REMITTANCES could fall 2-4% if the Philippines is determined to be lax in policing money laundering and terrorist financing, which will compel international banks to treat transactions by Filipinos with extra caution, Anti-Money Laundering Council (AMLC) Executive Director Mel Georgie B. Racela said.
“Financial institutions may de-risk Filipinos, both individuals and entities, which include remittance companies; and may withdraw from existing business relationships,” Mr. Racela said in a text message to BusinessWorld.
He said “delayed processing of transactions due to requests for additional justification or documentary requirements” could produce delays of five to 10 days, which “will result in a reduction of 2-4% in annual foreign currency remittances, computed based on 240 working days per year,” Mr. Racela said.
He said more cautious treatment of transactions by Filipinos could ensue if the Philippines is put on the gray list or identified as a high risk-jurisdiction due to its anti-money laundering (AML) or counter-terrorism financing (CTF) regime. If this happens, other jurisdictions will have the option to require more paperwork or even to prohibit transactions with entities and individuals in the Philippines.
“Further, international banks may become reluctant to enter into partnerships with Philippine banks,” Mr. Racela said.
The Financial Action Task Force (FATF) has adjusted its timeline for its review on the Philippines’ AML and CTF practices due to the pandemic, allowing legislators and officials more time to act on the matter.
Mr. Racela said the Philippines’ observation period will end by February instead of the initial deadline of October. The FATF will then decide whether or not to include the Philippines in its gray list by June 2021.
Cash remittance growth slowed to 2.5% year on year to $2.301 billion in February as coronavirus disease 2019 (COVID-19) began to spread to economies where Filipino workers are deployed. In January, remittances grew 6.6% to $2.648 billion.
Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said earlier this month that the remittance growth target this year was cut to 2% from the 3% goal before the pandemic. The World Bank’s global projection is that remittances may drop 13% to lower and middle-income countries due to the looming global recession as well as layoffs and lower wages due to the COVID-19 crisis.
Remittance inflows prop up consumption in the Philippines, which makes up 70% of the economy.
“Currently, the pandemic continues to cripple different sectors of the economy, and an FATF ICRG (International Co-operation Review Group) public listing, which is in itself a national emergency, will worsen the already negatively-affected Philippine economy,” Mr. Racela said.
House Bill 6174 which seeks to amend the Anti-Money Laundering Act (AMLA) with more stringent AML measures has been pending with the House Committee on Banks and Financial Intermediaries since February. Its counterpart in the other chamber, Senate Bill 1412, is also pending at the committee level.
Key AMLA amendments proposed are the inclusion of tax crimes, inclusion of real estate agents as covered persons, and the expansion of investigative powers of the AMLC to include subpoena and contempt powers, among others.
Meanwhile, House Bill 7141 which seeks to amend the Human Security Act and to strengthen CTF measures has been pending with the Committee on Public Order and Safety since March 2018. Its counterpart Senate Bill No. 1083 was approved on final reading in February. — Luz Wendy T. Noble
