POLICIES AND REGULATIONS TO IMPROVE TRANSPARENCY IN … · ANTI-MONEY LAUNDERING ACT (AMLA), AS...

POLICIES AND REGULATIONS TO IMPROVE TRANSPARENCY

IN THE OWNERSHIP,

CONTROL AND BENEFIT OF

CORPORATE VEHICLESALFONSO D. LANUZA, JR

Officer-In-ChargeAnti-Money Laundering Division

Enforcement and Investor Protection DepartmentSECURITIES AND EXCHANGE COMMISSION, PHILIPPINES

23-25 September 2019JAKARTA, INDONESIA

RECENT LAWS AND RULES AIMED AT

IMPROVING TRANSPARENCY OF OWNERSHIP

AND CONTROL AND BENEFIT OF CORPORATE

VEHICLES

ANTI-MONEY LAUNDERING ACT, AS AMENDED (R.A. 9160 as amended by R.A. 9194, R.A. 10167, R.A.10365, R.A. 10927)

2018 IMPLEMENTING RULES AND REGULATIONS OF THE ANTI-MONEY LAUNDERING ACT, AS AMENDED (2018 IRR)

SEC MEMORANDUM CIRCULAR NO. 16, SERIES OF 2018

SEC MEMORANDUM CIRCULAR NO. 15, SERIES OF 2019 – REVISION OF THE GIS TO INCLUDE BENEFICIAL OWNERSHIP INFORMATION

REVISED CORPORATION CODE OF THE PHILIPPINES (RCC)

EIPD-Anti-Money Laundering Division (AMLD)

ANTI-MONEY LAUNDERING ACT (AMLA),

AS AMENDED

• Signed into law on September 29, 2001 and took effect on October

17, 2001.

• Defined and prescribed penalties for the offense of Money Laundering

• Created the Anti-Money Laundering Council (AMLC), the financial

intelligence unit of the Philippines.

• Empowered the Anti-Money Laundering Council to implement such

measures as may be necessary and justified to counteract money

laundering.

Pursuant to its authority under the AMLA, the

AMLC issued its 2018 Implementing Rules

and Regulations • PROVIDES FOR THE SUPERVISION AND MONITORING OF COMPLIANCE OF

COVERED PERSONS WITH THE AMLA AND ITS IRR BY THEIR RESPECTIVESUPERVISING AUTHORITIES

• REQUIRES COVERED PERSONS TO IMPLEMENT CUSTOMER DUE DILIGENCE(CDD) MEASURES INCLUDING BENEFICIAL OWNERSHIP VERIFICATION

• DEFINES WHO IS A BENEFICIAL OWNER

• REQUIRES THE SEC TO OBTAIN AND HOLD UP-TO-DATE INFORMATION ON THECOMPANIES’ BENEFICIAL OWNERSHIP TO REQUIRE COMPANIES AND CLIENTSWHICH ARE LEGAL PERSONS, RESPECTIVELY, TO TAKE REASONABLE MEASURESTO OBTAIN AND HOLD UP-TO-DATE INFORMATION ON THE COMPANIES’BENEFICIAL OWNERSHIP AND TO SUBMIT ACCURATE AND REGULARLY UPDATEDBENEFICIAL OWNERSHIP INFORMATION.

SUPERVISING AUTHORITIES (SAs)

• Refers to the Bangko Sentral ng Pilipinas (BSP), Securities and

Exchange Commission (SEC), and the Insurance Commission

(IC) or other government agencies designated by law to supervise or regulate a particular financial institution or DNFBP.

COVERED PERSONS• Persons supervised and/or regulated by the Bangko Sentral ng Pilipinas

(BSP) such as Banks, Quasi-banks, Trust Entities, Pawnshops, Non-Stock Savings and Loan Associations, Other Non-Bank Financial Institutions which under special laws are subject to BSP supervision and/or regulation, Electronic Money Issuers, Foreign Exchange Dealers, Money Changers, and Remittance and Transfer Companies.

