Guidelines on Records Maintenance and Minimum Internal Control Standards

August 1, 2017

BSP MEMORANDUM NO. M-2017-024

 

Pursuant to Bangko Sentral ng Pilipinas (BSP) Circular No. 942 dated 20 January 2017 on the Amendments to Section 4511N of the Manual of Regulations for Non-Bank Financial Institutions — N Regulations, the following guidelines on records maintenance, and minimum internal control standards shall be observed by all non-bank Remittance and Transfer Companies (RTCs)/Money Changers (MCs)/Foreign Exchange Dealers (FXDs): HTcADC

I. Records Maintenance

The RTC/MC/FXD, collectively known as Money Service Business (MSB) operators shall ensure proper records maintenance, and shall conform to the Philippine Financial Reporting Standards/Philippine Accounting Standards. It shall maintain proper and adequate accounting records, which include reconciliation of due to/from head office/branches, if the MSB has several offices. It shall also ensure that all business transactions (cash and non-cash) are properly recorded and accounted for and reconciled with all relevant source documents (e.g., bank statement of accounts, official receipts, invoices, purchase orders, etc.). All pertinent records including the duplicate copies of receipts and other relevant documents/records for each money service transaction should be kept up-to-date, which support a proper audit trail.

The accounting period of the MSB shall be on the calendar year basis. The accounting records of MSB shall consist of records of original entry and books of final entry. The records of original entry shall consist of remittance and/or money changing tickets, official receipts, vouchers and other supporting documents. The books of final entry shall consist of the general and subsidiary ledgers.

Where an MSB outsources its accounting function to a third party, the Board of Directors/Owner shall remain ultimately responsible in ensuring that the accounts reflected on its financial statements are proper and fairly presented.

For the purpose of this Memorandum, the MSB records, ledgers, books and documents (including those in electronic media) shall:

1. be maintained and safely stored for five (5) years from the date of transaction;

2 have hard and/or soft backup copy to allow reconstruction of records in case of loss or destruction due to fire and other fortuitous events; and

3. be made available for BSP examination upon request.

Refusal to permit examination shall include any act of refusing to present the pertinent MSB's record upon request by any duly authorized BSP officer/examiner. These may include, but not limited to the following actions or inactions: (i) refusal to permit access to its records, ledgers, registers, books or documents; (ii) failure to submit the requested documents, and (iii) delay of MSBs in the submission of information, data and documents without justifiable reasons and explanation. CAIHTE

II. Minimum Internal Control Standards

A. Establishment of Written Policies and Procedures

The Board of Directors/Owner of MSBs shall establish written internal policies and procedures commensurate to the size and complexity of its business operations. MSBs are expected to maintain an Operations Manual which shall include, among others, the following key features:

1. Standard operating procedures for the conduct of money service operations.

2. Policies and procedures of the RTC on the accreditation and delisting of its Remittance Sub-agents (RSAs). RTC is expected to include in the said policies and procedures, the following:

a. Conduct of appropriate review to assess the capability of an RSA to perform the remittance service to be contracted;

b. Regular monitoring and periodic testing and review of RSA's compliance with the agency/remittance agreement, and performance in carrying out money service business activities;

c. Grounds and procedures on the termination of the agency/remittance agreement;

d. Standards of professional ethics and conduct to be observed by the RSA in the conduct of remittance transactions; and

e. Mechanism for resolving disputes between the RTC and its RSAs.

3. Mechanism on handling consumer complaints.

4. Policies on branch/RSA oversight which include, among others, the procedures to support reconciliation and consolidation of business transactions on its branches to ensure that all business transactions undertaken by the MSBs are properly captured.

5. Policies on the recruitment, selection and retention of employees.

B. Minimum Internal Control Measures

The MSBs shall adopt adequate and effective internal control measures to safeguard the assets of the MSB. In this regard, MSB shall ensure that:

1. There is proper segregation of duties and functions for critical operational functions, including cash handling and record keeping, to prevent the likelihood of mismanagement or fraud. The said duties and functions of employees must be clearly defined, understood and documented. aScITE

2. No individual shall have complete authority and responsibility for handling all phases of any transaction from beginning to end, without some check or balance from some part of the organization. In addition, no employee shall also be permitted to process a transaction wherein the said employee is either a beneficiary/remitter or buyer/seller of currency.

3. The following are the forms that shall be number-controlled:

a. Official receipts;

b. Disbursement/expense vouchers; and

c. Application to Sell/Purchase Foreign Currency (Annex A).

4. The following shall be under joint custody: 1

a. Cash on hand or in vault;

b. Vault door and safe combinations; and

c. All accountable forms.

5. The work of one (1) employee is to be verified by a second employee to ensure that the transactions is properly authorized, recorded and settled (i.e., dual control). The routine and completion of each transaction shall involve at least two (2) employees.

6. Adequate controls are in place to protect key information and records maintained in the system, and to prevent access by any unauthorized party.

7. Cash including foreign-currency denominated and other vital record shall be kept inside the vault or safe.

For this purpose, an MSB's vault, that is, its walls, ceiling and floors shall be made of steel-reinforced concrete or such other equally safe materials/specification. It should also be sufficiently heavy or be securely anchored to the floor of the premises and its door/s shall be made of steel or other drill- and torch-resistant materials.

8. Robust recruitment policies are in place which include, but not limited to, conduct of extensive background checking of persons intended to be assigned to handle cash. More so, frequent follow-up checking after their employment shall also be made.

9. Employees are competent and well-trained in carrying out their functions to ensure professional business conduct and compliance with relevant laws, rules, and regulations in undertaking money service activities.

10. All remittance and/or foreign exchange transactions shall be conducted only at the entity's principal place of business and other registered branches. DETACa

C. Internal Control Procedures

The following minimum internal control procedures shall be observed by all MSB, if applicable:

1. Official receipts, in case of sales, and other accountable forms, shall be issued in numerical order as evidence of the MSB transactions.

2. All foreign exchange transactions shall be supported by Application to Sell/Purchase Foreign Currency.

3. The amount of foreign currencies sold shall be indicated in the corresponding official receipt both in words and in figures. The staff serving the particular transaction as well as the person buying/selling foreign currency shall sign in their usual signatures on the receipt.

4. A daily record of foreign exchange transactions shall be maintained and all foreign exchange sale and purchase transactions shall be posted chronologically.

5. All copies of cancelled receipts shall be marked and stamped "CANCELLED" for internal control purposes.

For guidance and compliance.

 

(SGD.) CHUCHI G. FONACIERDeputy Governor

 

ANNEX A

 

Application to Sell/Purchase Foreign Currency

Footnotes

1.Joint custody shall mean the processing of transactions in the presence of and under the direct observation of a second person. Both persons shall be equally accountable for the physical protection of the items and records involved.