Anti-Money Laundering and Countering Financing of Terrorism: Sectoral Risk Assessment 2021

2021 SEC NOTICE ANTI-MONEY LAUNDERING AND COUNTERING FINANCING OF TERRORISM SECTORAL RISK ASSESSMENT 2021 FINANCING COMPANIES AND LENDING COMPANIES EXECUTIVE SUMMARY BACKGROUND The Securities and Exchange Commission (SEC) pursuant to the authority granted to it under the Anti-Money Laundering Act of 2001 (AMLA) (RA 9160), as amended assists the Anti-Money Laundering Council (AMLC) in the implementation of the AMLA. Covered persons regulated by the SEC under the Securities Regulation Code (SRC), the Investment Houses Law, the Investment Company Act, the Financing Company Act, the Lending Company Regulation Act are the Brokers, Dealers and Salesman, Associated Person of a brokers dealer and other 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; and 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 SEC. In order to implement an effective risk based AML/CFT supervision of the financing companies and lending companies sector, there is a need to identify, assess and understand the ML/TF risk to which the sector is exposed. This Sector Risk Assessment (SRA) covers all 4,099 Financing companies and Lending companies registered with the SEC as of December 2020. The report is an assessment of the money laundering and terrorist financing (ML/TF) risks affecting the sector in the Philippines. It identifies the main criminal offenses, ML/TF threats currently facing the sector, determines and highlights the key vulnerabilities of the sector to such ML/TF threats. The SRA follows the Financial Action Task Force (FATF) guidance that states that ML/TF risk should be assessed as a function of criminal threat, vulnerability and consequence. The risk assessment adopts a systematic approach that combines both quantitative and qualitative data. To ensure the accuracy of the findings, the SRA was developed in wide consultation with key government stakeholders, including supervisors, regulators and LEAs. OVERALL RISK RATING The overall money laundering and terrorist financing (ML/TF) risks for the financing companies and lending companies sector is assessed as MEDIUM . Crime Threat Assessment The overall ML crime threat for financing companies and lending companies is assessed as MEDIUM . The ML criminal threat environment for the financing companies is MEDIUM-HIGH while that for lending companies is assessed as MEDIUM . The overall TF crime threat for financing companies and lending companies is assessed as MEDIUM-LOW . Vulnerabilities Assessment The ML/TF vulnerabilities are assessed as MEDIUM for both the financing companies and lending companies. Consequences Assessment The overall consequences of ML/TF activity in the sector is assessed as MEDIUM . A. GENERAL FINDINGS CRIME THREAT ASSESSMENT The sector attracts various criminal threats, with moderate level of sophisticated tactics and methods to commit offenses. The cheap availability of internet access, increasing functionality of mobile phones, and technological advancements that speed up transactions, while admittedly contributing to the ease of doing business and financial inclusion, nonetheless provides criminals with tools to escape detection or hide the proceeds of their illegal activities. There is likewise an emerging risk arising from violations of the Anti-Carnapping Act of 2002, hijacking and other violations under RA 6235 (destructive arson and murder) and drug-trafficking and related offenses. The involvement of cash in the predicate offenses or ML/TF offenses related to financing companies is quite significant. There were 61% of STRs (4,975 STRs) in the sector which reported to have involved cash transactions, with an estimated value of approximately PHP89 million. In all of the 8,155 STRs filed with the AMLC, the predicate offenses have been suspected to be committed in the home jurisdiction. There were a small number of other types of predicate offenses that have been reported in the STRs by financing companies in the sample period for this risk assessment: o Hijacking and other violations under RA No. 6235 (Destructive Arson and Murder) o Violations of the Revised Forestry Code of the Philippines o Forgeries and Counterfeiting o Electronic Commerce Act of 2000 o Violations of the Decree Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing in, Acquisition or Disposition of Firearms, Ammunition or Explosives o Violations of the Philippine Mining Act of 1995 o Qualified Theft o Smuggling STRs and CTRs filed with the AMLC provide the basis for determining the nature and extent or materiality of the criminal threat. The number and value of STRs and CTRs filed over the past three years by financing companies and lending companies registered with the AMLC as of 31 December 2019 are as follows: STRs and CTRs Filed by Financing Companies and Lending Companies, 2017-2019 REGISTERED WITH AMLC STRs (2017-2019) CTRs (2017-2019) NO. OF STRs VALUE OF STRs (in Millions PhP) NO. OF CTRs VALUE OF CTRs (in Millions PhP) Financing Companies 160 8,155 1,211 251,483 851,867 Lending Companies 45 0 0 1,433 5,552 TOTAL 8,155 1,211 252,916 857,419 The top three (3) suspected predicate crimes that were reported by financing companies in the STRs include: a. swindling (41.79%), b. graft and corrupt practices (2.43%) and c. frauds and illegal exactions