SOME PHILIPPINE-RELATED financial transactions have been subjected to tighter scrutiny even though no countermeasures have been required after the Financial Action Task Force (FATF) put the country under its “gray list.”

This prompted the government to call on financial institutions to apply only commensurate measures as the Philippines is not a “high risk” to financial crimes and is only classified as “jurisdiction under increased monitoring” by the Paris-based “dirty money” watchdog.

“The Philippine government has been receiving reports that Philippine-related transactions have been subjected to more scrutiny, or worse, de-risking,” the National Anti-Money Laundering/Countering the Financing of Terrorism Coordinating Committee (NACC) said in an advisory posted on the Anti-Money Laundering Council (AMLC) website.

De-risking happens when financial institutions terminate or restrict business relationships to avoid risks to financial crimes they associate with parties or clients.

“This is not in line and inconsistent with FATF’s expectations on the application of risk-based approach, which is central to the effective implementation of the FATF standards,” the NACC said.

Disproportionate application of measures against gray-listed countries included requiring financial institutions to apply specific elements of enhanced due diligence; limiting business relationships or financial transactions with the identified jurisdictions or persons in that country; and requiring financial institutions to review or even terminate correspondent relationship in the country concerned.

The FATF included the Philippines in its gray list in June 2021.  Republic Act 11521 which amended the Anti-Money Laundering Law was signed by President Rodrigo R. Duterte on Jan. 29, only days ahead of the Feb. 1 deadline set by the FATF. The Philippines had to show the FATF that it had made progress in tightening anti-money laundering (AML) and counter-terrorism financing (CTF) measures.

The FATF at that time did not call for application of enhanced due diligence for transactions involving the countries under increased monitoring. However, the FATF encouraged countries to take into account information regarding the said jurisdictions’ deficiencies in their risk analysis.

“Filipino businesses or nationals should not be considered as high risk based solely on the inclusion of the Philippines in the FATF’s list of jurisdictions under increased monitoring,” the NACC said.

“What is not in line with the FATF standards is the wholesale cutting loose of entire classes of customer, without taking into account, seriously and comprehensively, the level of risk or risk mitigation measures for individual customers within a particular sector,” it added.

The NACC stressed that terminating business relationships should only be applied on a case-by-case basis when proven that money laundering and terrorism financing risks cannot be mitigated.

To date, only Iran and North Korea are classified under the FATF’s black list or high-risk jurisdictions, which means counteracting measures are required due to possible financial crimes from said countries.

The NACC directed government agencies and covered persons to provide assistance to the AMLC by submitting reports of incidents wherein additional measures were imposed on Philippine-related accounts.

Countries classified as jurisdictions under increased monitoring like the Philippines are required to submit progress reports annually every January, August and May.

In October, the FATF said the Philippines remained under the gray list despite some progress in implementing AML/CTF measures. The country still needs to address 17 out of 18 action plan items to show it has strengthened its tangible progress on measures against financial crimes.

Government officials are hopeful that the country can exit the gray list by January 2023. — Luz Wendy T. Noble