Beneficial ownership transparency in the Philippines
1. Introduction and background
Beneficial ownership transparency in the Philippines has its roots in the country’s efforts to combat money laundering and terrorist financing. These efforts were driven mainly by the FATF [2] and commitments under the Asia/Pacific Group on Money Laundering, [3] of which the Philippines is a founding member and was co-chair from 1998 to 2000. The Philippines enacted AML/CFT laws, such as the Anti-Money Laundering Act (AMLA) in 2001 [4] and the Terrorism Financing Prevention and Suppression Act in 2012 [5] since its inclusion in the FATF list of “non-cooperative countries and territories” or “blacklist” in 2000. [6] Under this AML/CFT regime, BO disclosure became mandatory through various regulations issued by the AMLC, the country’s financial intelligence unit, or separately by supervisors, such as the Bangko Sentral ng Pilipinas (BSP), the Insurance Commission (IC), the SEC, the Philippine Amusement and Gaming Corporation (PAGCOR), the Cagayan Economic Zone Authority (CEZA) and the Aurora Pacific Economic Zone and Freeport Authority (APECO).
The SEC leads the implementation of BO disclosure in the Philippines. This is in line with its mandate as corporate regulator, company registry and supervising authority under the AMLA. Pursuant to this, the SEC has issued several regulations relating to BOT: SEC Memorandum Circular (MC) 15, s. 2019 [7] (MC 15), as amended by SEC MC 10, s. 2022 [8] (MC 10), contains comprehensive guidance on BO disclosure for domestic stock and non-stock corporations and penalties for violation, while SEC MC 30, s. 2020 [9] (MC 30) extends this requirement to SEC-registered foreign corporations. SEC MC 1, s. 2021 [10] (MC 1) contains additional guidelines that aim to promote BOT by explicitly prohibiting the issuance, sale or public offering of bearer shares and bearer share warrants, [11] and requiring nominee directors, trustees, shareholders and incorporators to declare their principals.
Apart from the SEC, stock exchanges and issuers of securities, [12] as well as “covered persons” under the AMLA, [13] are also required to collect and maintain BO information as part of their due diligence. Every corporation (whether stock or non-stock, domestic or foreign) doing business in the Philippines is likewise required to keep and preserve at its principal office all BO-related information. [14] This is in line with the FATF’s recommended multi-pronged approach, which the Philippines adopts, in collecting, storing and sharing BO information.
There is as yet no economy-wide publicly accessible BO register in the Philippines. Access to BO information collected and held by the SEC is limited to law enforcement agencies (LEAs) and other competent authorities.
Despite this, the Philippines has adopted other international initiatives that promote BOT. For instance, it has progressively implemented EITI Requirement 2.5, which requires, among others, public disclosure of extractive companies’ BO information. [15] Since 2021, PH-EITI has published on its website a BO database of extractive companies that consented to such publication based on company declarations submitted to the SEC and PH-EITI. [16] This includes information on whether the declared beneficial owner is a PEP.
The Philippines also implements BOT as a party to the United Nations Convention Against Corruption, and as part of its commitments under the Open Government Partnership (OGP) and Global Forum on Transparency and Exchange of Information for Tax Purposes. In light of its continued inclusion in the FATF grey list, [17] the Philippines aims to continue strengthening its AML/CFT programme – which includes BOT – in line with international standards.
Scope and methodology
As the BO disclosure regime in the Philippines is set against the broader legal and institutional framework of the country’s AML/CFT regime, this assessment focuses on the SEC and its general BO disclosure regulations, i.e. MC 15, MC 30, MC 10 and MC 1. It likewise considers alignment with the EITI Standard for extractive companies, particularly on key technical aspects of Requirement 2.5 on BOT and the corrective actions from the 2021 Validation of the Philippines. [18]
The research was conducted through desk review and interviews with critical stakeholders and regulators, including PH-EITI, the SEC, the AMLC and the National Privacy Commission (NPC). It uses the OO Principles [19] as a framework for identifying the challenges and opportunities for the Philippines to implement a robust BO disclosure system on an economy-wide basis.
Footnotes
[2] See: FATF (no date), Home page. Retrieved from: https://www.fatf-gafi.org.
[3] See: Asia/Pacific Group on Money Laundering (no date), Home page. Retrieved from: https://apgml.org/.
[4] AMLC (2001), Republic Act No. 9160 (2001), as amended by Republic Act No. 9194 (2003), No. 10167 (2012), No. 10365 (2013), No. 10927 (2017) and No. 11521 (2021). Retrieved from: http://www.amlc.gov.ph/laws/money-laundering/2015-10-16-02-50-56/republic-act-9160.