and transactions (1.12%). STRs filed on "other suspicious indicators" accounted for more than half (50.62%) of the total STRs filed by financing companies in 2017-2019, which may indicate that financing companies are being targeted to launder money and move the proceeds of the crimes. A small number of STRs related to various other types of predicate offenses, including terrorism and conspiracy to commit terrorism (0.92%), hijacking and other violations under RA No. 6235 (destruction arson and murder) (0.86%), bribery and corruption of public officers (0.56%), violations of the Revised Forestry Code of the Philippines (0.49%), violations of the Anti-Carnapping Act of 2002 (0.36%), and drug trafficking and related offenses (0.32%) were also recorded. In all of the 8,155 STRs filed with the AMLC, the predicate offenses have been suspected to be committed in the home jurisdiction. Money Laundering Out of the 8,155 STRs filed with the AMLC by financing companies in 2017-2019, there were 4,128 STRs related to other suspicious indicators. STRs Filed Per Suspicious Indicator: Financing Companies, 2017-2019 SUSPICIOUS INDICATORS % TO TOTAL SAMPLE STRs The transaction is not a suspicious circumstance under Sec. 3 (B-1) of the AMLA, as amended. 50.24% The client is not properly identified. 33.96% The transaction is similar, analogous or identical to any of the foregoing. 13.54% There is no underlying legal or trade obligation, purpose or economic justification. 1.36% The amount involved is not commensurate with the business or financial capacity of the client. 0.39% The transaction is structured to avoid being reported. 0.27% There is a deviation from the client's profile/past transactions. 0.24% TOTAL 100.00% Terrorist Financing, Terrorism and Conspiracy to Commit Terrorism There has been a low level of reporting of transactions related to possible terrorist financing, either by the financing companies or lending companies, despite the fact that there is a separate suspicious indicator for 'Financing of Terrorism' (PC14) in the STR submission form. Fraud-Related Offenses The most common offense reported in STRs from the financing companies was swindling, representing 42% of STRs received by the AMLC during the sample period for this assessment. The SEC issued advisories against financing companies and lending companies between 2018 to 2019 to warn the public regarding the unauthorized investment solicitation. SEC Advisories Involving Financing Companies and Lending Companies, 2018-2019 2018 Violations of the Securities Regulation Code 1 Registered Financing Company 1 Registered Lending Company 2 Unregistered Lending Companies 2019 Violations of the Securities Regulation Code 1 Unregistered Financing Company Corruption-Related Offenses A total of 245 STRs filed by financing companies were related to graft and corrupt practices (198 STRs), bribery and corruption of public officers (46 STRs) and malversation of public funds and property (1 STR). Although these STRs only represent 3% of the total STRs filed with the AMLC by financing companies during this period, the value involved has been significant at 37.34% of the total value of STRs received from financing companies between 2017 to 2019. In 2020, one financing company was impleaded as a necessary party in a Petition for Freeze Order (FO) and Application for Bank Inquiry (BI) filed by the AMLC related to a corruption case involving a total amount of PhP57,539.00. Carnapping Financing companies filed 29 STRs in relation to carnapping in 2019 with a total value of Php65.2 Million. Drug-Trafficking and Related Offenses The 2019 AMLC external threat assessment report has noted that although 'substantial amount of illicit funds from drug trafficking were generated in the Philippines, they have been circulated around the financial system generally through commercial banks.' 1 Drug Trafficking-Related STRs Filed by Financing Companies, 2017-2019 In the last three years, there were a total five petitions for freeze order (FO), Application for Bank Inquiry (BI) and petition for Civil Forfeiture (CF) filed against financing companies as a necessary party and three of these petitions/applications relate to drug-cases. Statistics on Financing Companies Involved in Petitions for Freeze Order (FO), Applications for Bank Inquiry (BI) and Petitions for Civil Forfeiture (CF) Involving Drug Cases (2017-2020) Case/Predicate Crime Type of Case Financing Company Impleaded as Necessary Party** Amount Involved 2017 Drugs Case FO/BI/CF F1 PhP787,770.02 Drugs Case CF F2 Impleaded as respondent because said company foreclosed one real property of one of the respondents before the FO and CF case. 2020 Drugs Case FO/BI F5 No FO Return yet ** F1 for Financing Company 1, F2 for Financing Company 2, and F3 for Financing Company 3 In 2017, eighteen (18) lending companies applying for registration and license to operate were found to have submitted false certificates of bank deposit. As a result, the SEC filed 18 cases of falsification of public document and 18 cases of violation of the LCRA for making a false statement in an application filed with the SEC against the incorporators, directors, officers and stockholders of said companies. 