Other Sub-Topics about Anti-Money Laundering Act (AMLA)

and Know Your Customer (KYC)

This lesson will give you a thorough understanding of the Anti-Money Laundering Act (AMLA) and
Know Your Customer (KYC), allowing you to answer the following questions confidently:

• What are the 5 ways a business can do to comply with Anti-Money Laundering Act (AMLA)?
• What are the two new covered persons and covered transactions under Anti?Money Laundering Act
(AMLA)?
• What makes a loophole in anti-money laundering? What should Anti-Money Laundering Council
(AMLC) do to resolve this issue?
• What is the importance of Know Your Customer (KYC)? How to understand your customers better?
• What are the documents required and processing of Know Your Customer KYC)?
• What are the benefits of Know Your Customer (KYC)
Topic 1: 5 Ways Your Business Can Comply with
the Anti-Money Laundering Act
Under AMLA, there are select organizations that are required to comply with the anti-money
laundering regulations in the Philippines, including:

• Banks, trust entities, and other institutions regulated by the Bangko Sentral ng Pilipinas
(BSP)
• Insurance companies
• Brokers, salespeople and investment agents
• Closed-end investment and pre-need companies (e.g., memorial chapels, schools)
• Money changers, payment, remittance and transfer companies
• Financing and lending companies
 5 Ways Your Business Can Comply with the Anti-Money Laundering Act
The government has created an AML regulatory framework to address this threat in the Philippines, and
these are the:

a) monitor and ensure the integrity of the country’s financial system and
b) seek the support of companies and individuals in order to achieve the government’s goal of achieving a
robust and fraud-free financial framework.

In addition to the requirements of AMLA, you can manage your business’s compliance
obligations, whether it is an AMLA-controlled business or not, by reading through the
following top tips:

1) Review policies set by financial regulations

2) Monitor customer transactions regularly
3) Keep detailed records of transactions
4) Screen customers and transactions
5) Require a holding period
Topic 2: Two New Covered Persons and Covered Transactions
Under the AMLA, covered persons are required to report covered or suspicious transactions
to AMLC. Covered persons who fail to report these transactions are guilty of money
laundering.

The AMLA defines and lists down these covered persons, and under Sections 3(a) (9) and
(10) of R.A. 11521, “real estate developers and brokers”; and “offshore gaming operators, as
well as their service providers,” are new covered persons and are now required to report
covered and suspicious transactions to the AMLC.
R.A. 11521 likewise defines these new covered persons, as seen in the table below:
Topic 3: Plugged Money Laundering Loophole
With the addition of new covered persons and covered transactions, such as offshore gaming operators and real
estate developers and brokers, there is a State Transactions that has been taken a long time to be covered by anti-
money laundering regulations, making a loophole that has been exploited by small-scale gambling operators (in
particular, of the numbers game jueteng) and government officials who think “kickbacks” from government
transactions come with their territory.
Basically, the strategy involves the purchase, in cash, of real estate properties located in lower or lower middle
income residential areas whose owners are in dire need of money, or are migrating elsewhere in the world and are
rushing to monetize their properties, or are heirs who are feuding over the disposition of inherited property

As stated in the new law, the threshold for transactions by real estate developers and brokers is P7.5 million.
However, with the strategy of small-scale gambling operators, now could the Anti-Money Laundering Council
(AMLC) identify if the money is purely clean. That is why, it is important that when the AMLC drafts the
implementing regulations for the new law, it must ensure that all possible nuances in “legally” evading
compliance with it are addressed.
Topic 4: The Importance of Knowing Your Customers
KYC means “Know Your Customer.” Financial companies use a due diligence process to verify customer identity
and assess and monitor customer risk. The Importance of Knowing Your Customers. KYC ensures a customer is
who they say they are. Compliance with KYC regulations helps prevent money laundering, terrorism financing,
and run-of-the-mill fraud schemes.

