Failing to exit the ‘grey list’

Following a review by the Financial Action Task Force (FATF) in June 2021, the Philippines was identified by the global money laundering and terrorism financing watchdog as a “jurisdiction under increased monitoring.” This means we have once again made it to the FATF’s “grey list.” Jurisdictions or countries in the grey list are those identified by the FATF to have strategic deficiencies in their systems to counter money laundering, terrorism, and proliferation financing.

The FATF expects countries in the grey list to complete agreed-upon action plans within a set timetable. While the FATF acknowledged in its June 2021 review the high-level political commitment and progress made by the Philippines on its action plans since 2019, it still decided to place the country under increased monitoring until the Philippines can complete the implementation of action plans to address 17 identified deficiencies.

The Philippine Anti-Money Laundering Council (AMLC) has said it is confident that the country will be able to exit the grey list in 2023. As part of the FATF’s monitoring of Philippine compliance, the body will be requiring the submission of reports in January, May, and September 2022 to show progress done in implementing anti-money laundering and anti-terrorism financing measures.

AMLC executive director Mel Georgie B. Racela said the action plans include increasing the employees of the AMLC’s Financial Intelligence Analysis Group and proving improvements in the requirement to share intelligence information with law enforcement agencies. More terrorist financing investigators will also be needed, as well as tightening measures to ensure that foreign currency declarations are followed in major seaports and airports. The AMLC is working with other agencies such as the Bureau of Customs, the Philippine National Police, and the Armed Forces of the Philippines in a whole-of-government approach to achieve compliance by January 2022, because the FATF has set a Feb. 1 deadline for the Philippines to show tangible progress.

Failure to exit from the grey list and exhibit progress can run the risk of the Philippines being reclassified as a High Risk Jurisdiction Subject and have a Call for Action against it, which is also known as being in the FATF “black list.” The Philippines used to be in the FATF black list from 2000 to 2005.

Under the grey list, the FATF does not call for the application of enhanced due diligence measures. Inclusion in the black list, on the other hand, usually results in the imposition of enhanced due diligence measures meant to counter money laundering, terrorism financing, and corruption that, at the same time, will negatively affect the local business environment and even overseas Filipinos. In their commentary published in the Inquirer Opinion section on Oct. 16, 2021, Geneve Guyano and Alex Panaguiton of the Makati Business Club noted the difficulties local businesses with foreign clients and suppliers and overseas Filipinos would face if the Philippines were to fail to get out of the grey list, because the additional requirements would raise the cost of remitting funds in and out of the country.

It goes without saying, therefore, that exiting the grey list should be a priority of the government, no matter who is in charge. If we go by the 2023 timeline set by the AMLC, it is a commitment that would need to be assumed by the incoming administration after the May 2022 elections. In the meantime, it falls on the present administration to ensure that progress is made between now and January 2022 so that the FATF remains convinced that adequate progress is being made. According to Central Bank Governor Benjamin Diokno, no legislation is needed to enable the Philippines to exit from the grey list; the Philippine government just needs to demonstrate the effective implementation of existing laws to address the 17 identified deficiencies. That means there should be no excuse to show less-than-satisfactory results when it is time once again to update the FATF on our progress early next year.

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Moira G. Gallaga served three Philippine presidents as presidential protocol officer, diplomatically posted to the Philippine Consulate General in Los Angeles and the Philippine Embassy in Washington, DC.