SEC rolls out tougher rules to fight money laundering
The Securities and Exchange Commission (SEC) is implementing stricter anti-money laundering measures in the stock market by requiring the disclosure of the identity of the beneficial owners of shares.
The new anti-money laundering rules are included in its SEC Memorandum Circular No. 1, Series of 2021, or the Guidelines in Preventing the Misuse of Corporations for Illicit Activities through Measures Designed to Promote Transparency of Beneficial Ownership.
The measures include a prohibition on the issuance of bearer shares and a requirement for the mandatory disclosure of the identity of the beneficial owners, or persons who ultimately own or effectively control corporations.
“Arrangements that allow shareholders or members to hide their identity expose corporations to the risk of being misused for illicit activities such as money laundering and terrorist financing,” SEC Chairman Emilio B. Aquino said.
“The newly issued guidelines will provide the commission with adequate, accurate, and timely information to combat such unlawful activities, while cementing our commitment to international standards and best practices against money laundering and terrorist financing.”
The guidelines provide that no corporation or entity shall issue, sell or offer for sale or distribution bearer shares, as well as bearer share warrants, where the name of owners are neither reflected on the physical stock certificate nor recorded in the stock and transfer book of the issuing corporation. The guidelines further require corporations other than publicly listed companies to disclose and record in their stock and transfer book the alienation, sale or transfer of shares of stock, the date, by whom and to whom made within 30 days. Otherwise, the transaction shall not be binding on the issuer.
No dividends shall be paid to any person or entity unless the name appears in the records of the corporation as the owner of the concerned shares of stock, except for dividend payments made by publicly listed companies to the PCD Nominee or any similar entity authorized to act as depository and custodian of shares for purposes of trading in the stock exchange and operating under the same rules.
The guidelines also require newly registered corporations to disclose the identity of the persons on whose behalf they were registered and the nominators, principals of nominee incorporators, first directors, trustees and shareholders within 30 days from receipt of their certificates of registration.
Those who will violate the new rules may be fined P5,000 to up P2 million, plus up to P1,000 for each day of continuing violation but not exceeding P2 million; face suspension or revocation of their certificate of incorporation; and face other penalties that the SEC may impose.
The guidelines adopt the recommendations in the Mutual Evaluation Report issued by Financial Action Task Force (FATF) in October 2019.
The FATF recommended that the Philippines introduce measures to ensure that bearer share warrants, nominee directors and nominee shareholders are not misused for money laundering and terrorist financing.