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Grey list

The Philippines needs to enact major reforms in the country’s bank secrecy laws to avoid being included anew in the grey list of the Paris-based money laundering watchdog Financial Action Task Force (FATF), resulting in adverse effects on trade and remittances.

The International Monetary Fund said that without major reform by June, the Philippines could be reverted to the list of jurisdictions with serious anti-money laundering / counter financing of terrorism (AML/CFT) deficiencies that may expose the local financial system to significant risks.

The multilateral lender said the effectiveness of the AML/CFT in the Philippines needs to be substantially enhanced. “The banking sector is subject to bank secrecy laws that undermine financial stability, financial integrity and development, and expose the banking system to reputational risk,” it added.

The BangkoSentral ng Pilipinas, Department of Finance and other government agencies have been pushing for proposed amendments to Republic Act 1405, or the Secrecy of Bank Deposits Law. Passed in 1955, the law states that deposit accounts may only be examined with a written permission of the depositor or when a court so orders.

Proposed amendments aim to make financial institutions comply with international standards on transparency and combat both domestic and global tax evasion, money laundering and other financial crimes.

Other legislative amendments that are needed to be approved promptly include designating tax crimes as predicate money laundering offenses and establishing a comprehensive legal framework for targeted financial sanctions against proliferation financing.

The Philippines was blacklisted by the FATF in 2000 for failing to address “dirty” money issues, paving the way for the enactment of the Anti-Money Laundering Act of 2001. After removal from the blacklist in 2005, it narrowly avoided the blacklist again in 2012 after we criminalized terrorist financing and pursued quicker freezing of suspect accounts.

Reinclusion in the FATF grey list would not only be an embarrassment for the Philippines that has tried so hard to avoid it, it would also increase the cost of doing business in the country and even make the simple act of remitting funds more difficult for Filipinos. The government has a couple of months to avoid that fate. Let’s hope our officials can get it done by then.*

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