Investor sentiment likely to improve as Philippines is removed from ‘gray list’

The Philippines’ exit from the Financial Action Task Force’s (FATF) “gray list” is seen to improve investor sentiment, but analysts noted that continued reforms are necessary to sustain progress.

The FATF on Friday removed the Philippines from its list of jurisdictions under increased monitoring for “dirty money” following a “successful” on-site visit.

BSP Governor Eli M. Remolona, Jr. said in a text message that the Philippines’ removal from the FATF’s gray list will “help our overseas Filipino workers (OFWs) and foster more investment in our economy.”

“It also complements our ongoing efforts to make the financial system a stronger driver of sustainable growth,” he added.

Mr. Remolona attended the FATF Plenary and Working Group Meetings that took place in Paris, France from Feb. 17 to Feb. 21.

“Indeed, the Philippines came out of our gray list. They showed our members that they have completed in full the action plan,” FATF President Elisa de Anda Madrazo said at a press conference late on Friday.

The Philippines was on the FATF’s gray list for over three years or since June 2021.

The dirty money watchdog noted the Philippines’ “positive progress in addressing the strategic anti-money laundering and countering the financing of terrorism and proliferation financing (AML/CFT/CPF) deficiencies previously identified during their mutual evaluations.”

“The Philippines has completed their Action Plan to resolve the identified strategic deficiencies within agreed timeframes and will no longer be subject to the FATF’s increased monitoring process,” it said.

Finance Secretary Ralph G. Recto said in a statement that the removal of the Philippines from the gray list is a “seal of good housekeeping that strengthens public confidence in our financial system.”

“By upholding the highest standards of financial governance, we will attract more foreign direct investments and expand more trade partnerships that will help accelerate economic growth,” he said.

This would also support the government’s push to achieve an A-credit rating, Mr. Recto added.

The Anti-Money Laundering Council (AMLC) said the exit from the gray list will “facilitate faster and lower-cost cross-border transactions, reduce compliance barriers, and enhance financial transparency.”

Being part of the gray list for the past years has been a “burdensome process for banks and other financial institutions,” AMLC said.

“This process discourages correspondent banking relationships and international financial flows into the country. The exit will reduce international fund transfer requirements, benefiting Filipino individuals and businesses.”

The AMLC also said that the gray list status had hindered other countries from doing business with the Philippines.

“Moreover, even prior to the gray-listing, some foreign regulators were already imposing stringent requirements or fines on financial institutions dealing with entities in the Philippines and other countries deemed to have weak anti-dirty money regimes.”

“This prompted some banks to just avoid doing business with entities in those countries rather than managing possible money laundering or terrorist financing risks. The FATF decision may prompt foreign banks to review and resume their business relationship and transactions with Philippine financial entities.”

President Ferdinand R. Marcos, Jr. last year directed all concerned agencies to work on efforts to exit the list by October.

In July, Malacañang issued an executive order mandating all government offices to adopt the National Anti-Money Laundering, Counter-Terrorism Financing, and Counter-Proliferation Financing Strategy 2023-2027.

“With our exit from the FATF gray list, we are optimistic that the international community will see the Philippines as an even more attractive destination for business and investment,” Securities and Exchange Commission (SEC) Chairperson Emilio B. Aquino said.

Chester B. Cabalza, founding president of Manila-based International Development and Security Cooperation, said that this is a “celebratory moment” for the country.

“As an aspiring upper middle-income country, such transformation will give it more credibility as an investment destination in the region without fear that our financial buoyancy comes from dirty money,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said this would increase investor confidence in the Philippines.

“The Philippines would save more processing time and also save on transaction costs, a more desirable scenario if transactions of the country with the rest of the world move with greater ease,” he added.

FATF’s Ms. Madrazo had also noted the Philippines’ efforts “in combating the risk of dirty money running through the casinos.”

The Philippine Amusement and Gaming Corp. (PAGCOR) said it will continue to strengthen regulations and strictly monitor the local gaming industry.

“We also commit to sustain the fight against money laundering and terrorist financing in the entire Philippine gaming industry, including our online gaming operators, land-based casinos and junket operators,” PAGCOR Chairman and Chief Executive Officer Alejandro H. Tengco said.

