The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) has reported a significant enhancement in compliance across the sectors under its supervision, evidenced by a nearly 30% reduction in penalties, totaling P2.8 million for the fiscal year ending March 2024, down from P3.9 million in 2022. This authority oversees a wide array of entities, including insurance firms, non-bank lenders such as microlenders and pawn shops, capital markets, pension funds, asset managers, and virtual asset service providers like cryptocurrency exchanges.
The count of regulated entities climbed to 867 by March 2024, marking a 6% year-on-year growth, while their combined assets expanded by 7%, reaching P161 billion. As outlined in NBFIRA’s 2023–2024 annual report, enforcement actions increased slightly from 88 the previous year to 89, with a strategic pivot toward issuing warnings instead of imposing severe penalties like administrative fines and account cancellations.
The non-bank lending and insurance sectors accounted for the majority of enforcement actions, comprising 46% and 40% respectively. These sectors also lead the regulated landscape, with 407 non-bank lending entities and 251 insurance-related businesses as of March 2024. Enforcement actions in the non-bank lending sector rose from 33 in 2023 to 41 in 2024, driven by lapses such as the failure to submit statutory returns and non-compliant business activities. Conversely, penalties in the insurance sector slightly decreased from 39 to 36 over the same timeframe.
The insurance sector contributed the lion’s share of the P2.8 million in fines, with P2.6 million linked to breaches of Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) requirements. Common infractions included inadequate customer due diligence, poor transaction monitoring, and failure to report suspicious activities. NBFIRA highlighted recurring deficiencies in internal controls, staff training, and outdated AML/CFT policies among non-compliant entities.
The report noted that two entities were fined a cumulative P1.3 million for AML/CFT infractions in 2024, a decrease from P1.6 million across three entities in the preceding year. These penalties reflect NBFIRA’s intensified focus on combating financial crime and ensuring adherence to international standards by regulated entities.
NBFIRA utilizes a risk-based supervisory approach, urging regulated entities to proactively identify and mitigate risks. Despite the regulator’s collaborative posture, it has maintained a firm stance on non-compliance, employing measures ranging from warnings to freezing accounts and liquidations. Over the years, NBFIRA has levied hefty fines for offenses like operating without proper licenses and employing unqualified insurance agents.
While the regulator acknowledged substantial progress in compliance, it identified a few entities as “significantly non-compliant,” warranting further enforcement actions. These cases often involved persistent failures to meet fundamental compliance standards, including deficiencies in reporting frameworks and governance structures.
NBFIRA directors expressed optimism regarding ongoing improvements, noting that the increase in warnings issued indicates a reduction in severe violations. Nevertheless, they stressed the necessity of continued vigilance, especially in high-risk areas like AML/CFT compliance and the rapidly evolving virtual asset sector.
Looking ahead, NBFIRA plans to enhance its regulatory frameworks and deepen collaboration with stakeholders to support a more robust and resilient financial system. The authority is also expected to broaden its focus on emerging sectors, such as digital financial services and virtual assets, ensuring these industries align with global best practices. The annual report underscores NBFIRA’s dual role in fostering sectoral growth while safeguarding financial stability, as it continues to adapt to an increasingly intricate regulatory environment.