153 individuals including 66 foreign nationals were charged by the SEC in 18 cases filed before the RTCs for violation of LCRA for false statements made in application documents and 18 cases before the Municipal Trial Courts for Falsification of Public Document/Perjury in violation of the Revised Penal Code. The SEC successfully obtained judgments of conviction in five (5) criminal cases filed before the Regional Trial Court of Pasay City for violation of the LCRA where 22 foreigners and 25 Filipinos were convicted for making false statements in application documents filed with the SEC. Cease and Desist Orders (CDOs) Issued by SEC Involving Lending Companies and Financing Companies for Violations of Laws and Other Entities Engaging in Lending and Financing Businesses without the Required Authority from the SEC (2019-2020) The SEC has been vigilant about the threat posed by illegal financing companies and lending companies operating in the sector. In the past three years, a number of other measures/actions have also been taken by SEC to prevent illegal lending and financing in the sector. For the period 2018-2020, the SEC has received a total of 12,398 complaints against financing companies and lending companies for the following violations: Complaints Received by SEC Against Financing Companies and Lending Companies, 2018-2020 COMPLAINT YEAR 2018 2019 2020 High Interest and Penalties 34 585 3,046 Violations of the Truth in Lending Act 2 67 322 Collection Harassment 42 1,487 2,851 Violation of Privacy 6 578 641 Others ( e.g. , Violation of the Bayanihan Law) 6 206 2,525 TOTAL 90 2,923 9,385 Crime Threat Environment Bureau of Customs There are no reports regarding alert orders, warrants of seizure and detention and apprehension involving financing companies and lending companies reported. Bureau of Internal Revenue There are no financing companies and lending companies among those listed as having been charged with tax evasion by the BIR. National Privacy Commission Three (3) online lending companies for violations of the Data Privacy Act (DPA) recommended the prosecution of an online lending firm found criminally liable for violating the DPA. SOCTA Financing firms accounted for at least 90 mortgaged vehicles involved in carnapping activities. SEC Thirty-six (36) cases were filed by the SEC against 18 lending companies for falsification of public document in violation of the Revised Penal Code and for making false statements in a report required to be submitted to the SEC in violation of the Lending Company Regulation Act. Investigations conducted also show an increasing number of fraud cases involving the unauthorized offering and selling of securities to the public in violation of the Securities Regulation Code in the form of Ponzi and pyramiding schemes. The SEC has received a number of complaints from victims of investment fraud saying that the money they invested was actually money borrowed from banks or lending companies. The purchase of certain assets by scammers may have also been done through loans secured by mortgages by availing of financing from certain banks, financing companies or lending companies. VULNERABILITIES ASSESSMENT Financing Companies The overall vulnerability of financing companies for ML/TF is assessed as MEDIUM . Overview As of December 2020, there are 797 financing companies operating in the Philippines which are licensed by the SEC 456 total covered persons 440 Supervised by SEC 16 Supervised by BSP 74 have more than 40% foreign equity participation Total assets of PhP412.2 Million, average of PhP1.4 Million Nature, Size and Complexity of Business As of December 2020, there are 111 financing companies with foreign ownership and 332 financing companies that are entirely domestic. Based on the 287 financing companies with available 2019 AFS in the SEC database, the financing companies' sub-sector generated a total gross revenue in 2019 of PhP80.2 Billion. Total loan portfolio of financing companies as of 31 December 2019 is in the sum of PhP290.6 Billion. 66.7% of the financing companies surveyed for this risk assessment indicated that 91% or more transactions are simple whereas only 2 covered persons have indicated to have been involved in highly complex transactions where it might be difficult to determine the beneficial ownership. Total number of transactions 420,901 420,351 by covered persons 550 by non-covered persons Products and Services Products and services of financing companies include personal loans, business loans, real estate loan, corporate loan, educational loan, and consumer loan (for gadget, appliances, and furniture), among others. They also provide the following sophisticated products and/or services: a) receivable financing; b) discounting; and c) factoring. Disbursement of loan proceeds financing companies use different methods to transmit the funds to borrower accounts, including disbursement of proceeds done through banks ( i.e. , credit to borrowers' account with partner banks, and check issuance for bigger amounts), or over-the-counter cash disbursement for smaller amounts. a) domestic transfers ( e.g. , checks to borrowers' account) 57% b) domestic online transfers to borrowers' bank account 53% c) international online transfers (only two financing companies in the survey) very rare Repayment is done through banks, partner payment centers, remittance service providers, over-the-counter payments, or collection agents. Small number of financing