Philippines Poised to Exit FATF Grey List with AML/CFT Reforms

The Philippines, through the efforts and support of the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP), is set to exit the Financial Action Task Force (FATF) grey list with reforms aimed at strengthening anti-money laundering and counter-terrorism financing (AML/CFT) measures.

What’s the significance: Exiting the grey list will improve the country’s international financial reputation, reduce financial transaction costs, and benefit overseas Filipino workers through smoother remittance processes.

The Big Picture

According to the SEC, since being added to the grey list in 2021, the Philippines has implemented comprehensive anti-money laundering and counter-terrorism financing reforms, working closely with other regulatory bodies and law enforcement agencies.

Key details: 

• FATF’s October 2024 plenary stated the Philippines “substantially completed” its action plan, pending an on-site visit for verification.
• SEC and BSP pledge ongoing audits, monitoring, and beneficial ownership registry initiatives to ensure compliance.
  • In separate  media releases:
    • The Commission shared commitment and existing efforts to sustain AML and CFT reforms.
    • BSP affirmed its commitment to helping the Philippines exit the FATF grey list by supporting the country’s AML/CFT reforms.
  • The regulatory bodies noted that exiting the grey list will improve cross-border financial services, benefiting Filipinos, particularly Overseas Filipino Workers (OFWs).

Reforms and Collaborations:

• The SEC led the enhancement of beneficial ownership transparency, strict reporting, and risk-based supervision.
  • Enhanced transparency through mandatory beneficial ownership declarations and banning bearer shares.
• SEC measures include digitalization, e-filing tools—Electronic Filing and Submission Tool (eFAST) and the Electronic Simplified Processing of Application for Registration of Company (eSPARC)—, and increased penalties.
  • The Commission noted that it improved compliance through a 2023 amnesty program and increased penalties, raising compliance rates from 30% to nearly 70%.
• The SEC emphasized that it developed a risk-based framework to manage NPO risks related to terrorism financing without disrupting legitimate activities.
  • Conducted compliance audits for NPOs and outreach activities, engaging over 113,000 stakeholders in seminars on good governance.
• BSP also contributed by strengthening AML/CFT supervision for financial institutions and money service businesses.
  • Last January, the central bank issued a memorandum clarifying Travel Rule requirements for Virtual Asset Service Providers (VASPs).

• SEC and BSP coordinated with AMLC and international partners like the United Nations for training and standards alignment.
• SEC engaged stakeholders through 138+ seminars/workshops and compliance audits for NPOs to prevent misuse for terrorism financing.

Key quote: 

“On our part, the SEC will continue investing in digitalizing and optimizing resources to ensure that the reforms we have implemented will be sustainable. We will also remain unwavering in our dedication to transparency and compliance, as we build on our gains and work alongside local and international partners to further strengthen our AML/CFT efforts.” 

Emilio B. Aquino, Chairperson, SEC

How it works:

FATF requires countries on its grey list to implement action plans addressing AML/CFT gaps. With substantial completion, an on-site visit will now confirm if the reforms are fully operational and sustainable.

• If the FATF is satisfied with the implementation, the country can then be removed from the grey list.

What is the FAFT Grey List:

Officially known as “Jurisdictions under Increased Monitoring,” includes countries collaborating with the FATF to rectify deficiencies in their AML and CFT systems. 

• Countries on this list are under heightened scrutiny and must implement specific action plans to address identified weaknesses, aiming to strengthen their AML/CFT measures and ultimately be removed from the list.
• Read more: The FATF Grey List and Its Implications for the Philippine Cryptocurrency Landscape

What’s next: The SEC aims to sustain AML/CFT reforms through continuous audits, beneficial ownership registries, and targeted financial sanctions, aligning with its 2023-2028 strategic plan.

Worth reading: Earlier this year, in an article contributed by BitShares Head of Business Development Henry Banayat, he noted that the Philippines must address key AML/CFT deficiencies to exit the FATF grey list, or risk reduced foreign investment, increased regulatory scrutiny, and complications in international transactions.

• Also read: What is the FATF Travel Rule on Cryptocurrency?

This article is published on BitPinas: Philippines Poised to Exit FATF Grey List with AML/CFT Reforms

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