• Persons supervised and regulated by the Insurance Commission (IC) such as Insurance Companies, Pre-Need Companies, Insurance Agents, Insurance Brokers, Professional Reinsurers, Reinsurance Brokers, Holding Companies, Holding Company Systems, Mutual Benefit Systems, and all other persons and their subsidiaries and affiliates, supervised or regulated by the IC.

SECURITIES AND EXCHANGE COMMISSION

(SEC) AS SUPERVISING AUTHORITY (2018 IRR

OF THE AMLA, AS AMENDED)

The following are the institutions/persons under the supervision of the SEC

Securities Dealers, Brokers, Salesmen, Investment Houses, and other similar persons managing securities or rendering services, such as investment agents, advisors, or consultants;

Mutual Funds or Open End Investment Companies, Close-End Investment Companies or Issuers, and other similar entities; and

Other entities administering or otherwise dealing in commodities, or financial derivatives based thereon, valuable objects, cash substitutes, and other similar monetary instruments or properties supervised or regulated by the SEC.

SEC COVERED PERSONS PER SEC MC NO. 16,

SERIES OF 2018 (2018 GUIDELINES ON AML/CFT

FOR SEC COVERED INSTITUTIONS

.


• Securities Brokers, Dealers and Salesmen, Associated Person of a Broker or Dealer, Investment Houses and other similar entities managing securities or rendering similar services;

• Investment Company Advisers/Fund Managers, Mutual Fund Distributors, Mutual Fund Companies, Closed-End Investment Companies;

• Investment Advisor/Agent/Consultant;• Financing Companies and Lending Companies, both with more than 40% foreign

participation in its voting stock or with paid-up capital of Php10 Million or more;• Other entities administering or otherwise dealing in currency, commodities or financial

derivatives based thereon, cash substitutes and other similar monetary instruments or property, supervised or regulated by the Commission.

.

SECURITIES AND EXCHANGE

COMMISSION

• ADMINISTRATIVE AGENCY HAVING SUPERVISION AND JURISDICTION OVER ALL CORPORATIONS GRANTED A PRIMARY AND/OR SECONDARY FRANCHISE

• ENFORCES AND ADMINISTERS, AMONG OTHERS, THE FOLLOWING LAWS:

1. Securities Regulation Code – law which provides for investor protection, regulation of the capital market

2. Revised Corporation Code – provides for the creation, operation and regulation of corporations


OTHER LAWS ENFORCED BY THE SEC AS

A REGULATORY AGENCY

• INVESTMENT COMPANY ACT

• INVESTMENT HOUSES LAW

• CREDIT INFORMATION SYSTEM ACT

• LENDING COMPANY REGULATION ACT

• THE FINANCING COMPANY ACT

• Rule 23, Sections 1 and 3 of the 2018 IRR of the AMLA, as amended

�Section 1: SEC is enlisted to develop mechanisms for identification of juridical persons including the processes for obtaining and recording basic and beneficial ownership information.

�Section 3: SEC shall obtain and hold up-to-date information on the companies’ beneficial ownership; require companies and clients that are legal persons to take reasonable measures to obtain hold up-to-date information on the companies’ beneficial ownership; and require companies and corporate clients, respectively, to submit accurate and regularly updated beneficial ownership information for ML/TF.


DEFINITION OF BENEFICIAL OWNER

UNDER THE 2018 IRR OF THE AMLA

Beneficial Owner refers to a natural person who:

• (1) Ultimately owns or controls the customer and/or on whose

behalf a transaction or activity is being conducted;

• (2) Has ultimate effective control over a juridical person or legal

arrangement; or

• (3) Owns, at least, twenty percent (20%) shares, contributions or

equity interest in a juridical person or legal arrangement.

DEFINITION OF BENEFICIAL OWNER UNDER

SEC MEMORANDUM CIRCULAR NO. 16,

SERIES OF 2018Refers to a natural person who:

1) ultimately owns or controls the customer or on whose behalf the transaction is being conducted; or

2) 2) has ultimate effective control over a customer that is a legal person or arrangement.