companies, as surveyed for this assessment, have indicated to be allowing third-party payments on behalf of their customers. a) 14 allowed domestic third-party payments on behalf of their customers b) 6 allowed overseas domestic third-party payments Customer Types The total number of customers of respondent-financing companies, as of 31 December 2019, are reported to be 7,437,240 including both covered persons and non-covered persons. Financing companies appear to cater mostly to domestic individuals. Trust and other legal arrangements are not reported to be the customers of any surveyed financing company. No financing company has been reported to be dealing with non-resident legal entities or arrangements. The legal persons and arrangements were reported as customer type in only 189 STRs, which indicates the relatively moderate level or risk posed by legal entities or legal arrangements to financing companies. 31.8% of financing companies surveyed are dealing with clients having a net worth below PhP15 Million, whereas 18% of them have customers with net worth above PhP20 Million. Domestic Politically Exposed Persons (PEPs) constitute a very small proportion of the total customers of financing companies. No financing company has reported to be dealing with foreign PEPs as their customers. Delivery Channels 42.4% allow only face-to-face on-boarding 30 out of 66 of financing companies surveyed have reported to be using a combination of both face-to-face and non-face-to-face onboarding methods 12% use exclusively non-face-to-face onboarding 54.5% deliver their products and services to customers exclusively face-to-face 9% exclusively online 26.4% combination of face-to-face and non-face-to-face-delivery methods Country Risk Financing companies have very low exposure to non-resident customers and majority of the borrowers of financing companies are local-based. Only seven financing companies have transacted with foreign jurisdictions between 2017 and 2019 in which two (2) have transactions above PhP20 million with foreign jurisdictions, and five (5) have total value of transactions with foreign countries less than PhP500,000. The main four foreign jurisdictions with which the financing companies have been involved in transactions include: Singapore Japan UK Australia Operational Vulnerabilities From the information obtained through the survey, majority (91%) of financing companies conduct their transactions through banks. Only a small percentage (22.7%) of financing companies get involved in any transactions with money service businesses (MSBs). Cash is, however, a prevalent method in conducting transactions by financing companies. Twenty-one financing companies highlighted the use of cash in their transactions, with five financing companies using cash in 91% or more of the total value of their transactions. A small number (five) of financing companies also indicated to be using other financial channels to carry out their transactions, without providing any further details. AML/CFT Systems and Controls In the sample period of 2017 to 2019, 8155 STRs were filed by the financing companies with the AMLC. 3 financing companies filed 4,018 STRs 4 financing companies filed 1,968 STRs 6 financing companies filed 2,989 STRs The level of STR reporting by the limited number of financing companies suggests that AML/CFT reporting mechanisms could be strengthened to better detect financial crime and increase reporting to AMLC. Another major sectoral vulnerability that has been identified is the limited role of the AML/CFT supervisor ( i.e. , SEC/BSP) over the financing companies, as well as lack of statistics and other information relating to ML/TF activities in this sub-sector. In 2019, however, SEC has initiated more on-site and off-site inspections of the financing companies and imposed sanctions on 31 financing companies for late/non-submission of MTPP and 23 financing companies for late/non-submission of the AMLA-Compliance Form. The number of covered persons required to register with the AMLC has increased following stricter monitoring by the SEC in the past 3 years. To determine the level of compliance and adequacy of the AML/CFT framework of financing companies, the SEC recently conducted off-site and virtual (due to COVID-19) examination of 28 financing companies that were selected using a risk-based approach. Some of the common AML/CFT deficiencies identified by the SEC included: No active board and management oversight No institutional risk assessment conducted by lending companies No institutional risk management No risk profiling of customers Inadequate Know Your Client and Customer Due Diligence No procedures and policies for suspicious transaction reporting Inadequate training and dissemination Inadequate fit and proper screening of employees Lending Companies The overall vulnerability of lending companies for ML/TF is assessed as MEDIUM. Overview As of 31 December 2020, there are 3,302 SEC registered lending companies operating in the Philippines. None of these 3,302 lending companies are involved in any quasi-banking function. SEC is currently supervising 165 lending companies as 'covered persons' for AML/CFT purposes. BSP has general supervision over one lending company which is a subsidiary/affiliate of a bank. Of the 165 covered persons, 53 lending companies have more than 