The Philippines is out of the FATF grey list in a significant global development in financial oversight, while new entries Laos and Nepal make it complete in the revised gray lists. This proves a new outreach in international confidence regarding the AML and CTF efforts undertaken by these countries.
Philippines Out of Grey List
The removal of the FATF grey list would mark a very significant achievement for the territory. It follows four years of comprehensive reforms created towards augmenting efforts in money laundering and terrorist financing. The FATF noted a very significant advance for the Philippines, particularly through amendments to its Anti-Money Laundering Act and improvements in national risk assessments. The recent on-site evaluation confirmed that those measures were effectively implemented, resulting in its removal from increased monitoring.
Finance Secretary Ralph G. Recto emphasized that this success reinforces public confidence in the Philippine financial system and bodes well for a possible credit rating upgrade for the country. He pointed out that this development is expected to attract foreign direct investments and expand trade partnerships to translate this into economic growth.
The Anti-Money Laundering Council (AMLC) commented that the removal would further facilitate fast and cheap cross-border transactions, diminish compliance barriers, and strengthen financial transparency. Such benefits are expected to trickle down to businesses and overseas Filipino workers (OFWs) in remittance facilitation improvements that are faster and cheaper.
Laos and Nepal Added to the Grey List
Laos and Nepal have now been placed on the grey list of the FATF, meaning that they require increased monitoring for strategic deficiencies in their banking systems, in contrast to the achievements of the Philippines.
In the case of Laos, efforts to enhance financial supervision have been weakened by the continued capacity to redress financial crimes in the country. The FATF found a number of issues, among them: weak regulatory oversight; insufficient risk-based supervision of high-risk sectors such as casinos and Special Economic Zones (SEZs); minimal financial intelligence sharing; and poor enforcement action against transnational financial crimes. Remaining on the grey list means heightened scrutiny by international financial institutions for Laos, which can affect its foreign investment and banking relations. It is now up to the government to work with the FATF to mitigate these issues and shore up its anti-money laundering apparatus.
Consistent with Laos, such a grey-listing of Nepal is somehow justified since it also has failed to fully effectuate the necessary legal, policy, and structural reforms for money laundering and terrorist fundings, despite some degree of legislative progress. According to the Asia/Pacific Group on Money Laundering (APG) carrying out the mutual evaluation of Nepal, weaknesses persist in enforcement, investigation, and prosecution of financial crimes and adequate regulation of high-risk sectors, such as cooperatives and real estate. Nepal is now required to develop and implement an action plan on a specified deadline—usually quarterly review with exit from the grey list, potentially by one year, being an opportunity if development is rapid.
Implications and the Way Forward
The grey list of FATF serves to signal a country’s vulnerability towards adherence to global standards on anti-money laundering and countering the financing of terrorism to the eyes of the international community. Placing a country on the grey list usually means international financial institutions drawing more scrutiny, thereby affecting foreign investments, banking relations, and imposing increased costs on cross-border transactions.
Passing from the grey list is expected, for the Philippines, to boost investor confidence and facilitate improved financial transactions, as well as a reduction in remittance fees for Overseas Filipino Workers. The government has committed to maintaining the reforms initiated in order to protect the animated future and sustain global confidence in its financial system.
On the other side, Laos and Nepal must begin compulsorily addressing the deficiencies named by FATF. Were they to implement action plans focusing on invigorating their financial regulatory frameworks, improving enforcement mechanisms, and enhancing international collaboration against financial crimes, successful implementation of these would be pivotal for their exit from the grey list and to avert their possible economic fallout.