MOVING FORWARD

However, the FATF said it will be crucial for the Philippines to sustain the measures on strengthening AML/CFT regimes.

“The FATF encourages the Philippines to continue its work in ensuring that its CFT measures are appropriately applied, particularly the identification and prosecution of TF cases, and are neither discouraging nor disrupting legitimate nonprofit organization activity,” it said.

Ms. Madrazo also said the Philippines will face a new assessment in 2027.

“That will be an opportunity for the FATF to verify that the measures are sustained and still in place,” she added.

For its part, the AMLC said that it is committed to “ensuring long-term compliance with international standards.”

Bienvenido S. Oplas, Jr., president of a research consultancy and of the Minimal Government Thinkers think tank, said the Philippines should continue to clamp down on illegal trade, which is a channel for dirty money.

“Illicit trade in tobacco, oil, jewelries, etc., this is a big source of money laundering. The government should crack them down,” he said.

Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said the government must accompany reforms with other measures to better attract investments.

“While exiting the FATF gray list removes a major barrier to investments, the Philippines must compete on its strengths, such as its young workforce, service-driven economy, and tourism potential,” he said.

“Regional competitors are also aggressively courting investors, so policy consistency, infrastructure upgrades, and targeted investment promotions will be critical,” he added.

SAFEGUARDS SOUGHT

Meanwhile, Jose Enrique “Sonny” A. Africa, executive director at think tank IBON Foundation, said there needs to be “stronger safeguards to mitigate the heightened risk of continued erosion of civic and democratic space.”

“The FATF itself nominally calls for a targeted risk-based approach — the government should be challenged to uphold the spirit of this with transparent data-driven risk assessments and with sanctions governed by due process with clear judicial oversight,” Mr. Africa said.

The FATF in its statement said that the Philippines’ continued measures should not impede on legitimate nonprofit activities.

“Executive misapplication has already been checked with so-called terrorist financing cases motu proprio dismissed for insufficiency of evidence and no probable cause at least thrice by the courts,” Mr. Africa said.

He said that the government should “stop using AML/CFT as political tools to suppress activism and use them against actual financial crimes.”

“It should stop freezing assets of NGOs and individual activists with trumped-up terrorism financing accusations and redirect enforcement towards systemic financial crimes including those committed by politically connected individuals.”

In 2002, the FATF blacklisted the Philippines for having no legal anti-money laundering framework. It was removed from the blacklist a year later after the passage of the Anti-Money Laundering Act.

Source: Business World

Corruption and education are top concerns of business executives

Corruption, education, and dealing with local government units (LGUs) are top concerns for businesses this year, according to the Management Association of the Philippines (MAP).

Speaking at the business group’s inaugural meeting yesterday, MAP president Alfredo Panlilio said a survey conducted among members in the fourth quarter last year showed corruption as the top concern of businesses for 2025.

Other concerns identified by MAP members in the survey are education, the economy, ease of doing business, climate change, cybersecurity, and dealing with LGUs.

Panlilio said concerns about dealing with LGUs involve the delays in issuance of permits to undertake projects, including those in the telecommunications and power sectors.

To address the concerns, he said this year’s board has set four main thrusts that will guide the group’s activities. These are member engagement, country competitiveness, ESG (environmental, social, and governance) shared prosperity, and investing in the youth.

“To address corruption and ease of doing business, we will continue to participate actively in the programs of the Anti-Red Tape Authority or ARTA,” he said.

In terms of member engagement, he said MAP’s general membership meetings would cover issues that are relevant and beneficial to members and the economy.

On country competitiveness, he said MAP would continue to push for policy reforms that will eliminate corruption, improve the ease of doing business, ensure food security through agricultural productivity, and sustain an enabling business environment for both local and foreign investors.

“The aspiration is to attract greater and more diverse job-creating investments for more Filipinos to be gainfully employed,” he said.

When it comes to the ESG and shared prosperity thrust, he said MAP would continue to promote sustainable practices, ethical leadership, and inclusive growth to create long-term value for members and all stakeholders.

“We will continue pushing for the discourse and activities to champion responsible business, uplift communities, and contribute to a resilient and equitable future for the Philippines,” he said.

