The global anti-money laundering watchdog, the Paris-based Financial Action Task Force (FATF), has taken note of the Philippines' progress in adopting stronger measures against money laundering and terrorist financing in the latest mutual evaluation report (MER), part of efforts to be delisted from the “grey list”.
Based on the country’s third follow-up report (FUR) on its MER since the Philippines was placed under the FATF grey list on June 25, 2021 for serious Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) deficiencies, the FATF said the country has acted sufficiently to resolve some of the AML/CFT issues within the agreed timelines.
“Overall, the Philippines has made good progress in addressing the technical compliance deficiencies identified in its MER,” said FATF in the FUR published on Aug. 26, which came out on Saturday, Philippine time.
The Philippines’ latest MER is deemed “largely compliant” on two of 37 recommendations based on the 18 action plans necessary to delist the Philippines from the grey list. Being on the list means the Philippines is one of jurisdictions under closed monitoring by the FATF until these strategic flaws have been addressed.
The country currently has 37 FATF recommendations that are rated under four possible levels of technical compliance: compliant; largely compliant; partially compliant; and non-compliant. The Aug. 26 progress report contains the current ratings based on the follow-up re-ratings.
The FATF said that after reviewing the latest MER, the Philippines will stay in the so-called “enhanced follow-up” level and will continue to report back to the organization’s Asia/Pacific Group (APG) on Money Laundering to monitor its progress and to “strengthen its implementation of AML/CFT measures.”
To be taken out of the grey list, the country has committed to comply with 18 action plan items by January 2023. Progress reports are submitted to the FATF in three reporting cycles in a given year, or in January, May and September. The updated FUR was based on progress made up until February 1, 2022.
So far, the Philippines has resolved some of its AML/CFT problems and has made good progress in dealing with technical compliance deficiencies in the MER, according to the FATF.
Specifically, the FATF said it is largely compliant on two recommendations that the Philippines requested for re-ratings since these were previously rated as only partially complied.
The first recommendation or “Recommendation 28” which reported progress were the following: the licensing procedures of the Philippine Amusement Gaming Corp. or PAGCOR which covered boards of directors but not shareholders or beneficial owners; fit and proper framework for land-based casinos under the supervision of the Cagayan Economic Zone Authority (CEZA) and the Aurora Pacific Economic Zone and Freeport Authority (APECO); the issue on real estate agents that are not covered persons to any AML/CTF requirements; and a risk-based AML/CFT supervision framework to be established for casinos.
The other largely compliant recommendation or “Recommendation 32” which were previously only partially complied with, involved the Bureau of Customs (BOC) which FATF noted has an “implied authority” to acquire further information to detect false declaration of domestic and foreign currency, imports or exports.
In this case, the FATF noted previously that while BOC imposes penalties such as imprisonment which it deemed “dissuasive,” but said the fines are however neither dissuasive or proportionate. It added that “competent authorities were not clearly empowered to restrain currency and bearer negotiable instruments (BNIs) suspected of ML/TF or other predicate offences.”
Nonetheless, in the latest FUR, the FATF said issues around BOC has been “mostly met” including imposition of fines that were proportionate. Still, while it is now considered as largely compliant, the FATF said the improved fines “do not apply to the failure to declare, or the false declaration of BNIs of equivalent value, which do not appear to be goods for the purposes of the CMTA (Customs Modernization and Tariff Act).”
Since the remaining deficiencies that refer to Recommendation 32 are now referred to as “minor shortcoming” the FATF has re-rated this recommendation as largely compliant.
“(The) Philippines has made good progress in addressing the technical compliance deficiencies identified in its MER and has been re-rated as largely compliant for Recommendations 28 and 32. No Recommendations have changed since the Philippines’ last FUR. The Philippines’ next progress report is due 1 February 2023,” said the FATF.
Basically, with regards to Recommendation 28, the factors underlying the rerating are: for lawyers, accountants and real estate brokers, no ongoing criminal history checks (unless a complaint is received); for dealers in jewellery, precious stones or metals, no fit and proper framework to enter sector; administrative sanctions for non-compliance may not be dissuasive; APECO/CEZA risk-based supervision has not yet commenced; the risk-based supervision of other Designated Non-Financial Business and Professions sectors is only in the process of being implemented by the Anti Money Laundering Council (AMLC); the scope gap for casinos and lawyers/accountants.
Meantime, factors underlying the rerating for Recommendation 32 are: CMTA powers do not appear to apply to a failure to declare, or a false declaration of equivalent BNIs of $10,000 at the border; competent authorities at the border can only restrain foreign currency or BNI where AML/CFT or predicate offences are
suspected where there is a false declaration or the currency is already subject to forfeiture action; and pre-lodgement control orders only appear to apply to the importation of the local currency, not foreign currency or foreign currency denominated BNIs.
The country’s financial intelligence unit, the AMLC, said that as a grey-listed FATF, the Philippines “must improve its AML/CFT regime” and “removal from such list requires accomplishing the country’s action plan within the prescribed timeline.” The commitment to resolve deficiencies are contained in the MER, which is a country's assessment of its AML/CFT measures and its compliance. The July-August FUR is the third released by the FATF. The first two were September 2020 and September 2021. The MER was submitted in October 2019.
Before June 25, 2021, the last time the country was on the FATF watch list was in 2013. The Philippines has addressed the technical deficiencies with the AML/CTF laws such as the Anti-Terrorism Act of 2020 and amendments to the AMLA.