‘High incidence’ of money laundering seen in gaming

By Luisa Maria Jacinta C. Jocson, Reporter

THE PHILIPPINES is likely to exit the “gray list” of the Financial Action Task Force (FATF) soon despite a “high incidence” of money laundering, mainly in the gaming sector, Moody’s said.

Choon Hong Chua, Moody’s senior director and head of the Financial Crime Practice Group for Asia and the Pacific and the Middle East, said that the Philippines is “on track” to exit the gray list.

“It is clear the country is committed to strengthening anti-money laundering and counter financing of terrorism (AML/CFT) controls and has implemented more stringent requirements,” he told the BusinessWorld in an e-mail interview.

The Moody’s Grid database showed that from 2018 to 2023, the Philippines was among the top five countries in Southeast Asia with money laundering activity events added over the five-year period.

“From 2022 to 2023, the number of money laundering events added in the Philippines increased 45%,” it added.

Mr. Chua said that there has been a “high incidence” of money laundering events in the country related to gaming activities, citing online gambling, casinos and betting centers.

“Besides these activities, a large proportion of money laundering activity in the region is also linked to organized crime and complex scam operations, some of which are set up in the Philippines,” he added.

The Philippines has been on the FATF’s list of jurisdictions under increased monitoring for dirty money activities since June 2021.

The FATF Plenary, which is the organization’s decision-making body, usually meets in February, June and October.

“We have seen the current regime take an active step to improve the level of AML competency in the banking sector — from the implementation of new regulations to active communications with the covered entities. This stemmed from some of the weaknesses observed,” Mr. Chua said.

He noted the government’s ongoing initiatives to “implement stricter controls, reporting requirements, and enforce compliance within the financial sector.”

Early this year, President Ferdinand R. Marcos, Jr. ordered all concerned government agencies to hasten efforts to help the country exit the gray list as soon as possible.

The Anti-Money Laundering Council  also earlier said it is working to increase the investigations and prosecutions related to dirty money this year.

“The private sector also has a part to play by adhering to the requirements promptly to lift the Philippines out of the gray list. This requires a concerted effort and engagement from both the public and private stakeholders,” Mr. Chua said.

“The private sector will also need to invest to build capabilities that enable a shift towards a faster, more efficient, digitized system.”

Financial institutions and the overall private sector must “participate in anti-money laundering efforts.”

Mr. Chua also recommended measures to boost the private sector’s capacity to combat money laundering activities and strengthen third-party risk management capabilities to help institutions mitigate various risks.

Emerging technologies such as artificial intelligence (AI) and machine learning (ML) can also be used to strengthen financial crime detection and reporting, Mr. Chua said.

“AI and ML can enhance Know Your Customer (KYC) workflows when it comes to the screening, onboarding, and due diligence processes for compliance,” he said.

“KYC workflows can be enhanced with access to trusted internal and external datasets. Embedding an AI capability, such as a chat interface or copilot tool, within a client lifecycle management platform, can also help highlight critical information and provide more datapoints to make an informed decision.”

Mr. Chua said there must still be humans involved in the compliance teams to maximize the potential of these technologies and workflows as well as “ensure a fair, quality outcome.”

Mr. Chua said AI can be used in screening technologies to “reduce false positives in the name matching process.”

“True alerts can be prioritized to reduce time-to-decision when assessing risk,” he added.