40% foreign equity participation while 152 lending companies have paid-up capital of PhP10 Million or more. As of 31 December 2019, the total amount of assets of lending companies (including both covered persons and non-covered persons), based on the data of 1,158 lending companies with available 2019 audited financial statements, are in the sum of PhP11.5 Billion, with an average value of assets per entity to be PhP9.9 Million. Nature, Size and Complexity of Business There were 496 entities with foreign ownership/equity and 1,210 lending companies that are entirely domestic. The ownership structure of the rest of the registered lending companies cannot be determined because either they have not yet submitted their GIS for 2019 or their GIS were not yet uploaded in the SEC database. It is worth noting that the SEC has extended the deadlines for the submission of the GIS in 2020 due to COVID-19 pandemic. Based on the 1,158 lending companies with available 2019 Audited Financial Statements (AFS) in the SEC database, total gross revenue is recorded at PhP4.4 Billion. The total loan portfolio is in the sum of PhP7.9 Billion. Transactions on payday loans by lending companies that responded to the survey are 2,278,821 transactions, equating to around 43,823 transactions per entity. Total number of transactions conducted by covered persons is 81,830, equating to approximately 20,457 transactions per covered person. Total number of transactions conducted by non-covered persons is 2,196,991, equating to approximately 45,771 transactions per non-covered person. 83.3% (15 out of 18) of the covered persons surveyed for this risk assessment indicated that their transactions are simple whereas only three covered persons have indicated involvement in complex transactions where it might be difficult to determine the beneficial ownership. Majority of the non-covered persons responded to be involved in simple transactions. There were 2 non-covered persons who indicated to be involved in complex transactions whereas 32 non-covered persons have answered this question as 'not-applicable.' Products and Services Products and services of lending companies include personal loans, business loans, financial leasing of movable property, financial leasing of immovable property, and others (including agricultural loans, revolving credit line, etc.). Majority (71%) of the lending companies surveyed for this assessment use cash for disbursement of funds. 50% use domestic transfers ( e.g. , checks to borrowers' account). 39% conduct domestic online transfers to borrowers' bank account. Two covered persons use digital currency. One covered person highlighted the use of mobile payments. Repayment is done through banks, partner payment centres, remittance service providers, over-the-counter payments, or collection agents. Only a few lending companies have indicated to be allowing domestic and overseas third-party payments on behalf of their customers. Customer Types Total number of customers of lending companies surveyed for this risk assessment are 1,305,146, of which 261,187 are customers of covered persons and 1,043,959 are customers of non-covered persons. Lending companies appear to cater mostly to domestic individuals while a very few lending companies have non-resident customers. No trusts and other legal arrangements are reported to be the customers of the surveyed lending companies; no dealings with non-resident legal entities or arrangements as well. Twenty-eight (28%) of the covered persons ( i.e. , 5 out of 18) and 14.5% (7 out of 48) of non-covered persons have at least one domestic Politically exposed person (PEP) on their books, with 10.7% (7 entities) reporting to have at least 1 domestic PEP, 4.5% (3 entities) having 1-10 PEPs, and 3% (only 1 entity) as dealing with 400 or more domestic PEPs. One covered person and one non-covered person have foreign PEPs as their customers. Sixty-two (62%) of lending companies (including 9 covered persons and 32 non-covered persons) deal with clients with a net worth below PhP20 Million, whereas 6% ( i.e. , 2 covered persons and 2 non-covered persons) have customers with a net worth above PhP20 million. Country Risk Lending companies have very low exposure to non-resident customers and majority of the borrowers of lending companies are locally based. Only one covered person surveyed for this assessment has reported to have transactions involving foreign jurisdictions, which are limited to Hong Kong and Singapore. Operational Vulnerabilities Majority (94%) of covered persons conduct their transactions through banks. Only a small percentage (11%) of covered persons get involved in any transactions with MSBs. Cash is the prevalent method to conduct transactions by the covered persons. Eleven lending companies highlighted the use of cash in their transactions, with four covered persons using cash in 91% or more of the total value of their transactions. 