ULTIMATE EFFECTIVE CONTROLRefers to any situation in which ownership/control is exercised

through actual or a chain of ownership or by means other than

direct control. This may be achieved through, but not limited to

any of the following:

a)Direct or indirect ownership of at least 25% of any category of

voting shares or capital of a legal person, understanding,

relationship or otherwise has or shares voting power, which

includes the power to vote, or to direct the voting of such security;

and/or investment returns or power which includes the power to

dispose of, or to direct the disposition of such security; xxx

THE REVISED CORPORATION CODE OF THE

PHILIPPINES (RCCP)

• The RCCP is the law providing for the incorporation, registration,classification, organization, ownership structure, management,control, operation, rights and obligations and the regulationand supervision of private corporations in the Philippines. Underthe law, registration with the SEC of the Articles of Incorporationof an organization gives it a juridical personality.

• CLASSES OF CORPORATIONS UNDER PHILIPPINE LAW

A. STOCK CORPORATIONS – those which have capital stockdivided into shares and are authorized to distribute to the holdersof such shares, dividends, or allotments of the surplus profits on thebasis of the shares held

B. NON-STOCK – all other corporations.


REVISED CORPORATION CODE OF THE

PHILIPPINES (RCCP)• SEC. 73. Books to be Kept; Stock Transfer Agent. – Every

corporation shall keep and carefully preserve at its principal

office all information relating to the corporation including, but

not limited to:

(a) The articles of incorporation and bylaws of the corporation

and all their amendments;

(b) The current ownership structure and voting rights of the

corporation, including lists of stockholders or members, group

structures, intra-group relations, ownership data, and

beneficial ownership;

xxx.


• REPORTORIAL REQUIREMENTS OF CORPORATIONS

(SEC. 177, RCCP)


Except as otherwise provided in this Code or in the rules issued by the Commission, every corporation, domestic or foreign, doing business in the Philippines shall submit to the Commission: (a) Annual financial statements audited by an independent certified public accountant: Provided, That if the total assets or total liabilities of the corporation are less than Six hundred thousand pesos (P600,000.00), the financial statements shall be certified under oath by the corporation’s treasurer or chief financial officer; and (b) A general information sheet (GIS).

INFORMATION REQUIRED TO BE REPORTED TO

THE SEC

• Section 25 of the Revised Corporation Code of the Philippinesrequires the corporate secretary, or any other officer of thecorporation to submit to the SEC, the names, nationalities,shareholdings, and residence addresses of the directors,trustees, and officers within thirty (30) days after their electioninto office. The non-holding of elections and the reasons thereforshall be reported to the SEC within thirty (30) days from the dateof the scheduled election. Should a director, trustee or officerdie, resign or in any manner cease to hold office, the same shallbe reported to the SEC by the secretary, within seven (7) daysfrom knowledge thereof.

WHAT IS THE GENERAL INFORMATION

SHEET (GIS)

• The GIS is a report containing information on the current

directors, stockholders and officers, and office address of the

corporation, among others, required to be submitted to the SEC

within 30 days from the actual holding of the annual

membership meeting. If there are any material changes in the

information submitted, the same should be reported to the SEC

within 7 days from the time it occurred or became effective.

SEC MEMORANDUM CIRCULAR NO.

15, SERIES OF 2019

• SECTION 3. Disclosure of Beneficial Ownership Information. – Toensure timely access to adequate, accurate and current

information on the beneficial ownership and control of SEC

registered corporations by competent authorities, all SEC

registered corporations are required to take reasonable

measures to obtain and hold up-to-date information on their

beneficial owners as defined herein and to disclose the same

in a timely manner in the GIS. Accordingly, the GIS is hereby

revised to include such information.


DEFINITION OF BENIFICIAL OWNER UNDER

SEC MEMORANDUM CIRCULAR NO.15,

SERIES OF 2019, AS AMENDED

“Beneficial Owner” refers to any natural person(s) whoultimately own(s) or control(s) or exercise(s) ultimateeffective control over the corporation. [This definitioncovers the natural person(s) who actually own or controlthe corporation as distinguished from its legal owners.]


