FATF 'gray list' exit: benefits and issues

The financial community welcomed the recent news that the Financial Action Task Force (FATF) removed the Philippines from its money laundering “gray list.”

- BENEL D. LAGUA

The benefits of this development are definitely welcome, but we also need to be aware that there are concerns raised by civil society organizations (CSOs) on allegations of state overreach in the counter-financing of terrorism (CFT) enforcement.

The FATF, an international policy-making body, monitors global efforts to combat financial crimes. When a country is gray-listed, it means the FATF recognizes that jurisdiction’s commitment to addressing deficiencies but also notes that the existing measures are inadequate or not effectively implemented. For the Philippines, its gray list inclusion stemmed from concerns over its capacity to prevent illicit financial flows, enforce regulations, and prosecute financial crimes effectively.

The Philippines was first gray-listed in the year 2000, and then again in June 2021. The reasons for this included the weak implementation of the Anti-Money Laundering Act (AMLA), lack of effective supervision of designated nonfinancial businesses and professions, insufficient beneficial ownership transparency, and poor prosecution and conviction rates in money laundering cases. While the Philippines had a legal framework in place, its enforcement, monitoring, and risk-based supervision mechanisms were lagging.

To be removed from the gray list, several reforms were implemented. The AMLA was amended in January 2021 to strengthen the Anti-Money Laundering Council’s powers. This included the authority to impose sanctions, conduct more rigorous investigations, and enforce the submission of suspicious transaction reports. The Philippines increased efforts in registering beneficial owners of corporations, thereby reducing the risks of shell companies being used for illicit finance.