Global watchdog checks Philippine compliance with anti-money laundering standards

MANILA, Philippines — A global watchdog is set to evaluate the compliance of the Philippines with international anti-money laundering and combating the financing of terrorism (AML/CFT) standards.

Malacañang has tasked the Anti-Money Laundering Council (AMLC) to lead the preparation of the third round of mutual evaluations to be undertaken by the Asia Pacific Group (APG) on money laundering this year to gauge the country’s levels of compliance.

The review consists of two phases, namely, the technical compliance assessment and the effectiveness assessment.

The first phase involves submission of the report of technical compliance by next month, which is intended to check whether the existing laws, regulations, legal issuances, and enforceable means comply with the Financial Action Task Force (FATF) standards and criteria.

There are four possible levels of compliance: compliant, largely compliant, partially compliant and non-compliant.

The second phase includes turning in the report on the effectiveness of the country’s existing AML/CFT system in July.

The APG mutual evaluations team consisting of legal, financial, regulatory, FIU, and law enforcement experts will visit the country in November to validate the report through a series of interviews with local supervisors, government and law enforcement agencies and private stakeholders concerned.

The results of the third evaluation would be deliberated upon and published in 2019.

Mel Georgie Racela, executive director of the AMLC Secretariat, said the Philippines needs to show it conforms to international standards on AML/CFT.

“Surpassing the mutual evaluations requires not only narrating, but also showing that the country conforms to international standards and that the systems in place achieve their purpose. Show and tell, as the APG Secretariat has mentioned,” he said.

Racela said the review system among APG members is about intensifying the world’s fight against ML/TF through cooperation and commitment across borders and across cultures.

“The mutual evaluations, however, is not about the AMLC or any government agency. It’s about the Philippines. Maintaining a suitable investment climate is intimately connected to preserving the integrity of the financial system, and the country’s respective agencies can contribute in a very tangible way in this regard,” he said.

Last year, the AMLC led the second National Risk Assessment (NRA) Report, covering the years 2015 and 2016. It evaluated the overall threat and effectiveness of the country’s AML/CFT mechanisms, and the report would be one of the instruments to be assessed during the mutual evaluations process.

The Philippines has come a long way from the second mutual evaluations back in 2009.

In 2013, the country was removed from the gray list of the FATF’s International Cooperation Review Group (ICRG), as most of the deficiencies identified in the second mutual evaluations have been addressed, such as the passage of Republic Act 10168 or the Terrorism Financing Prevention and Suppression Act of 2012. In addition, the passage of RA 10365 strengthened the Anti-Money Laundering Act of 2001 (AMLA), as amended, with additional predicate offenses in accordance with FATF-designated categories of offenses.

A poor rating in the mutual evaluation would put the country back on the ICRG’s “monitored jurisdictions,” deeming the Philippines as a high-risk jurisdiction.

Consequently, this will lead to additional scrutiny from regulators and financial institutions that discourage trade and investment and increase the cost of doing business.

Restrictions, such as limits to the amount of cross-border transactions with the Philippines, may be imposed. Remittance transaction fees, for example, would rise, and for overseas Filipinos, this would mean less money intended for the basic needs of their families back home.

The outcome of the mutual evaluations could also reshape the country’s financial and economic landscape through the adoption of responsive and effective policies that are based on reliable data to combat ML/TF.