CATEGORIES OF BENEFICIAL OWNER

(SEC MC NO.15, SERIES OF 2019)

A. Natural person(s) owning, directly or indirectly orthrough a chain of ownership, at least twenty fivepercent (25%) of the voting shares or capital of thereporting corporation.

B. Natural person(s) who exercise control over thereporting corporation, alone or together withothers, through any contract, understanding,relationship, intermediary or tiered entity.

D. Natural person(s) having the abilityto elect a majority of the board ofdirectors/trustees, or any similarbody, of the corporation.

E. Natural person(s) having the ability toexert a dominant influence over themanagement or policies of thecorporation.


F. Natural person(s) whose directions, instructions orwishes in conducting the affairs of thecorporation are carried out by majority of themembers of the board of directors of suchcorporation who are accustomed or under anobligation to act in accordance with suchperson’s directions, instructions or wishes.

G. Natural person(s) acting as stewards of theproperties of corporations, where such propertiesare under the care or administration of saidnatural person(s).


H. Natural person(s) who actually own orcontrol the reporting corporationthrough nominee shareholders ornominee directors acting for or onbehalf of such natural persons.

J. Natural person(s) ultimately owning orcontrolling or exercising ultimateeffective control over the corporationthrough other means not falling underany of the foregoing categories.

K. Natural person(s) exercising control throughpositions held within a corporation (i.e.,responsible for strategic decisions thatfundamentally affect the business practices orgeneral direction of the corporation such as themembers of the board of directors or trustees orsimilar body within the corporation; or exercisingexecutive control over the daily or regular affairsof the corporation through a senior managementposition). This category is only applicable inexceptional cases where no natural person isidentifiable who ultimately owns or exerts controlover the corporation, the reporting corporationhaving exhausted all reasonable means ofidentification and provided there are no groundsfor suspicion.


UPDATING OF BENEFICIAL OWNERSHIP

INFORMATION

The SEC shall be timely apprised of relevant changes inthe submitted beneficial ownership information as theyarise. An updated GIS shall be submitted to the SECwithin seven (7) calendar days after such changeoccurred or became effective.


VALIDATING INFORMATION

• The Commission may, at any reasonable time, verify thebeneficial ownership information provided in the GIS through anon-site inspection of the books and records of the corporationand/or through other means available which may include butnot limited to information that may be obtained from othersources such as the books and records of other corporateentities and data gathered by law enforcement and othergovernment agencies and/or the AMLC in the exercise of theirrespective functions.


OBLIGATION OF

DIRECTORS/TRUSTEES/OFFICERS OF THE

CORPORATIONSECTION 8. Obligation of Directors/Trustees and Officers. TheDirectors/Trustees and Officers of the reporting corporation shall exercise thedue diligence required in ensuring that the requirement to disclose itsbeneficial owner in the GIS is complied with. This due diligence requirementis deemed complied with if reasonable measures are undertaken to obtainand hold updated information on the beneficial owner(s) of the corporationas defined herein and to ensure that such information is timely disclosed inthe GIS. Such reasonable measures include the adoption of writtenprocedures for obtaining, updating and recording beneficial ownershipinformation and in timely disclosing the same in the GIS submitted to theCommission by the Corporate Secretary. Board and Senior Managementoversight in ensuring that such procedures are observed shall likewise berequired as part of the due diligence measures.

BENEFICIAL OWNERSHIP DECLARATION

PAGE IN THE NEW GIS

BENEFICIAL OWNERSHIP INFORMATION

COMPLETE NAME

(Surname, Given Name, Middle

Name, Name Extension

[i.e., Jr., Sr., III

SPECIFIC RESIDENTIAL ADDRESS NATIONALITYDATE OF

BIRTH

TAX

IDENTIFICATION

NO.

