FATF: Philippines makes progress in drive vs dirty money

MANILA, Philippines — The Philippines has made notable progress in addressing the technical compliance deficiencies in its anti-money laundering/combating the financing of terrorism (AML/CFT) framework,  according to the regional affiliate of Paris-based global dirty money watchdog Financial Action Task Force (FATF).

The Asia Pacific Group on Money Laundering (APG) has decided to move the Philippines to enhanced follow-up list from the enhanced (expedited) list after completing the second follow-up on the country’s mutual evaluation report.

“In keeping with the APG third round procedures, the Philippines will move from enhanced (expedited) to enhanced follow-up, and will continue to report back to the APG on progress to strengthen its implementation of AML/CFT measures,” the APG said.

Those under the enhanced follow-up are countries subject to a more intensive process of follow-up due to significant deficiencies for technical compliance or effectiveness in their AML/CFT systems, while those under enhanced (expedited) are countries with very serious deficiencies.

The Philippines, through the Anti-Money Laundering Council (AMLC), earlier requested re-ratings for six of the recommendations made by the APG in its 2019 Mutual Evaluation Report, which was used to place the country in the gray list or list of jurisdictions under increased monitoring by the FATF on June 25.

“As a result of this progress, the Philippines has been re-rated on each of those recommendations to largely compliant,” the APG said.

These include ratings under the confiscation and provisional measures (Recommendation 4) to largely compliant as of February 2021 from partially compliant in October 2019, targeted financial sanctions related to terrorism and terrorist financing (Recommendation 6) to largely compliant from partially compliant, and targeted financial sanctions related to proliferation (Recommendation 7) to partially compliant from non-compliant.

The country was also able to improve its ratings under Recommendation 22  (Designated Non-Financial Businesses and Professions: Customer due diligence), Recommendation 23 (DNFBPs: Other measures) as well as Recommendation 24 (Transparency and beneficial ownership of legal persons) to largely compliant from partially compliant.

In the 22-page report, the APG said the additional legislative and regulatory measures address the majority of the shortcomings in the Philippines’ capacity to confiscate instruments and proceeds of crime and carry out provisional measures.

Likewise, it said the amended legal and regulatory measures, mechanisms and processes comprehensively address most of the shortcomings in the Philippines’ ability to implement targeted financial sanctions relating to terrorism and terrorist financing as well as weapons of mass destruction and its financing.

The APG said further amendments to Republic Act 9160 or the Anti-Money Laundering Act of 2001 as well as new regulatory instruments have addressed the majority of the deficiencies in the 2019 mutual evaluation review.

“The threshold for occasional transactions only impacts a small number of walk-in customers of land-based casinos at the time of this report, and is not weighted significantly in the analysis. Also, the scope gap in the definition on lawyers and accountants remains,” it said.

It said the remaining shortcomings are the exclusion under section 3 of AMLA that may lead to some lawyers and accountants being not subject to AML/CFT requirements as well as the absence of supervisory measures imposed to casinos for high-risk countries that warrant attention by the FATF or by the supervisory authorities.

The body also noted the new beneficial ownership measures by the Securities and Exchange Commission (SEC) are generally comprehensive for corporations and complement the enhanced use of and expanded provisions in the AMLA and its implementing rules and regulations.

In February last year, the Philippines also improved its rating under Recommendation 20 or reporting of suspicious transactions to largely compliant from partially compliant and Recommendation 29 or financial intelligence units to compliant from partially compliant.

However, the country’s rating under Recommendation 15 or new technologies was downgraded to partially compliant from compliant due primarily to the insufficient coverage of virtual asset service providers (VASPs) in the AML/CFT framework.

The APG noted the Philippines is already conducting a risk assessment on threats and vulnerabilities associated with VASPs and has now included exchanges and transfers as well as safekeeping and administration of virtual assets.

On Recommendation 22 pertaining to cash couriers rated as partially compliant, the APG said there are pending legislations to address the deficiencies such as improving the implementation of existing cross-border declaration system, increasing penalties for violations, and authorizing the Bureau of Customs (BOC) to restrain currencies and bearer of monetary instruments.

After being removed from the gray list in June 2013 and the watchlist in July 2017, the Philippines was reincluded in the FATF gray list on June 25 after the country failed to address the technical deficiencies raised by the APG.

AMLC chairman and Bangko Sentral ng Pilipinas Governor Benjamin Diokno is confident that the Philippines would be removed from the gray list  on or before January 2023.