From grey list to green light

From being blacklisted in 2000 to greylisted in 2021, the Philippines has made significant strides in its battle against financial crimes. In a remarkable turnaround, the country has now reached a pivotal milestone: removal from the Financial Action Task Force (FATF) monitoring list.

This achievement was announced on Feb. 21, 2025, marking a new chapter in the Philippines' commitment to financial integrity and global security. The country's journey through the FATF listings has been challenging, marked by cycles of blacklisting and grey-listing.

Initially blacklisted in the early 2000s due to the absence of a strong Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) legal framework, the Philippines took its first step toward reform with the pas-sage of Republic Act 9160, also known as the Anti-Money Laundering Act of 2001.

This led to the country's removal from the blacklist in 2005. However, achieving full compliance was still challenging. Between 2008 and 2021, the country's listing status varied, often due to concerns about counter-terrorist financing laws and other regulatory gaps.

Despite these challenges, the Philippines showed resilience. In response to its 2021 greylisting, the country implemented a comprehensive action plan to address key AML/CFT deficiencies. It involved strengthening supervision of designated nonfinancial businesses and professions, cracking down on illegal money transfers, improving law enforcement's access to beneficial ownership information and safeguarding nonprofit organizations from misuse.

The collaborative efforts have led to the Philippines' removal from the greylist, highlighting the country's commitment, through the Anti-Money Laundering Council, to combating financial crimes and strengthening global financial security.

It must be emphasized that the Philippines' removal from the FATF greylist is more than just a symbolic victory. It signifies an exceptional strengthening of the country's financial system. For businesses and financial institutions, this development brings immediate and tangible benefits.

One of the most notable advantages is the reduction in the need for enhanced due diligence on cross-border transactions, which not only lowers operational costs but also streamlines processes. Moreover, the easing of reporting requirements also reduces administrative tasks, allowing entities to use resources more efficiently.

This makes the country's financial system more attractive to international investors, enhancing the Philip-pines' competitiveness. This shift is especially significant given the well-documented negative effects of grey-listing: studies indicate that countries on the FATF greylist often experience a decline in gross domestic product (GDP), reduced foreign direct investment (FDI) inflows and a lower FDI-to-GDP ratio.

For the Philippines, reversing these effects will pave the way for a more resilient and dynamic economy. Moreover, the removal from the greylist will help streamline and reduce the cost of remittance processing, providing direct benefits to overseas Filipino workers (OFWs).

With fewer regulatory hurdles and faster transaction times, OFWs will be able to send more of their hard-earned money back home, further improving their financial well-being. While the Philippines' removal from the FATF greylist is a remarkable feat, it is only the beginning of a long-term commitment to maintaining financial integrity.

To avoid future relisting, the country must keep enforcing strong measures to tackle emerging financial crime trends. Drawing from nearly 25 years of experience in exiting the FATF watch list and learnings from countries with strong, consistent AML/CFT frameworks — such as Australia, Canada and several EU nations — will be crucial.

This includes enacting forward-thinking legislation to stay ahead of emerging threats, reinforcing the enforcement and prosecution of financial crimes and conducting thorough national risk assessments to identify and address specific deficiencies.

Additionally, maintaining risk-based supervision across all sectors and fostering collaboration between the government and private sectors in implementing AML/CFT measures will be essential. Above all, maintaining strong political commitment to AML/CFT as a national priority will be crucial for protecting the country's financial system in the long term.

The key takeaway is that the Philippines' successful exit from the FATF greylist underscores the collective commitment of all stakeholders to maintaining a transparent financial system.

This achievement has boosted investor confidence and contributed to a more dynamic global market. How-ever, maintaining this success will require continuous compliance, proactive measures and the ability to adapt to emerging threats.

By doing so, the Philippines will ensure the long-term stability and resilience of its financial system.

Source: Manila Times

Philippine business conditions seen headed in right direction

The Philippines is headed in the right direction in terms of becoming a more conducive business environment, the Chandler Institute of Governance (CIG) said.

“The attractive marketplace (pillar) is about the capabilities that the government has to create a conducive business environment,” Kenneth Sim, dean at Chandler Academy of Governance, a Singapore-based public-sector training organization, said in an event organized by CIG and the Eastern Regional Organization for Public Administration.

“Relative to peers, the Philippines doesn’t do as well. But the gap is closing, and in the right direction, which means the Philippines is actually catching up to the global average,” he added, citing comparable economies like Vietnam and Egypt.

Citing results of the Chandler Good Government Index (CGGI) in 2024, Mr. Sim said that the Philippines posted a 0.56 marketplace attractiveness score last year, up from 0.53 in 2023. The global average is 0.58.

“Part of the reason why this is improving is the stable macroeconomic environment, which looks at things like inflation, as well as the other one that has improved, which is logistics competence,” he said.

Some key indicators for an attractive marketplace, like property rights and business regulations, are below the global average.

In particular, the country scored 0.39 in stability of business regulations, against the 0.51 global average. It scored 0.30 in property rights, against the 0.50 global average.