% OF

OWNERSHIP

/

% OF

VOTING

RIGHTS

TYPE OF

BENEFICIAL

OWNER

Direct (D)

or

Indirect (I)

CATEGORY OF

BENEFICIAL

OWNERSHIP

CATEGORY DESCRIPTION

A Natural person(s) owning, directly or indirectly or through a chain of ownership, at least twenty percent (20%) of the voting rights, voting shares or capital of the reporting corporation.

B Natural person(s) who exercise control over the reporting corporation, alone or together with others, through any contract, understanding, relationship, intermediary or tiered entity.

C Natural person(s) having the ability to elect a majority of the board of directors/trustees, or any similar body, of the corporation.

D Natural person(s) having the ability to exert a dominant influence over the management or policies of the corporation.

E Natural person(s) whose directions, instructions or wishes in conducting the affairs of the corporation are carried out by majority of the members of the board of directors of such

corporation who are accustomed or under an obligation to act in accordance with such person’s directions, instructions or wishes.

F Natural person(s) acting as stewards of the properties of corporations, where such properties are under the care or administration of said natural person(s).

G Natural person(s) who actually own or control the reporting corporation through nominee shareholders or nominee directors acting for or on behalf of such natural persons.

H Natural person(s) ultimately owning or controlling or exercising ultimate effective control over the corporation through other means not falling under any of the foregoing categories.

I Natural person(s) exercising control through positions held within a corporation (i.e., responsible for strategic decisions that fundamentally affect the business practices or general

direction of the corporation such as the members of the board of directors or trustees or similar body within the corporation; or exercising executive control over the daily or regular affairs

of the corporation through a senior management position). This category is only applicable in exceptional cases where no natural person is identifiable who ultimately owns or exerts

control over the corporation, the reporting corporation having exhausted all reasonable means of identification and provided there are no grounds for suspicion.

Instructions:

1. Identify the Beneficial Owner/s of the corporation as described in the Categories of Beneficial Ownership in items A to I below. List down as many as you can identify. You may use an

additional sheet if necessary.

2. Fill in the required information on the beneficial owner in the fields provided for.

3. In the “Category of Beneficial Ownership” column, indicate the letter(s) corresponding thereto. In the event that the person identified as beneficial owner falls under several

categories, indicate all the letters corresponding to such categories.

4. If the category is under letter “I”, indicate the position held (i.e., Director/Trustee, President, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, etc.).

5. Do not leave any item blank. Write “N/A” if the information required is not applicable or “NONE” if non-existent.

“Beneficial Owner” refers to any natural person(s) who ultimately own(s) or control(s) or exercise(s) ultimate effective control over the corporation. This definition covers the natural person(s) who

ally own or control the corporation as distinguished from the legal owners. Such beneficial ownership may be determined on the basis of the following:

actu

DETERMINING THE ULTIMATE BENIFICIAL

OWNER THROUGH MULTIPLE LAYERS

PENALTIES• FAILURE TO DISCLOSE. If after due notice and hearing, the

Commission finds that the reporting corporation has committed

a violation of this Circular by failing to disclose, without lawful

cause, its Beneficial Owner, in accordance with the provisions

thereof, the reporting corporation shall be penalized as follows:

PENALTIES

For Stock Corporations with retained earnings of less than Php500,000.00:

• For the first violation……………………………………………..…………..Php10,000.00

• For the second violation…………………………………………………..…Php20,000.00

• For the third violation………………………………………………………...Php50,000.00

• For the fourth and subsequent violations…………………………..…..Php100,000.00

For Non-Stock Corporations with fund balance of less than Php500,000.00:

• For the first violation……………………………………………..…………....Php5,000.00

• For the second violation……………………………………………….……Php10,000.00

• For the third violation…………………………………………………….….Php20,000.00

• For the fourth and subsequent violations…………………..…………...Php50,000.00

PENALTIES

• For Stock Corporations with retained earnings or Non-Stock Corporations with fund balanceof Php500,000.00 or more but less than Php5,000,000.00, the penalties shall be twice theamount of the penalties imposed for those with retained earnings or fund balance of lessthan Php500,000.00.

