FATF’s fourth virtual plenary ended on Friday, June 25, with the intergovernmental agency placing four jurisdictions under increased monitoring for strategic deficiencies in their anti-money laundering efforts. The Philippines — along with Haiti, Malta, and South Sudan — join 18 other countries on FATF’s gray list. Ghana was the lone jurisdiction to be taken off the list.
Jurisdictions subject to increased monitoring must actively work with FATF to make swift yet steady progress to address the gaps identified. They must submit progress reports throughout the year and meet certain milestones and deadlines. Otherwise, they risk being placed on FATF’s blacklist, which means an even higher level of scrutiny and, likely, economic sanctions.
Unfortunately, this isn’t the first time the Philippines has found itself on one of FATF’s lists. It was blacklisted from 2000 to 2005 — and faced several economic obstacles due to its more limited access to the global financial system.
Indeed, returning to the list is a fate the Philippines has tried to avoid. Following the release of FATF’s mutual evaluation report in 2019, which identified several gaps in the Philippines’ AML/CFT framework, the country has taken significant steps to shore up its controls. These include legislation giving the Anti-Money Laundering Council (AMLC) to impose financial sanctions on entities involved with weapons of mass destruction proliferation and aligning regulations around virtual asset service providers (VASPs) with FATF standards. Even so, many of these steps were taken days before a FATF-imposed deadline — hardly a proactive approach.
FATF recognized the progress the Philippines has made in addressing several of the agency’s recommendations. Yet recommendations around the regulation of non-financial businesses and professions (DNFBPs), casino junkets, remittance operators, and the NPO sector have not yet been sufficiently implemented.
In addition to monitoring progress on those, FATF plans to keep an eye on the Philippines’ approach to gathering and sharing information on ultimate beneficial owners. It will then look at how the Philippines’ law enforcement agencies use that information and other financial intelligence to investigate and prosecute money laundering offenses.
In a statement issued on June 26, the AMLC responded to FATF’s announcement, saying, “Given the recent identification of the Philippines as ‘Jurisdiction under Increased Monitoring’ with serious antimoney laundering/counterterrorism financing deficiencies, the relevant government and law enforcement agencies’ sustained pledge to implement the 18 action plans within the prescribed timelines will be essential to the country’s removal from such list.”
Whether the country sustains that pledge — and how long it will take — is the big question. Even so, placing the Philippines back on FATF’s gray list sends a clear message that the Philippines must do better. It also likely serves to put the Philippines on notice about dragging their feet on some of these reforms, perhaps ultimately providing the motivation needed to start kicking their AML/CFT efforts into high gear.