The Philippine Securities and Exchange Commission (SEC) issued Memorandum Circular No. 15 Series 2018 on November 7, 2018, requiring registered non-profit organizations (NPOs) and politically exposed persons (PEPs) holding prominent positions in public office to comply with guidelines to ensure that they are not risk of money laundering and terrorist financing abuse.
The memorandum mandates the disclosure of information pertaining to activities, location of operations, funding, and the beneficiaries of NPOs’ activities and funding.
SEC will assess risk level via a points-based system and will require registered non-profits and PEPs to comply depending on the severity of the risk.
It will also refine its current registration and monitoring process to obtain relevant information from NPOs for risk assessment purposes.
More on SEC MC 2018 No. 15
SEC’s approach to assessing risk includes:
- Identify threats of terrorist financing based on the Anti-Money Laundering Council ‘s national risk assessment
- Identify vulnerabilities based on the typical features and characteristics of NPOs
- Indentify the consequences of these threats and vulnerabilities
- Reportorial requirements including General Information Sheet and Annual Financial Statements
- Accomplished membership book to be inspected by SEC
- Miscellaneous minimum requirements based on SEC rules and current laws
- Same reportorial requirements as Low Risk NPOs, except that the Annual Financial Statements must be audited by an independent public account with accreditation from the Board of Accountancy
- Additional documents such as Sworn Statement of Sources, Amount and Application of Fund (SS) and Certificate of Existence of Program/Activity (CEP)
- Formation of internal audit system
- Attendance in SEC’s sustained outreach program
- Same reportorial requirements as Medium Risk entities
- Background checks of trustees and officers
- Audit by the Commission
- Denied registration
- For registered NPOs, revocation process will be publicized, subject to proper notification and time period for compliance
All registered NPOs were required to submit required information within six months of the memorandum’s issuance. The deadline was May 7, 2019.
The information required of registered NPOs included:
- Objectives of stated activities
- Nature of projects and operations
- Identity of individuals who own or direct their activities, including trustees, board members, and officers
- Actual funds that have been raised and disbursed for carrying out educational, cultural, religious, charitable, and social or fraternal activities
- Fund balance
- Location of operations including headquarters, offices, areas of operation, and location of beneficiaries
PEPs were required to disclose the following information:
- Source of funds (as to persons and locations)
- Intended beneficiaries (as to persons and locations)
- Licenses and accreditations from government agencies
Failure to disclose information can result in the revocation of their registration. Any information that has been turned over to SEC will be kept in a database of non-stock corporations to be maintained by the Information and Communications Technology Department (ICTD) of SEC.
The Enforcement and Investor Protection Department (EIPD) and Asset and Liability Management Division (ALMD) will have access to this database.
For more information on Philippine laws and SEC compliance for NPOs and PEPs, contact Duran & Duran-Schulze Law at (+632) 478 5826 or [email protected].