Will the Philippines be removed from the FATF gray list soon?

For nearly 3 ½ years, the Philippines has been on the gray list of The Financial Action Task Force (FATF), which assessed the Southeast Asian country to have inadequate money-laundering and counterterrorism financing controls. Since then, the Philippines has been working to improve those controls so that it can be removed from the list, which is detrimental to the country’s business environment. Its next opportunity to be removed from the list will be in February 2025.

In recent years, the Philippines has some improvements addressing the strategic deficiencies that caused it to be placed on the gray list. These include taking some steps to boost its AML/CFT regime, notably in the non-profit organization sector and implementing supervision for targeted financial sanctions.

Further, in July, the Philippines announced plans to ban offshore gaming operators, known as POGOs, an industry that caters largely to Chinese gamblers and is believed to have significant ties to organized crime. President Ferdinand Marcos, in remarks published by Philippine media, said that POGOs disguised themselves as legitimate entities and were involved in crimes such as financial scams, financial scamming, money laundering, prostitution and human trafficking. “The grave abuse and disrespect to our system of laws must stop,” Marcos said.

FATF’s decision next February could largely come down to whether or not Manila can show that effective risk-based supervision of designated non-financial businesses and professional (DNFBPs) is occurring and that supervisors are using AML/CFT controls to mitigate risks associated with casino junkets. Further, FATF has previously called on the Philippines improve the access of law enforcement agencies to beneficial ownership information, show it is using financial intelligence more, and demonstrate an increase in money laundering and terrorism financing investigations and prosecutions.

For its part, the Philippine government has emphasized that it has addressed all 18 strategic deficiencies identified by FATF in June 2021. In a statement published during FATF’s plentary session held October 21-25, the watchdog said that the Philippines has completed its action plan to address deficiencies. FATF added that it would conduct an “on-site assessment” to verify that the implementation of AML/CFT reforms in the Philippines has begun and is being sustained and that there is adequate political commitment to ensure those reforms are properly implemented in the long term.

Philippine Executive Secretary Lucas Bersamin emphasized the government’s commitment to carrying out the reforms. “This milestone is a testament to the hard work and coordination across government agencies,” he said, adding, “It reflects our strong commitment to meeting the FATF’s stringent standards and ensuring the long-term protection of our financial system. We are confident that this progress will be affirmed during the on-site visit.”