PH Faces FATF Blacklist Prospects For Gaps In Combatting Money Laundering

The Philippines, currently teetering on the edge of the grey list of the Financial Action Task Force (FATF), the global body tasked with monitoring money laundering operations,  is staring down the barrel of a blacklist. 

The government must act swiftly to close the loopholes in its AML framework and strengthen oversight mechanisms to avoid the harsh consequences of an FATF blacklist designation. I Photo: FATF

Recent revelations from the House of Representatives' Quad Committee (Quad Comm) hearings on illegal Philippine Offshore Gaming Operators (POGOs) have exposed significant gaps in the country's financial controls.

The hearings, led by Surigao Representative Ace Barbers, uncovered serious concerns:

• Non-compliance by banks: Several banks were found to have accepted billions of pesos in deposits without adequately verifying the source of the funds, failing to report these transactions to the Anti-Money Laundering Council (AMLC).

  
  

  This lack of oversight opens the door for potentially illicit funds, including those from illegal activities such as drug trafficking, to be laundered through the Philippine financial system.

  
  

• Suspicious withdrawals: The Quad Comm identified instances where banks made large withdrawals immediately after deposits were revealed during the hearings, raising further red flags about the integrity of the financial system.

  
  

• Industry resistance: The Bankers Association of the Philippines (BAP) is reportedly trying to dissuade further investigations into the role of banks in accepting these questionable deposits, creating tension between the banking sector and regulators.

The consequences of the Philippines being blacklisted by the FATF are far-reaching. If the country is placed on the blacklist, it could face:

• Financial transaction restrictions: International financial institutions would likely impose stricter checks, resulting in delays and increased costs for Philippine-based transactions.

  
  

• Remittance disruptions: Overseas Filipino workers (OFWs) could see their remittances delayed or blocked, which would directly affect the Philippine economy, given its reliance on remittances as a significant source of foreign exchange.

  
  

• Reputational damage: Being blacklisted would severely tarnish the Philippines' standing as a reliable financial partner, deterring foreign investors and stifling economic growth.

Manila Representative Bishop Benny Abante, the Quad Comm co-chair, also highlighted that three major banks may be summoned to future hearings due to their potential violations of AML regulations.

During a forum organized by the Monday Circle at the Westin Hotel, Rep. Abante mentioned that the committee had learned of massive withdrawals—totaling billions—taking place the day after certain bank deposits were made public in the hearings.

The Philippines is now at a critical juncture.

The government must act swiftly to close the loopholes in its AML framework and strengthen oversight mechanisms to avoid the harsh consequences of an FATF blacklist designation.

Failure to address these vulnerabilities could destabilize the financial system and undermine the country’s economic prospects.