The Bangko Sentral ng Pilipinas (BSP) is optimistic that the Philippines would not return to the list of countries identified as risks to the international financial system as it remains confident that amendments to the anti-money laundering law would be approved soon.
In a virtual briefing on Friday, Bangko Sentral Governor Benjamin Diokno recalled that the Financial Action Task Force’s (FATF) 2019 evaluation of the country saw gaps in its laws and regulations on anti-money laundering and counterterrorism financing.
FATF is the international policymaking body that sets standards and promotes the effective implementation of measures to combat money laundering and terrorism financing.
The Philippines is under a 12-month observation period by the FATF on money laundering, which was supposed to end in October, but was extended up to February 2021 in light of the coronavirus pandemic.
The Anti-Money Laundering Council (AMLC) has said the observation period is the last opportunity for the government to address deficiencies to avoid gray-listing.
According to Diokno, also the AMLC chairman, one of the FATF’s recommendations for the Philippines is to amend Republic Act 9160, or the “Anti-Money Laundering Act of 2001.” He said the government was already working to amend the law through Senate Bill 1412 and House Bill 6174.
“If any of the proposed amendments are not passed and implemented before February, the Philippines will be included in the FATF gray list,” the BSP chief warned.
But “we remain optimistic that gray listing can be averted, as no less than the President himself has certified the bills” as priority measures, he said.
The AMLC has said gray listing would have a negative impact on the reputation of the Philippine economy and the cost of doing business with its citizens, both as an individual and a juridical entity.
Countries currently on the gray list are the Bahamas, Botswana, Cambodia, Ghana, Iceland, Mongolia, Pakistan, Panama, Syria, Trinidad and Tobago, Yemen and Zimbabwe. Those on the so-called black list are Iran and North Korea.
Once the Philippine has been gray-listed, the European Union (EU) will require its members to immediately impose enhanced due diligence (EDD) on Filipino citizens and businesses that are transacting through EU channels. An EDD will entail additional costs and additional paperwork or justification for the subjected individual or entity.
“Additional costs and paperwork could push banks and financial institutions to do a cost-benefit analysis in determining whether or not to continue doing business. If costs outweigh the benefits, it could result to de-risking or de-banking,” AMLC said.
The AMLC also said these additional costs would be charged to Filipino citizens and businesses in the form of higher interest rates or processing fees. Additional paper work and justifications also mean delays in processing transactions.