• For Stock Corporations with retained earnings or Non-Stock Corporations with fund balanceof Php5,000,000.00 or more but less than Php10,000,000.00, the penalties shall be thrice theamount imposed for those with retained earnings or fund balance of less thanPhp500,000.00.

• For Stock Corporations with retained earnings or Non-Stock Corporations with fund balanceof Php10,000,000.00 or more, the penalties shall be four times the penalties imposed forthose with retained earnings or fund balance of less than Php500,000.00.

• The failure to submit the GIS with the required beneficial ownership information shall beprima facie proof of such violation.

PENALTIES

• Liability of Directors/Trustees and/or Officers of the Corporation.If the Commission, after due notice and hearing, finds that thedirectors/trustees and/or officers of the reporting corporation,without any lawful cause, failed to exercise the due diligencerequired in ensuring compliance with the requirement todisclose beneficial ownership information in accordance withSection 9 hereof resulting in no beneficial owner(s) as definedherein being timely disclosed in the GIS or in the non-submissionof the GIS containing such information within the prescribedperiod, the following penalties shall be imposed upon suchdirectors, trustees and/or officers:

PENALTIES

• For the first

violation……………………………………………Php5,000.00

• For the second

violation……………………………………………Php10,000.00

• For the third

violation……………………………………………Php20,000.00

• For the fourth and subsequent

violations.….…………...………………………….Php50,000.00

PENALTIES

• The absence of written procedures and policies for obtaining,

updating and recording beneficial ownership information and for the

timely disclosure thereof to the Commission, as provided in Section 9

hereof, or the lack of Board or senior management oversight to ensure

compliance with such policies and procedures, shall be prima facie

proof of the failure to exercise the due diligence required. Every

submission of the GIS without the required beneficial ownership

information or every instance of non-submission or late submission of

such GIS, arising from the failure to exercise the due diligence

required, shall be considered as a prima facie violation of the duty to

exercise due diligence by said directors/trustees and/or officers.

SEC MEMORANDUM CIRCULAR NO. 16,

SERIES OF 2018

Section 5.A.2. Continuing Due Diligence. - "Know your customer"

measures of the covered institution should include conducting

continuing due diligence on the business relationship to ensure

that the transactions being conducted are consistent with the

covered institution's knowledge of the customer and/or beneficial

owner, their business profile, including, where necessary, the

source of its funds.


• SEC. 179. Powers, Functions and Jurisdiction of the Commission – TheCommission shall have the power and authority to:

xxx xxx xxx;

(d) Promote corporate governance and the protection of minority investors,through, among others, the issuance of rules and regulations consistent withinternational best practices;

xxx xxx xxx

(o) Formulate and enforce standards, guidelines, policies, rules andregulations to carry out the provisions of this Code;

xxx.


VISITORIAL POWERS OF THE SEC

• The SEC is vested with the power to exercise visitorial powers

over all corporations, which powers shall include the

examination and inspection of records, regulation and

supervision of activities, enforcement compliance, and

imposition of sanctions in accordance with the RCCP. Should

the corporation, without justifiable cause, refuse or obstruct the

SEC’s exercise of its visitorial powers, the SEC may revoke its

certificate of incorporation, without prejudice to the imposition

of other penalties and sanctions under the RCCP.

ISSUES AND CHALLENGES1. DIFFICULTY OF OBTAINING BENEFICIAL OWNERSHIP

INFORMATION – THE CASE OF PUBLICLY LISTED COMPANIES WITH

PCD NOMINEES

2. LEGAL CHALLENGES ON THE AUTHORITY OF THE SEC TO REQUIRE

DISCLOSURE OF BENEFICIAL OWNERSHIP INFORMATION OF

CORPORATE ENTITIES.

3. VALIDATION OF SUBMITTED INFORMATION

Thank you!


POLICIES AND REGULATIONS TO IMPROVE TRANSPARENCY IN … · ANTI-MONEY LAUNDERING ACT (AMLA), AS...

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Transcript of POLICIES AND REGULATIONS TO IMPROVE TRANSPARENCY IN … · ANTI-MONEY LAUNDERING ACT (AMLA), AS...