PHILIPPINES Law and Practice Contributed by: Kerwin K. Tan, Veronica S. Balbin and Jose Maria B. Buenagua, Tan Hassani and Counsels
If confidentiality, customer redress, or supervisory access cannot be assured, the BSP may order the bank to end the arrangement, change its terms, or use an alternate structure. For Insurer/Reinsurer Functions The Insurance Commission (IC) has issued a Circular Letter which provides for functions that cannot be out - sourced by an insurer/reinsurer as these are directly related to “doing or transacting insurance business”: • solicitation activities, which shall only be carried out by the insurer/reinsurer, licensed agents and/or brokers, except to the extent allowed by guidelines from the Insurance Commission; • the decision whether or not to undertake risk/s, which shall only be undertaken by the insurer/ reinsurer and/or licensed non-life company underwriter(s); • the decision whether or not to approve or reject an insurance/reinsurance claim, which shall only be undertaken by the insurer/reinsurer; and • loss adjustment, which shall only be undertaken by the insurer/reinsurer and/or licensed independent or public adjuster(s). Notwithstanding the foregoing, the insurer/reinsurer may engage advisory or consultancy services of a BPO provider in the performance of the aforemen - tioned functions or business processes. Currently, the IC allows outsourcing outside its non- delegable functions, subject to minimum regulatory controls. Permissible outsourced activities include support work for policy administration, accounting, customer support, claims documentation, IT opera - tions, analytics, and finance services. However, the IC mandates that the company remains ultimately responsible and accountable. Accordingly, its provider must be vetted as financially sound and competent, maintain compliance with IC standards, and ensure contracts preserve audit and access rights to the regulator. Personal data handling must also comply with the Data Privacy Act (DPA). Regarding outsourced agreements, the IC initially required pre-approval of BPO agreements in 2019, then removed pre-approval and shifted to an annual
reporting approach. The present rule is to file an annu - al report covering outsourcing agreements related to the conduct of insurance or reinsurance business, subject to examination. For Broker Dealers The Securities and Exchange Commission (SEC) issued a memorandum circular regulating outsourc - ing by broker dealers. Broker dealers can outsource back-office functions provided such broker dealers do not outsource: (i) material activities or (ii) any activ - ity that involves any interaction or direct contact with the clients of the broker dealer for the purpose of buying and/or selling securities or the solicitation of investments in securities, except in cases permitted under the Securities Regulation Code, the Anti-Mon - ey Laundering Act, as amended, or other law, rule or regulation. Further, clearing and settlement activities may only be outsourced to service providers who are authorised by SEC to conduct such activities. Such outsourced activities may further be subcon - tracted by the service provider provided (i) the prin - ciples and standards provided under such memo - randum circular shall likewise be applicable to the subcontractor; (ii) that such outsourcing is without prejudice to the right of the broker or dealer to prohibit any further subcontracting by the service provider; and (iii) that any further subcontracting shall not be implemented without prior notice to SEC. Foreign companies seeking to outsource to the Philip - pines should also be aware of any statutory restric - tions in their home countries that might impact the outsourcing process. 2.3 Restrictions on Data Processing or Data Security The Data Privacy Act of 2012 (DPA) governs all forms of personal information processing in the Philippines, setting out clear guidelines on when such processing is permissible. The processing of personal information is allowed under the following circumstances: • when the data subject has given his/her consent; • when processing personal information is necessary and is related to the fulfilment of a contract with the
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