The Anti-Money Laundering Council (AMLC) of The Philippines has just published its Guidance on Sanctions Screening based on the Thematic Review undertaken by AML Analytics over the past 12 months.
AMLC, the Philippine’s Financial Intelligence Unit has made this extremely valuable information public for all financial institutions, DNFBPs and crypto businesses around the globe and can be used as a much-needed point of reference for sanction screening best practice.
Upon being placed on the Financial Action Task Force’s (FATF) List of Jurisdictions under Increased Monitoring (also known as the “grey list”), the Philippines set out to improve its AML/CTF regime.
The plan to do so included enhancing the effectiveness of the Targeted Financial Sanctions Framework (TFS), framework for terrorism financing (TF) and proliferation financing (PF) of weapons of mass destruction.
To accomplish the action plan, covered persons must understand their TFS obligations and supervisors must undertake risk-based supervision of TFS measures of financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs).
The four areas of observation
During the review, the aim is to understand the effectiveness and efficiency of the primary client and its transaction sanction screening systems, with particular emphasis placed on the four following things:
• Does the system generate an alert when an unmanipulated sanctioned name is screened?
• Are the “fuzzy logic” matching rules, configuration, and threshold settings effective, such that a manipulated sanctioned name generates an alert?
• Are the levels of “false positives” or “noise” within operable/manageable levels?
• Is the system performance in line with the regulator’s expectations?
Current requirements under Philippine law
Under current legislation, all Covered Persons (CPs) must screen all relevant parties against the Anti-Terrorism Council (ATC) List and United Nations Security Council (UNSC) Resolutions. At a minimum, the sanctions database should include the following and their successor resolutions:
• UNSC Consolidated List that includes UNSC Resolutions 1267/1989 (Al Qaeda), 1988 (Taliban), and 2253 (ISIL Daesh) for Targeted Financial Sanctions on terrorism and terrorist financing.
• UNSC Consolidated List that includes UNSC Resolution Numbers 1718 of 2006 (DPRK) and 2231 of 2015 (Iran) for TFS on Proliferation Financing.
• Domestic designations (or those that are designated by the Anti-Terrorism Council [ATC] pursuant to UNSC Resolution 1373, Section 25 of the Anti-Terrorism Act of 2020, Rule 15.b of the Implementing Rules and Regulations of The Terrorism Financing Prevention and Suppression Act of 2012 [TFPSA]) and those proscribed by the Court of Appeals under Section 26 of The Anti-Terrorism Act of 2020.
For system performance metrics a reference point, or benchmark, must be aimed for. Below is the Global Benchmark data as of January 2023 for the effectiveness of customer and transaction sanction screening systems.
Global Benchmark as of January 2023