC continues to encourage Covered Persons to file STRs, particularly those with SI No. 3 and other associated financial crimes, and to use tax-related keywords (e.g., “taxable”, “taxation”, “tax evasion”, “tax fraud”, “possible tax evasion, tax fraud or tax crime”, “may relate to tax evasion, tax fraud or tax crime”, “transactions may be unreported for tax purposes”, and “income tax details deviate from the flow of transactions”) in their narratives.
On the other hand, the Circular Letter underscores the following matters contained in the Real Estate Sector: A ML/TF/PF Assessment report of the AMLC:
- The real estate sector is considered as “medium high” in terms of ML/TF/PF risk level and is overall threat is rated “medium”. This is attributed to the relatively recent inclusion of the sector as a Covered Person under the Anti-Money Laundering Act.
- Nevertheless, it was found that the real estate sector is more at risk to illegal drugs, corruption, and fraud, including violations of the Securities Regulation code. Real property investments may be used by criminals to facilitate movement of illegal proceeds and as hideouts for illegal operations.
- In terms of terrorism and TF, properties were allegedly used to train recruits to perform terrorism-related activities and the STRs studied by the AMLC also suggest TF through transactions posing as real estate investments.
- Use of complex loans or credit finance, loan back schemes, use of non-financial professionals and corporate vehicles, manipulation of appraisal of valuation of the property, and use of monetary instruments were identified as among the common methods employed on the use and misuses of the real estate sector to ML/TF.
In view of both reports, the BSP reminded the BSFIs to ensure proper reporting of STRs with possible links to tax crimes, include suggested tax-related keywords in the narrative of those STRs, and conduct commensurate measures and consider the results of the reports in their institutional risk assessment as well as risk profiling of the real estate sector.
The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
Partner, Ocampo & Suralvo Law Offices
Senior Associate, Ocampo & Suralvo Law Offices
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