POLICIES AND REGULATIONS TO IMPROVE TRANSPARENCY IN THE OWNERSHIP, - - PowerPoint PPT Presentation

POLICIES AND REGULATIONS TO IMPROVE TRANSPARENCY IN THE OWNERSHIP, CONTROL AND BENEFIT OF CORPORATE VEHICLES

ALFONSO D. LANUZA, JR Officer-In-Charge Anti-Money Laundering Division Enforcement and Investor Protection Department SECURITIES AND EXCHANGE COMMISSION, PHILIPPINES

23-25 September 2019 JAKARTA, 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 RESPECTIVE SUPERVISING 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 THE

COMPANIES’ BENEFICIAL OWNERSHIP TO REQUIRE COMPANIES AND CLIENTS WHICH ARE LEGAL PERSONS, RESPECTIVELY, TO TAKE REASONABLE MEASURES TO OBTAIN AND HOLD UP-TO-DATE INFORMATION ON THE COMPANIES’ BENEFICIAL OWNERSHIP AND TO SUBMIT ACCURATE AND REGULARLY UPDATED BENEFICIAL 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

. EIPD-Anti-Money Laundering Division (AMLD)

• 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,
• peration and regulation of corporations

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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

• wnership; and require companies and corporate

clients, respectively, to submit accurate and regularly updated beneficial ownership information for ML/TF.

EIPD-Anti-Money Laundering Division (AMLD)

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 2018

Refers 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 CONTROL

Refers 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,

• rganization, ownership structure, management,

control, operation, rights and obligations and the regulation and supervision of private corporations in the Philippines. Under the law, registration with the SEC of the Articles of Incorporation

• f an organization gives it a juridical personality.
• CLASSES OF CORPORATIONS UNDER PHILIPPINE LAW
• A. STOCK CORPORATIONS – those which have capital stock

divided into shares and are authorized to distribute to the holders

• f such shares, dividends, or allotments of the surplus profits on the

basis of the shares held

• B. NON-STOCK – all other corporations.

EIPD-Anti-Money Laundering Division (AMLD)

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

• ffice 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,

• wnership

data, and beneficial ownership; xxx.

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• REPORTORIAL REQUIREMENTS OF CORPORATIONS

(SEC. 177, RCCP)

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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

• f 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 Philippines

requires the corporate secretary, or any other officer of the corporation to submit to the SEC, the names, nationalities, shareholdings, and residence addresses

• f

the directors, trustees, and officers within thirty (30) days after their election into office. The non-holding of elections and the reasons therefor shall be reported to the SEC within thirty (30) days from the date

• f the scheduled election. Should a director, trustee or officer

die, resign or in any manner cease to hold office, the same shall be reported to the SEC by the secretary, within seven (7) days from 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

• f

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. – To

ensure 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.

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DEFINITION OF BENIFICIAL OWNER UNDER SEC MEMORANDUM CIRCULAR NO.15, SERIES OF 2019, AS AMENDED

“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 actually own or control the corporation as distinguished from its legal owners.]

EIPD-Anti-Money Laundering Division (AMLD)

CATEGORIES OF BENEFICIAL OWNER (SEC MC NO.15, SERIES OF 2019)

A.

Natural person(s) owning, directly or indirectly or through a chain of ownership, at least twenty five percent (25%) of the voting shares or capital of the reporting corporation.

B.

Natural person(s) who exercise control over the reporting corporation, alone

• r

together with

• thers,

through any contract, understanding, relationship, intermediary or tiered entity.

D. Natural person(s) having the ability to elect a majority of the board of directors/trustees,

• r

any similar body, of the corporation. E.

Natural person(s) having the ability to exert a dominant influence

• ver

the management

• r

policies

• f

the corporation.

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F. Natural person(s) whose directions, instructions or wishes in conducting the affairs

• f

the corporation are carried out by majority of the members of the board of directors of such corporation who are accustomed or under an

• bligation

to act in accordance with such person’s directions, instructions or wishes. G. 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).

