Manila, March 17, 2003 -- The Bangko Sentral ng Pilipinas (BSP) is expected to push through with a plan to regulate money-changing companies after a big foreign exchange shop managed to elude the government's recent strict monitoring of currency speculators, a government source told the Inquirer.

A source said a non-bank money-changer avoided the government's strict auditing by opening a dollar deposit account that could not be accessed by regulators.

Now loosely regulated, there are about 1,000 foreign exchange shops operating in the country although only 200 of these are considered large.

The anti-money-laundering Financial Action Task Force had been urging the Philippines to regulate money shops anew on fears that these companies could be used as outlets for money laundering.

First brought up in late 2001, the BSP has yet to finalize the policy that would bring back the money changers under its watch two decades after these non-bank foreign exchange companies were left on their own.

BSP deputy governor Alberto Reyes said the central bank has to closely monitor the operations of money changers given the potential role they could play in foreign exchange speculation, which had led the peso to drop to a record low of 55.099 to the dollar last March 12.

"Banks and non-banks engaged in foreign exchange are more sophisticated now in hiding their dollar transactions. They could be using deposit accounts," Reyes said.

Speculation was identified as one of the factors that aggravated the peso's recent weakness. The BSP has vowed to come down hard on currency speculators.

Requiring the big money-shops to register and be licensed by the BSP would allow monetary authorities to take a closer look at their operations to help curb currency speculation and also to prevent money laundering.

Before the country liberalized its foreign exchange sector in 1983, money changers were policed by the central bank. These dollar-changing companies were required to get a license and maintain a certain level of capital.

After foreign exchange deregulation and relaxation of government capital controls in the 1980s, the central bank also stopped regulating the money changers although the BSP charter still provides the authority for the regulation of these dollar-changing units.

Discussions between the government and the Foreign Exchange Dealers of the Philippines are ongoing to determine the scope of again regulating the money-changing companies. The group has more than 200 members operating mostly in the Binondo and Ermita areas.

The central bank was alerted to the possibility that money changers could be an outlet for money laundering in October last year when somebody attempted to smuggle 20 million dollars out of the country through the Ninoy Aquino International Airport in late 2001.

Reported by: Sol Jose Vanzi

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