[5] Philippine Government (2012), Republic Act No. 10168 (2012). Retrieved from: https://www.officialgazette.gov.ph/2012/06/18/republic-act-no-10168/.
[6] AMLC (2021), “A Chronology of the Philippines’ Anti-Money Laundering and Counter-Terrorism Financing Technical and Effectiveness Compliance”. Retrieved from: http://www.amlc.gov.ph/images/PDFs/PH%20AMLCTF%20COMPLIANCE%20CHRONOLOGY.pdf.
[7] SEC (2019), “MC No. 15 s.2019 – Amendment of SEC Memorandum Circular No. 17, Series of 2018 on the Revision of the General Information Sheet (GIS) to include Beneficial Ownership Information (‘2019 Revision of the GIS’)”. Retrieved from: https://www.sec.gov.ph/mc-2019/mc-no-15-s-2019-amendment-of-sec-memorandum-circular-no-17-series-of-2018-on-the-revision-of-the-general-information-sheet-gis-to-include-beneficial-ownership-information-2019-revisio/.
[8] SEC (2022), “SEC MC No. 10, series of 2022 – Amendments to SEC Memorandum Circular No. 15, s. 2019 (The 2019 Revision of the GIS) Increasing the Penalties and Imposing Additional Non-Financial Penalties and Providing Further Guidelines for Submission”. Retrieved from: https://www.sec.gov.ph/mc-aml/sec-mc-no-10-series-of-2022/.
[9] SEC (2020), “MC No. 30 s.2020 – Revision of the General Information Sheet (GIS) of Foreign Corporations to Include Beneficial Ownership Information”. Retrieved from: https://www.sec.gov.ph/mc-2020/mc-no-30-s-2020/.
[10] SEC (2021), “MC No. 01 s. 2021 – Guidelines in Preventing the Misuse of Corporations for Illicit Activities through Measures Designed to Promote Transparency of Beneficial Ownership (‘BO Transparency Guidelines’)”. Retrieved from: https://www.sec.gov.ph/mc-2021/mc-no-01-s-2021/.
[11] Prior to this MC, there was no express prohibition against the transfer of bearer shares/bearer share warrants apart from the requirement under section 62 of the Revised Corporation Code of the Philippines (Republic Act No. 11232) that transfers must be recorded in the corporation books to be valid as to third parties. See: SEC (2019), Republic Act No. 11232. Retrieved from: https://www.sec.gov.ph/wp-content/uploads/2019/11/2019Legislation_RA-11232-REVISED-CORPORATION-CODE-2019.pdf.
[12] SEC (2001), Republic Act No. 8799, “The Securities Regulation Code”. Retrieved from: https://www.sec.gov.ph/wp-content/uploads/2019/11/2019Legislation_RA-8799-Securities-Regulation-Code-2000.pdf; SEC (2015), Implementing Rules and Regulations of Republic Act No. 8799. Retrieved from: https://www.sec.gov.ph/wp-content/uploads/2019/11/2015-SRC-Rules-Published-in-Phil-Star-Manila-Bulletin-October-25-2015.pdf.
[13] See: SEC (2018), Implementing Rules and Regulations of Republic Act No. 9160, as amended. Retrieved from: http://www.amlc.gov.ph/images/PDFs/FINAL2018%20IRR.pdf.
[14] Revised Corporation Code, sections 177(b) and 73(b).
[15] EITI (2023), “Requirement 2.5”, EITI Standard 2023. Retrieved from: https://eiti.org/collections/eiti-standard.
[16] See: PH-EITI (2024), “Beneficial Ownership Registry”. Retrieved from: https://pheiti.dof.gov.ph/boregistry. The limited extractive BO register was an effort not only to meet the EITI Standard but also a commitment under the Philippine OGP 5th National Action Plan (2019-2022) to institutionalise transparency and accountability in the extractive sector by mainstreaming EITI implementation.
[17] See: FATF (2022), Jurisdictions under Increased Monitoring - June 2022. Retrieved from: https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/increased-monitoring-june-2022.html.
[18] Validation is the EITI’s key instrument to assess implementing countries on their ability to meet the provisions of the EITI Standard. See: EITI (2021), Validation of the Philippines: Final assessment of progress in implementing the EITI Standard. Retrieved from: https://eiti.org/sites/default/files/attachments/eiti_validation_of_the_philippines_2021_-_final_validation_report.pdf; EITI (2021), Documenting progress for Validation. Retrieved from: https://eiti.org/guidance-notes/documenting-progress-validation.
[19] OO (2023), Open Ownership Principles for effective beneficial ownership disclosure. Retrieved from: https://www.openownership.org/en/principles.