Stuck in the gray list

While moving heaven and Earth to amend the Constitution ostensibly to attract more foreign investments, the government is taking its sweet time getting out of the so-called gray list of jurisdictions under increased monitoring for money laundering and counterterrorist financing.

Being on the gray list of the Paris-based global dirty money watchdog Financial Action Task Force makes it harder to do business in the Philippines. Consequent restrictions on cross-border transactions make it difficult to obtain credit and limit foreign direct investments. Remittances of overseas Filipino workers are also affected. Yet the country has been unable to get out of the FATF gray list since its inclusion in June 2021.

At the end of a two-day plenary in Paris last week, the FATF announced that the Philippines would remain on the gray list along with 24 other countries and jurisdictions. While noting “some positive progress” in the Philippine effort, the FATF wants two strategic deficiencies addressed with urgency. One is the money laundering and terrorist financing risk linked to casino junkets. Another is the weak investigation and prosecution of money laundering and terrorist financing cases.

The FATF also wants to see effective risk-based supervision of designated non-financial businesses and professions as well as enhancement and streamlining of law enforcement agencies’ access to beneficial ownership information, which must be accurate and up-to-date.

Deadlines for implementing action plans to address the strategic deficiencies expired in January 2023. But the Philippines, which has one the world’s strictest bank secrecy laws, has always had problems in meeting antimoney laundering standards set by the FATF. It took a long time for the country, for example, to include corruption and related offenses among the covered transactions under the Anti-Money Laundering Act.

There is a National AntiMoney Laundering / Counter-Terrorism Financing / Counter-Proliferation Financing Coordinating Committee to promote a unified approach among relevant agencies in addressing the deficiencies cited by the FATF. Yet the country continues to struggle to get out of the gray list. Some developments even go in the opposite direction, promoting secrecy rather than transparency in government activities. The quality of governance is among the key factors considered by foreign investors in picking destinations for their money. Meeting FATF requirements is a good indication of this factor.