Philippines on FATF’s Gray List Again

A Paris-based global organization, Financial Action Task Force (FATF) added the Philippines to its gray list once more since it failed to resolve strategic inadequacies in countering money laundering, terrorist, and proliferation financing in accordance with its 40+9 recommendations. Even after the passage of the 2020 Anti-Terrorism Act and revisions to the Anti-Money Laundering Act(AMLA), its inefficiency continued to take place in the country. Meanwhile, amendments to the Bank Deposit Secrecy Act are still awaiting.


The country's efforts to overcome the technical flaws noted by the Asia Pacific Group (APG) on money laundering during its mutual evaluation analysis in October 2019 failed to satisfy the FATF-International Cooperation Review Group (ICRG). Being placed on the gray list of the Paris-based watchdog implies higher inflation and processing fees, as well as increased scrutiny from financial companies.


Being on the gray list, according to Mel Georgie Racela, executive director of the AMLC Secretariat, would publicly identify the Philippines and its inhabitants as a threat to the international financial system. As a result of its addition, the Philippines will face increased scrutiny from regulators and financial institutions, raising the cost of doing business with Filipinos, delaying transaction processing, and impeding the country's path to an A credit rating, according to Racela.


The FATF, on the other hand, praised the Philippines for making progress on a number of mutual evaluation review recommendations for technical compliance and productivity, such as fixing technical inadequacies on focused financial sanctions. The Philippines was placed on the FATF's blacklist in 2000 due to its inability to prevent money laundering and track down individuals implicated in terrorism financing. Following the implementation of the AMLA, the FATF removed the Philippines from the list in February 2005. After failing to address flaws such as prohibiting money laundering and criminalizing the coverage of reporting organizations, the FATF put the Philippines to its gray list again in June 2012. In June 2013, the country was once again removed from the gray list. Now that it is back on the list, the Philippines must submit progress reports to the FATF three times a year. Malta, Pakistan, Haiti, and South Sudan are among the countries on the FATF's gray list. According to a Reuters report, Ghana was withdrawn after the government demonstrated progress.


'High-Level Political Commitment'

The Philippines has established a greater political effort to change with the FATF and APG toward the effective identification of action plans to reinforce the efficiency of its Anti-Money Laundering and Counter-Terrorism Financing measures, according to the Anti-Money Laundering Council (AMLC), chaired by Bangko Sentral ng Pilipinas Governor Benjamin Diokno.


The AMLC however stated that this setback does not imply that sanctions will be imposed. The FATF will only call on countries to apply countermeasures against the Philippines if the country fails to satisfy the requirements. As a result, all government agencies engaged should deliver expected outputs on their action plans, according to the AMLC. Through the assistance of all relevant government and law enforcement entities, the country's single financial intelligence unit was able to reduce the suggestions under the mutual evaluation review from 70 to 18 problems. It emphasized that the Philippine government and law enforcement agencies must follow the 18 action plans within the timeframes set forth in order for the country to be withdrawn from the gray list.


FAFT’s Recommendations and Next Steps

The FATF advised the Philippines to take a number of steps to fix its weaknesses. One, the Anti-Money Laundering watchdog stated that the Philippines must demonstrate that adequate risk-based supervision of designated non-financial enterprises and professions is taking place and that supervisors are employing AML/CFT procedures to limit the risks associated with casino junkets. Two, the FATF recommended that the country enact new registration procedures for money or value transfer services and that unregistered and illegitimate remittance firms face punishment. This would help guarantee that data is accurate and current, as well as streamline law enforcement agencies' access to beneficial ownership data.


Aside from that, the FATF said the Philippines needed to show an increase in the use of economic data, as well as an increase in money laundering investigations and convictions that were proportional to risk. This also means that the country must show an increase in the detection, investigation, and prosecution of terrorist financing instances, as well as demonstrating that necessary steps are taken in the non-profit sector, especially unlicensed entities.


Finally, the FATF suggested that the targeted financial sanctions system for both terrorism and proliferation financing be improved. The Philippines is currently upgrading its National Anti-Money Laundering and Counter-Terrorism Financing Strategy for 2018-2022 to include the ICRG plans of action in order to maintain a whole-of-government strategy.

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