Way out of FATF ‘grey list’

The government has finally manifested a high-level political commitment to make the Philippines fully compliant with global standards on preventing money laundering and terrorist financing. Last Oct. 16, President Marcos issued Memorandum Circular (MC) No. 37 ordering concerned government agencies, state-owned corporations, and local government units to speed up the implementation of strategies to combat these illegal activities in the country. It specifically cited the “urgent” need to implement a blueprint called the National Anti-Money Laundering, Counter-Terrorism Financing and Counter-Proliferation Financing Strategy (NACS) 2023-2027.

This followed the move of the Paris-based global money laundering and terrorist financing watchdog Financial Action Task Force (FATF) to keep the country under its “grey list,” or jurisdictions under increased monitoring, after the Philippines failed to address deficiencies as of the January 2023 deadline. The country has been on this list since 2021. Last June, the FATF said the Philippines remains under the grey list as it has yet to address eight out of the 18 deficiencies in controlling anti-money laundering and combating the financing of terrorism and was given a year or until January 2024 to act on these gaps.

Among the remaining deficiencies cited by the FATF is that law enforcement agency objectives were focused on drugs and corruption, and thus did not fully reflect financial crime risks. It also cited insufficient terrorist-financing prosecutions, pointing out that authorities focused on prosecuting terrorist-financing predicate offenses and neglected the main terrorist-financing crimes. It added that there was no targeted financial sanctions framework against proliferation financing, which refers to the act of providing funds or financial services to activities linked to nuclear, chemical, or biological weapons. In January this year, then Bangko Sentral ng Pilipinas Governor Felipe Medalla, who chaired the Anti-Money Laundering Council (AMLC), noted that while the FATF cited gains in legislation against money laundering and terrorist financing in the Philippines, it noted the lack of action on easing the bank secrecy law, as well as on the low number of cases filed against violators of anti-money laundering and terrorist financing and their eventual conviction.

The FATF then recommended 18 “action plan items” the government must implement by January next year to exit the grey list. Among these are the supervision of covered persons; access to beneficial ownership information; enhancement in money laundering and financial investigations, prosecutions, and confiscations; enforcement of cross-border declarations, use of targeted financial actions in terrorism, terrorism financing and proliferation financing, and risk-based measures to protect nonprofit organizations.

Thus, on July 4, Mr. Marcos issued Executive Order No. 33 adopting the NACS 2023-2027 to enable the Philippines to address the FATF requirements. For instance, it revised the expired NACS for 2018-2022 and included a counter-proliferation financing (CPF) strategy to answer the FATF’s urgent call to implement such measures. It also restructured the National Anti-Money Laundering/Combating the Financing of Terrorism Coordinating Committee (NACC) by adding the National Intelligence Coordinating Agency as a member and granted it new powers to address the FATF’s call for enhanced financial intelligence to support law enforcement investigations on money laundering and terrorism financing.

In an effort to meet the January 2024 deadline, MC 37 now puts into action EO 33 by requiring all agency heads to review and assess their deliverables under the action plan, assign focal persons to complete the deliverables by Nov. 30, and establish a mechanism to monitor the progress of each deliverable. The NACC Secretariat was also directed to furnish all concerned agencies with the respective deliverables and office targets under the action plan. The memorandum tasked the AMLC to submit to the Office of the Executive Secretary a comprehensive report on the status of the implementation of the NACS 2023-2027 on or before Dec. 8.

Government agencies must act fast as the Philippines has about three months to meet the FATF deadline. Getting out of the grey list is also important for Filipino individuals and entities in their financial dealings with foreign agencies and institutions. While being on the grey list does not merit sanctions, some Philippine individuals and companies have reported unnecessary due diligence requirements that delay their legitimate foreign financial transactions.

The Philippines has been in and out of the FATF list of countries not fully compliant with global standards to fight money laundering and terrorist financing and it must now demonstrate it is serious in undertaking the measures through MC 37. Similarly, Congress must do its part and pass the long-languishing bill easing the bank secrecy law to once and for all address a number of the gaps cited by the FATF.