Philippines Nears Exit from FATF Gray List Amid Anti-Money Laundering Reforms

October 30, 2024 Philippines Industry Updates

The Philippines is on the verge of exiting the Financial Action Task Force’s (FATF) grey list, according to a recent statement from the Anti-Money Laundering Council (AMLC). This news comes as the FATF announced that the country has “substantially completed” its action plan aimed at combating money laundering and terrorism financing.

This declaration was made during the FATF’s October 2024 plenary, which saw participation from delegates representing over 200 countries and international organizations. Being placed on the gray list signifies that a country is under increased scrutiny for deficiencies in its anti-money laundering and counter-terrorism financing frameworks. The Philippines has been on this list since 2021, which has led to heightened monitoring and pressure to implement reforms.

The FATF has recognized the Philippines for enacting a comprehensive set of reforms. In total, the country has implemented 18 significant changes, highlighting its commitment to addressing concerns raised by the international watchdog. Among the key reforms are measures aimed at enhancing risk-based supervision of designated non-financial businesses and professions. This includes improved oversight of casino junkets, which have historically posed risks in money laundering scenarios.

Additional reforms include stricter registration requirements for money or value transfer services. The AMLC has focused on sanctioning unregistered and illegal remittance operators, ensuring that financial transactions comply with regulatory standards. Furthermore, the government has streamlined law enforcement access to beneficial ownership information, making it easier to track the origins of funds and verify that information is current and accurate.

The FATF has also noted an uptick in the use of financial intelligence. The Philippines has increased investigations and prosecutions related to money laundering, reflecting a proactive approach to enforcement. This includes intensified efforts to identify and prosecute terrorism financing cases, demonstrating the government’s commitment to tackling all facets of financial crime.

In addition to these measures, the Philippines is taking appropriate actions concerning non-profit organizations, especially unregistered entities. This initiative aims to ensure that legitimate activities are not disrupted while still addressing the potential for misuse in the sector.

The AMLC indicated that an upcoming visit from the FATF’s Asia/Pacific Group is scheduled for early 2025. This visit will serve to verify the sustainability of the reforms implemented by the Philippines. “This is the final step toward the country’s removal from the gray list,” the AMLC stated, underlining the significance of the impending evaluation.

The stakes are high for the Philippines. If the government fails to demonstrate adequate implementation of the FATF’s action plan, there is a risk of being placed on the FATF’s black list. This classification could result in severe restrictions on international financial transactions, which could have devastating impacts on the country’s economy.

The FATF said the Philippines has been able to address these 8 action plan items:

— Demonstrating effective risk-based supervision of Designated Non-Financial Business and Professions (DNFBP)
— Using anti-money laundering and counter-terrorism financing (AML/CTF) controls to mitigate risks associated with casino junket.
— Implementing new registration requirements for Money or Value Transfer Services (MVTS) and sanctions to unregistered and illegal remittance operators
— Compliance with enhanced law enforcement authorities’ access to beneficial ownership (BO) information, and keep the BO information accurate and up-to-date
— Using financial intelligence and increase in money laundering investigations and prosecutions; increase in the identification, investigation, and prosecution of terrorist financing (TF) cases
— Implementing appropriate measures for the non-profit organization (NPO) sector
— Enhancement of targeted financial sanctions framework for both TF and proliferation financing (PF).

Executive Secretary Lucas Bersamin expressed confidence in the reforms, calling the progress a testament to the hard work and coordination among various government agencies. He emphasized the importance of meeting FATF standards to protect the integrity of the Philippine financial system. “This milestone is a testament to the hard work and coordination across government agencies.”

“It reflects our strong commitment to meeting the FATF’s stringent standards and ensuring the long-term protection of our financial system. We are confident that this progress will be affirmed during the on-site visit,” pointed out Bersamin who is the chairperson of the National Anti-Money Laundering, Counter-Terrorism Financing and Counter-Proliferation Financing Coordinating Committee.