Risk-based regulation of pawnshops, money service firms
The Bangko Sentral ng Pilipinas (BSP) said it is adopting a “smarter” approach in regulating money service businesses (MSB) and pawnshops by imposing stricter rules on big players with higher risk profile, while setting “simplified regulatory expectations” for smaller, lower-risk entities.
In its latest report on the Philippine financial system, the BSP said it is applying a “proportionate, risk-based approach” that aligns oversight with the size, complexity and risk profile of MSBs and pawnshops.
This is to ensure that the local financial system can stay safe from risks without putting too much regulatory burden on small players that need to grow.
“This means higher-risk or more complex entities receive heightened oversight and stricter compliance requirements, while smaller, lower-risk entities benefit from simplified regulatory expectations, avoiding undue regulatory burden,” the central bank said.
“This approach ensures that regulatory measures correspond to the risk each business poses to the sector and the broader financial system,” it added.
Diversity
Data showed there were 1,428 pawnshops and 723 MSBs regulated by the BSP as of end-2024. These entities collectively operate more than 31,000 units of head offices, branches and sub-agents.
The central bank noted that these businesses varied widely in size, complexity and risk exposure. That said, the enhanced supervisory framework seeks to address potential risks emanating from such a “diversity”.
At the same time, the BSP said that making regulations “adaptive and proportional” for pawnshops and MSBs could help authorities target complex financial networks that criminals may exploit to facilitate illicit flow of funds.
“The flexibility allows BSP to quickly adapt to emerging threats and vulnerabilities, such as those arising from technological advancements, online platforms and digital transactions,” the central bank said.
“This capability ensures that businesses facing new risks—such as online MSBs or pawnshops involved in virtual assets and other online transactions—are closely monitored,” it added.
Fraud bureau
Beyond regulations, financial institutions also have their own initiatives to fight risks like fraud.
CIBI Information Inc. (CIBI), the country’s first and only local credit bureau, officially launched the Fraud Bureau, a collaborative project among banks, fintechs and financial institutions to share data on potentially deceptive applicant activity.
The data would include a watchlist or blacklist information, as well as details from incoming applications and inquiries. By compiling resources, the Fraud Bureau could help financial firms detect potential fraudulent activities within the sector.
“This initiative aims to curb fraudulent activity within the country’s financial ecosystem by sharing data among key financial institutions, ultimately fostering greater trust and transparency across the industry,” CIBI said.