EIPD-Anti-Money Laundering Division (AMLD)

H. Natural person(s) who actually own or control the reporting corporation through nominee shareholders

• r

nominee directors acting for or on behalf of such natural persons. J. Natural person(s) ultimately owning or controlling

• r

exercising ultimate effective control over the corporation through other means not falling under any of the foregoing categories.

K. 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

• f 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

• ver the corporation, the reporting corporation

having exhausted all reasonable means

• f

identification and provided there are no grounds for suspicion.

EIPD-Anti-Money Laundering Division (AMLD)

UPDATING OF BENEFICIAL OWNERSHIP INFORMATION

The SEC shall be timely apprised of relevant changes in the submitted beneficial ownership information as they arise. An updated GIS shall be submitted to the SEC within seven (7) calendar days after such change

• ccurred or became effective.

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VALIDATING INFORMATION

• The

Commission may, at any reasonable time, verify the beneficial ownership information provided in the GIS through an

• n-site inspection of the books and records of the corporation

and/or through other means available which may include but not limited to information that may be obtained from other sources such as the books and records of other corporate entities and data gathered by law enforcement and other government agencies and/or the AMLC in the exercise of their respective functions.

EIPD-Anti-Money Laundering Division (AMLD)

OBLIGATION OF DIRECTORS/TRUSTEES/OFFICERS OF THE CORPORATION

SECTION 8. Obligation

• f

Directors/Trustees and Officers. The Directors/Trustees and Officers of the reporting corporation shall exercise the due diligence required in ensuring that the requirement to disclose its beneficial owner in the GIS is complied with. This due diligence requirement is deemed complied with if reasonable measures are undertaken to obtain and hold updated information on the beneficial owner(s) of the corporation as defined herein and to ensure that such information is timely disclosed in the GIS. Such reasonable measures include the adoption of written procedures for obtaining, updating and recording beneficial ownership information and in timely disclosing the same in the GIS submitted to the Commission by the Corporate Secretary. Board and Senior Management

• versight in ensuring that such procedures are observed shall likewise be

required 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 NATIONALITY DATE OF BIRTH TAX IDENTIFICATION NO. % OF OWNERSHIP / % OF VOTING RIGHTS TYPE OF BENEFICIAL OWNER Direct (D)

• r

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 togetherwith 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 throughother 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

• f 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 balance
• f Php500,000.00 or more but less than Php5,000,000.00, the penalties shall be twice the

amount of the penalties imposed for those with retained earnings or fund balance of less than Php500,000.00.

• For Stock Corporations with retained earnings or Non-Stock Corporations with fund balance
• f Php5,000,000.00 or more but less than Php10,000,000.00, the penalties shall be thrice the

amount imposed for those with retained earnings

• r

fund balance

• f

less than Php500,000.00.

• For Stock Corporations with retained earnings or Non-Stock Corporations with fund balance
• f Php10,000,000.00 or more, the penalties shall be four times the penalties imposed for

those 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 be

prima 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 the directors/trustees and/or officers of the reporting corporation, without any lawful cause, failed to exercise the due diligence required in ensuring compliance with the requirement to disclose beneficial ownership information in accordance with Section 9 hereof resulting in no beneficial owner(s) as defined herein being timely disclosed in the GIS or in the non-submission

• f the GIS containing such information within the prescribed

period, the following penalties shall be imposed upon such directors, 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

• f

written procedures and policies for

• btaining,

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

• wner, their business profile, including, where necessary, the

source of its funds.

EIPD-Anti-Money Laundering Division (AMLD)

• SEC. 179. Powers, Functions and Jurisdiction of the Commission – The

Commission 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 with international best practices; xxx xxx xxx (o) Formulate and enforce standards, guidelines, policies, rules and regulations to carry out the provisions of this Code; xxx.

EIPD-Anti-Money Laundering Division (AMLD)

VISITORIAL POWERS OF THE SEC

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

all corporations, which powers shall include the examination and inspection

• f

records, regulation and supervision

• f

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

• f other penalties and sanctions under the RCCP.

ISSUES AND CHALLENGES

• 1. 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!

EIPD-Anti-Money Laundering Division (AMLD)