Mr. Sim noted opportunities to improve in the leadership and foresight components of the index.

“Over the years, there has been a decline in the score for the Philippines. It started at just above 0.4 in 2021, and by 2024, the Philippines will have dropped to 0.33. So this means, again, that the gap between the Philippines and the global average has been widening,” he said.

“It is important to point out, however, that even though we call it leadership and foresight, it is not about individual leaders; it is about the ability of the system to develop these capabilities,” he said.

“Of course, leaders play an important role, but this pillar is not about people. It is about the system,” he added.

“The performance of the Philippines in the CGGI in 2024 is somewhere in the middle. 67th out of 113, not the best, but certainly not the worst,” Mr. Sim said.

He added that although the country’s rank has suffered, its score has declined only slightly.

“What this means is that over time, relative to itself, in your own country, you have kept your performance relatively stable, but the rank has fallen, which simply means that more people are joining the index, and others are doing even better,” he said.

“So, staying in place and being patient is not going to help you to improve in ranking,” he added.

He said that the Philippines is stronger in areas like strong institutions and financial stewardship.

Source: Business World

PHL ranked among laggards in governance, ESG

The Philippines has kept the 11th spot but at a lower overall score in a ranking of 12 Asia-Pacific countries on their performance in corporate governance (CG) and environmental, social, and corporate governance (ESG).

The 2023 CG Watch biennial survey by nonprofit association Asian Corporate Governance Association (ACGA) showed that the Philippines maintained its previous ranking in 2020, besting only Indonesia. The survey looked into the countries’ market performance and practices.

According to the report, the Philippines scored 37.6 in the 2023 ranking, down from a score of 39 in 2020, citing the country’s policy focus being “elsewhere” and the securities regulator’s “lacks resources.” 

Australia secured the top spot with a score of 75.2, followed by Japan at 64.6, Singapore at 62.9, Taiwan at 62.8, Malaysia at 61.5, India at 59.4, Hong Kong at 59.3, Korea at 57.1, Thailand at 53.9, and China at 43.7. 

The rankings were based on seven categories, namely: government and public governance; regulators on funding, capacity building, and reform, and enforcement regulators; corporate governance rules; listed companies; investors; auditors and audit regulators; and civil society and media. 

ACGR data showed that the Philippines scored higher in categories such as government and public governance at 29 versus 28 in 2020; CG rules at 48 from 45; investors at 25 from 21; and auditors and audit regulators at 62 from 60. 

However, the country scored lower in terms of regulators at 25 from 27; listed companies at 48 from 55; and civil society and media at 33 from 36. 

“Our goal in CG Watch is to give a diagnosis of the health of CG systems across APAC (Asia-Pacific). More than 20 years after the Asian Financial Crisis there is no doubt that most of the region is in better shape. We hope our scores and rankings help each market to pinpoint next steps for improvement,” ACGA Secretary General Jamie Allen said. 

Meanwhile, a separate survey done by Hong Kong-based capital markets and investment group CLSA Ltd. showed that the Philippines ranked last among the 12 APAC countries in terms of the CLSA CG score. 

The Philippines came out with a score of 49.3 in the 2023 CLSA CG ranking, lower than the 50.5 score in 2020. 

“Our analysis of CG scores by thematic characteristics revealed that gender-diverse firms have the highest CG scores, followed by privately-owned enterprises, large caps and manager-run companies; while state-owned firms score the lowest,” CLSA said.

CLSA reveals CG winners and losers by sector and examines CG scores by corporate characteristics as well as CG’s relationship with broader ESG scores and shareholder value creation.

“The Asian region is characterized by extreme weather events, shifting demographics and geopolitical uncertainties. Now more than ever it has become increasingly crucial to comprehend the connection between effective corporate governance, ESG, and shareholder returns,” CLSA Head of Sustain Asia Research Seungjoo Ro said. 

Sought for comment, SEC Commissioner McJill Bryant T. Fernandez said via Viber message that the regulator has been consistent in promoting corporate governance and protecting minority investors, through policies and regulations consistent with international best practices.

“This can be attested by, among others, the recognitions from both domestic and international bodies, as well as engagements with stakeholders here and abroad,” he said.

He added that the SEC “was neither consulted nor interviewed” about the report.

“To be circumspect, the Commission will go over the entire report and commits to provide substantive comments thereon soonest,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that greater emphasis on ESG compliance is needed since it has been linked to good business practices. 

“Global and local regulators have already encouraged compliance with ESG standards for both issuers and investors even before the pandemic, which somewhat disrupted business, market, and other economic activities,” Mr. Ricafort said in a Viber message. 

“There should be greater emphasis on ESG compliance as this has become one of the important considerations by foreign investors in recent years, as ESG compliance is tied to good business practices,” he added.

Mr. Ricafort added that corporate regulators should have more funding to support more ESG compliance initiatives.

“More funding is needed to bankroll more ESG compliance initiatives amid limited financial resources of the government due to budget deficits especially since the pandemic,” Mr. Ricafort said.

Source: Business World