Challenges of FATF ‘gray list’ exit
More than three years after being placed on the “gray list” of the Financial Action Task Force (FATF), an organization of 40 countries that aims to prevent money laundering and terrorism financing, the Philippines was recently taken out of that roster.
The countries in that list “are the jurisdictions working closely with FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing.”
(As defined by the FATF, proliferation financing is the act of providing funds or financial services for the development and transshipment of nuclear, chemical or biological weapons.)
The cross-border financial transactions of the residents of a country in the list with other member countries are, among others, subject to tighter scrutiny to make sure they are not used as means to engage in the illegal activities mentioned.
That list is regularly monitored to check the progress of the countries in the list to the FATF’s anti-money laundering (AML) compliance structure.
Since the Philippines has millions of overseas workers who remit money to their families here, its inclusion in the list had put their remittances under more review, which had resulted in delay in funds transfer or higher transaction fees, or both.
The FATF website shows that, in the Asean region, Laos and Vietnam are in the list.
With the Philippines’ exit from that roster, our overseas workers would be able to enjoy lower remittance costs and, on the macro level, make the country more attractive to foreign investments as it will not be perceived as part of a global dirty money network.
Considering the obstacles that the past administrations had to hurdle to meet the FATF’s standards, in particular, persuading the lawmakers to enact more stringent AML laws, the country’s exit from that financial burden is a no mean feat.
But that is no reason for the regulatory authorities to ease up on the monitoring of companies engaged in banking, quasi-banking and financial intermediation services to make sure they do not run afoul with the FATF’s compliance measures.
Sadly, some government offices tend to have a ningas cogon attitude (or enthusiastic at the start, but later lose interest) in the enforcement or implementation of their regulatory duties and responsibilities.
After the hype and publicity over an action has died out, it’s back to the same old ways and routine until their attention is called to their lapses in implementation.
In the interim, the subjects of those actions simply lie low and resume their operations as soon as the opportunity presents itself.
With the expected ease in cross-border financial transactions, there is a strong possibility that some Filipinos who may be in cahoots with foreign elements may game the less strict transaction processes for unlawful purposes.
There is no dearth of lawyers or accountants who can spot loopholes or unintended cracks in the financial system that would allow their principal to engage in the activities proscribed by the FATF.
Recall how Philippine offshore gaming operators (Pogos) ran rings around our AML laws that enabled them to bring billions of pesos into the country to build and maintain their luxurious work and residential premises without attracting the attention of the regulatory authorities.
Had a Senate committee not discovered their illegal activities, the Pogos would probably still be riding high in the country and, along the way, continue to commit the heinous crimes they had committed.
No doubt, the removal of the Philippines from the FATF gray list is something to be happy about because it removed a stain from the country’s international financial reputation.
Whether or not it would eventually redound to the benefit of our overseas workers or make the country more attractive to foreign investments remains to be seen.
