Philippine Daily Inquirer

BSP orders more thorough vetting of bank employees

- By Daxim L. Lucas @daxINQ

It’s no longer enough for banks to perform thorough background checks on their customers and ascertain the provenance of their money under the prevailing know-your-customer scheme.

Under the newly approved rules of the Bangko Sentral ng Pilipinas (BSP), supervised financial institutio­ns will now have to carefully vet their own personnel, too, under the socalled know-your-employee framework or “KYE.”

The move was given the green light by the regulator’s policy making Monetary Board in a bid to prevent would-be rogue bank employees from committing fraud against customers of the institutio­n—an issue that does not happen often locally, but when it does, it usually involves hundreds of millions of pesos in funds that suddenly go missing.

According to the BSP, the guidelines “aim to strengthen policies and practices and tighten controls related to confirmati­on of deposit accounts, as part of the overall operationa­l risk management system” of banks.

BSP Governor Benjamin Diokno said the issuance was part of the commitment of the regulator “to continue to raise the bar on corporate governance and risk management systems to protect the integrity of the financial system.”

He added that “aligning BSP regulation­s with internatio­nal best practices on KYE procedures is just half the battle,” explaining that the other half would depend on the strength of oversight of the board of directors of financial institutio­n implementi­ng these policies.

Under the new rules, financial institutio­ns are required to adopt a risk-focused screening process which considers sensitivit­ies of certain positions that may require more stringent procedures.

Adequate understand­ing of a candidate’s personal background and character, potential conflicts of interest, as well as propensity to commit fraud or irregulari­ty will be considered in the recruitmen­t process. The revised rules also emphasize the use of BSP records as part of the screening process of banks.

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