“Knowing who your customers are” is very important to know who your clients are. You should know what the
motive for their transaction is. If something weird might occur while completing a certain transaction, ask them
and be able to assist with the query.
 List of Six Easy Ways to Understand Your Customers Better

1) Track Customers’ Real-Time Behavior

A business needs to be prompt and proactive. It needs to anticipate the customers’ needs to serve them on all
platforms before the requirement is placed. Experts suggest investing in a customer relationship management
tool (CRM) that provides in-depth analytics of the customers’ activities.

2) Identify the Different Categories of Your Customers

It’s important to understand the different parameters to segregate your customers. Once the categories are
formed, and customers are segregated, it becomes easier to frame precise marketing and cross-selling
campaigns with targeted messaging.
 3) Invest on Social Media Customer Engagement

This clearly explains the indispensable role that social media plays in shaping and influencing the opinions of
consumers. In such a scenario, it becomes essential for every business to invest exhaustively in social media
engagement. So frame strategies to engage with your target audience and customers on all social media
channels as they are the best place to reach them.

4) Leverage Customer Service Interactions

On every occasion, when your customers contact your service representatives, they can ask queries about the
customers’ likes/dislikes about the product or service usage.

Example: How are they using the product or service?

Are they satisfied using the product/service?
What changes would they like to see in the product/service?
5) Focus on Customers’ Personal Tastes and Preferences

Nurturing your customers with informative content about your product/service is good but do not limit
yourself to only that. Sometimes facilitating the generic interests of the customers serves a great purpose too.
It gives the impression of how attentive you are toward your customers and brings your buyers closest to you.

6) Build Comprehensive Contact Information

Make sure you have one centralized database with an accurate and detailed contact list. Millions of businesses
per annum implement a cloud-based CRM solution to store every piece of customer data neatly. This helps
build a rich customer profile and handle the ongoing interactions between customers and the company.
Topic 5: Know Your Customer (KYC) Documents Required and Processing
 To meet KYC requirements, clients must provide proof of their identity and address, such as ID card
verification, face verification, biometric verification, or document verification. Financial institutions must
ensure clients are not engaging in criminal activities while using their services.

2.1. The documents required for the KYC process for individuals include the usual documents
that individuals generally use, such as:
• Driver’s license
• Social security card/number
• Passport
• Documents issued by the state or the federal government

For proof of residence, the following documents can be furnished:

• Utility bills, such as telephone, electricity, gas, etc.
• Bank statements
• Employment documents
• Housing contracts and rent agreements
2.2 Know Your Customer (KYC) Process
The KYC process is simple and differs only slightly from country to country. A simple KYC process flow is
depicted below:
Step 1: Submission of Documents

An applicant or potential user of financial services is required to submit documents for the verification of their
identity and residence status. The submission can be either in electronic form or physical form.

Step 2: Identity Verification

The authorized agency/organization carries out the identity verification based on the document submitted.

Step 3: Residency Verification2: Identity Verification

The residency verification requires ascertaining the resident status (domestic or foreign), current residential
address, alternative residential address, citizenship status, etc.
Step 4: Verification of the Financial Condition

The assets and liabilities claimed are verified using documents, contacting the issuer, and physical checks.
This reduces the risk of misrepresentation.

Step 5: Transactions Monitoring

The financial institution checks the transactions conducted by the customer/client, and any transaction that is
different/high-valued, frequent, etc., is flagged automatically and then undergoes stringent manual checks.
Topic 6: Benefits of Know Your Customer (KYC)
To be mandated by the law, the Know Your Client (KYC) process also helps financial
institutions in several ways:

• Helps lenders perform risk assessment by identifying the previous financial history and assets
owned.
• Limits fraud that result mainly due to hiding of identity.
• Prevents money laundering and other anti-social activities.
• It brings stability and investment to the country, as it makes the financial framework more
trustworthy and less risky.
• Decreased uncertainty allows institutions to lend more to customers and increase their profits.