19 non-covered persons used cash in all of their transactions; ten used cash in 91% or more of the total value of their transactions. Majority (28) of lending companies have indicated 'cash' as 'not-applicable' in their transactions. AML/CFT Systems and Controls Lending companies have not submitted any STRs to the AMLC for the sample period of this assessment. This is due to the fact that there are only a limited number of lending companies required to file STRs. Majority of lending companies licensed by the SEC are not covered persons and thus were not required to submit STRs and CTRs. The low level of STR reporting suggests that AML/CFT reporting mechanisms need to be strengthened to better detect financial crime and increase reporting to AMLC. Another major sectoral vulnerability that has been identified is the limited role of the AML/CFT supervisor as well lack of statistics and other information relating to ML/TF activities in this sub-sector. AMLC registration has increased in the past 3 years, although there has been a limited participation in the training events organized by the SEC/BSP/AMLC by the surveyed lending companies. Only one covered person has been examined by the regulating authority in the past 3 years out of 18 covered persons surveyed for this risk assessment. In 2020 the SEC has conducted off site and virtual due to COVID-19 examination of 9 lending companies including holding virtual meetings and interviews with the relevant officers. The entities with deficiencies noted were required to submit action plans with specific timelines on how to address the findings and noted deficiencies within thirty 30 days from receipt of the Compliance Audit Deficiency Notice (CADN). Some of the common AML/CFT deficiencies identified by the SEC included. Common AML/CFT Deficiencies Identified by the SEC during the Off-Site and Virtual Examinations of Lending Companies: No Active Board and Management Oversight No Institutional Risk Assessment Conducted No Institutional Risk Management No Risk Profiling of Customers Inadequate Know Your Client and Customer Due Diligence No Procedures and Policies for STR Inadequate Training and Dissemination Inadequate Fit and Proper Screening of Employees CONSEQUENCES ASSESSMENT The consequences of ML/TF in the sector are assessed as MEDIUM. Criminal and ML activity involving the financing companies and lending companies are not widespread or affecting large segments of the population , directly or indirectly or do not appear to occur on a regular basis, or supported by organized syndicates using sophisticated techniques. Criminal threat environment does not appear to be of such magnitude as to occupy prominence in the national consciousness and law enforcement records. Typologies in the use of financing companies and lending companies for ML/TF are rare , if any. The data gathered from LEAs, AMLC and other relevant government agencies are bereft of any indication that the likelihood of ML/TF activity and predicate crimes involving the financing companies and lending companies sector is high . A high likelihood does not appear evident from an assessment of the risk factors arising from the criminal threat environment and the vulnerabilities of the sector. The criminal and ML/TF activity involving the financing companies and lending companies sector noted appear to be relatively minimal . Risk posed by the crime threat environment in the country as a whole including those identified as sector specific to financing and lending companies appear to render them more exposed to ML/TF risk in view of the opportunities and areas in their operations that could be exploited including the lack of awareness and understanding of the risk to which the companies are exposed. ML activity can happen at different stages and financing companies and lending companies are more likely than not to be used during the layering or integration stages . The national and international security consequences of terrorist financing for financing companies and lending companies is assessed as medium-low , given the relatively low level of terrorism financing activity reported. Due to the number of suspicious transactions related to 'terrorism and conspiracy to terrorism' reported in the STRs in 2017, the financing companies and lending companies need to be constantly on guard against this threat, as undetected terrorism financing activity could have severe consequences . ACTION PLANS AND/OR MITIGATING MEASURES In light of the findings of the risk assessment, the following action plans and/or mitigating measures should be put in place at sector level to effectively combat the misuse of financing companies and lending companies for money laundering and terrorist financing. a. Extend the AML/CFT supervision of SEC/BSP to all SEC registered lending and financing companies within the sector. b. Develop regular reporting mechanisms and processes to collect adequate, accurate and up-to-date information and data from financing companies and lending companies relating to their business and processes. c. Develop and implement AML/CFT risk-based supervisory model, including risk profiling of financing companies and lending companies and regular off-site and on-site examinations. d. Conduct outreach activities, including seminars, workshops and conferences. e. Issue sectoral-specific AML/CFT guidance to financing companies and lending companies. f. Strengthen the coordination among the SEC, AMLC, BSP, other supervisors, LEAs, and other relevant government agencies in sharing of risk information and current trends and typologies involving the financing companies and lending companies sector. Footnotes 1. Note from the Publisher: Copied verbatim from the official document. Missing Footnote Text.