He said MAP would also continue its campaign against malnutrition and child stunting in line with the thrust to invest in the youth.

The business group will also continue efforts to urge both the government and private sector to pursue relevant education, health, and wellness programs, particularly for the youth.

“The objective is for the youth to become productive members of society, with competitive skills and capacity that will ensure a progressive economy of the future,” Panlilio said.

In addition to the four main thrusts, he said MAP would pursue other advocacies and programs aimed at helping businesses adapt to developments in the domestic and global landscape.

Source: Philstar

Financial crimes top concern for Filipinos

A leading global analytics software firm recently unveiled its latest global consumer fraud research, shedding light on Filipinos' ongoing apprehension regarding real-time payment scams amid the growing adoption of new, convenient, fast payment channels.

According to the study, the primary worry for Filipinos remains the risk of being tricked into sending money to criminals (35 percent), which exposes individuals to instant, irrevocable losses rarely eligible for reimbursement.

Additionally, concerns about identity theft persist, with over 23 percent of Filipinos citing it as their top financial crime concern. This type of fraud carries additional risks beyond financial loss, such as compromised credit scores and the challenging process of restoring financial integrity.

"The Philippines' adoption of real-time payments continues to accelerate, with 98 percent of adults having sent a real-time payment and 65 percent expecting to increase their use over the next year," said C K Leo, lead for fraud, security and financial crime in Asia-Pacific at analytics software firm FICO.

"As the adoption of real-time payments surges, driven by platforms like Maya, GCash and GrabPay, we're witnessing a transformative shift in financial behavior. Yet, amid this rapid digitization comes an urgent need for heightened vigilance against fraudsters lurking in the digital realm."

Real-time payment scams

As the incidence of scams continues to rise, FICO's commissioned research from last year uncovered a troubling trend concerning authorized push payment (APP) fraud and real-time payments in the Philippines. A concerning 82 percent of Filipinos have received unsolicited text messages, emails, phone calls or other outreach that they believed to be part of a scam, while 61 percent of respondents stated that their friends or family members had been victims of a scam.

Shockingly, 25 percent of respondents admitted to sending real-time payments for investments, goods or services they never received. Additionally, 74 percent of those who made scam payments through real-time payments lost up to P25,000, while 1 percent experienced losses of up to P300,000. Despite these alarming figures, only 26 percent reported actual or suspected losses to their banks.

"Banks now face a crucial moment to invest in cutting-edge solutions to tackle the surge in scams, particularly with the swift uptake of real-time payments in the Asia-Pacific financial landscape," said Leo. "The irrevocable nature of these transactions has led to new criminal threats. By integrating scam-specific analysis and scoring into transactions, along with robust decision-making capabilities across the customer journey, banks can pre-emptively detect and thwart scam payments, sparing customers from financial harm. Furthermore, while some consumers may ignore warnings, the majority will heed alerts and refrain from making real-time payments if alerted to potential scams."

Perception vs reality

Despite widespread concern about identity theft, there is a noticeable dissonance between perception and reality among Filipinos. About 33 percent believe it's unlikely they've been a victim, while 19 percent see it as possible, and 27 percent are confident their identity remains untouched.

Moreover, only 5 percent of Filipino respondents reported their stolen identity being used to open a financial account, a slight increase from 4.5 percent in 2022. However, given the adult population in the Philippines, this 5 percent translates to over 3 million individuals. Interestingly, this rate was much higher in other countries surveyed, with 13 percent of Indians and 12 percent of Thais saying their identity had been stolen and used to open an account by a fraudster.

"While some may downplay the risk of identity theft in the Philippines, millions remain vulnerable," added Leo. "This underscores the need for heightened awareness and proactive measures. By breaking down silos and integrating identity verification and fraud detection processes, we can streamline applications and bolster trust in legitimate customers."

Good fraud protection

When asked about the most important considerations respondents have when they select a new provider for a financial account, good fraud protection and ease of use were the two most important. These were both considered significantly more important than good customer service, strong anti-money laundering policies, sound green/environmental policies, ethical use of customer data, behaving fairly, and good value for money.

FICO_Global_Scams_Survey_2023df.

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Source: Manila Times