The Paris-based Financial Action Task Force (FATF) has removed the Philippines from the grey list of global money-laundering destinations, a development the government expects will attract more foreign investment. The country was on the list for over three years.

“By upholding the highest standards of financial governance, we will attract more foreign direct investments and expand more trade partnerships that will help accelerate our economic growth,” Finance Secretary Ralph Recto said Saturday.

The Philippines was placed in the FATF grey list in June 2021.

The Anti-Money Laundering Council (AMLC) on Saturday announced the country’s exit from the grey list after it completed 18 requirements of the FATF.

These included stronger supervision of non-bank institutions such as casinos, property developers, law and accounting firms, and money transfer firms.

The others were investigations and closures of unregistered and illegal fund transfer operations, widespread information campaigns on money laundering, easier access to information for enforcement agencies, and stricter rules on cross-border activities at airports and seaports.

Corporate regulator Securities and Exchange Commission said the FATF action was prompted partly by reforms implemented to enhance financial integrity and transparency in the corporate sector.

SEC Chairperson Emilio B. Aquino, the longest-serving member of the Anti-Money Laundering Council (AMLC), highlighted the commission’s role in achieving the milestone development.

“When I became a member of the AMLC in 2018, the SEC stepped up and positioned itself at the forefront of our fight against money laundering and terrorist financing, recognizing the need for reforms to prevent the misuse of corporate vehicles in illicit activities,” Aquino said.

“A secure and stable financial system is integral to our vision of a highly sophisticated and globally competitive capital market and corporate sector. To gain the trust of Filipinos and foreigners alike to invest in or transact with corporations based in the Philippines, we must adhere to the highest standards for combating money laundering and the financing of terrorism and proliferation financing,” he added.

Push for a stronger framework

As a result of its inclusion in the FATF grey list, the country became vulnerable to financial crimes and illicit activities. This subjected cross-border financial transactions to and from the Philippines to higher costs and heightened scrutiny.

The FATF subsequently released an action plan to address AML/CFT concerns, including necessary reforms concerning beneficial ownership (BO) of entities, non-profit organizations (NPOs), and casino junkets in the country.

Among other things, the FATF urged the Philippines to enhance and streamline access of law enforcement authorities to BO information and to take steps to ensure that BO information was accurate and up-to-date; and to demonstrate that appropriate measures have been taken concerning the NPO sector without disrupting legitimate NPO activity.

Designated non-financial businesses and professions, along with Philippine financial institutions, including SEC-covered persons, were also mandated to adopt and implement AML/CTF/CPF policies to mitigate the country’s risk for ML/TF/PF abuse.

Accordingly, President Ferdinand R. Marcos Jr. on 2 January 2024 instituted a whole-of-nation approach to address FATF’s concerns, directing all government agencies to comply with all the remaining action plan items within the year to trigger the exit process.

The National Anti-Money Laundering, Counter-Terrorism Financing, and Counter-Proliferation Financing Coordinating Committee (NACC) headed by Executive Secretary Lucas P. Bersamin, as well as all agencies concerned, have since exhausted all measures in line with the President’s directive.

As early as 2019, the SEC mandated the declaration of the corporation’s beneficial owner through the General Information Sheet required to be submitted annually.

In 2021, the SEC prohibited the issuance and sale of bearer shares and bearer share warrants through SEC Memorandum Circular No. 1 to enhance transparency and prevent the misuse of corporations for illicit activities.

The SEC also implemented an amnesty program in 2023 that encouraged corporations to comply with their reportorial requirements through a waiver or reduction of penalties for late submission and non-compliance.

The reforms implemented by the SEC resulted in a significant increase in the compliance rate, from 26 percent in 2021 to 69 percent, regarding the BO information disclosure of active and registered companies.

Fewer restrictions on business deals

Consisting of 39 countries and the European Commission, the FATF sets international standards for governments in over 200 countries to prevent illegal money transfers used for multiple crimes, such as the drug trade, terrorism, human trafficking, and financial scams.

Removal from the FATF grey list and black list means Filipino institutions, banks, and other firms must comply with fewer requirements for doing business with foreign financial institutions and other businesses.

“It’s a seal of good housekeeping that strengthens public confidence in our financial system. This will directly benefit our remitting overseas Filipino workers, businesses, and the Filipino people,” Recto said.

The FATF conducted on-site evaluations on the 18 tasks from 20 to 22 January this year.

This was after President Marcos issued Executive Order 33 in July 2023, mobilizing more than 20 government agencies to hasten the implementation of the country’s anti-money laundering roadmap.

“This achievement is a result of strong cooperation within the government as well as the private sector. It also complements our ongoing efforts to make the financial system a stronger driver of sustainable growth,” Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said.

Moving forward, Recto said the Department of Finance is improving fiscal management to attract affordable loans that will support the Marcos administration’s ambitious development goals.

“With this momentum, our next goal is clear: a credit rating upgrade within the Marcos administration,” he said.

In the first eight months of 2021, the AMLC reported filing 85 criminal and civil cases for transactions totaling P1.31 billion linked to terrorism activities.

PAGCOR welcomes grey list exit

The Philippine Amusement and Gaming Corporation (PAGCOR) welcomed the country’s exit from the FATF grey list, emphasizing its commitment to strengthening regulations and monitoring the gaming industry.

PAGCOR chairman Alejandro Tengco emphasized that the exit will help attract foreign investments and assured the public of ongoing compliance with anti-money laundering rules.

PAGCOR’s efforts, led by its Anti-Money Laundering Supervision and Enforcement Department and Anti-Money Laundering Compliance Department, aim to prevent the country’s return to the grey list, he said.