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The Bangko Sentral ng Pilipinas (BSP) is optimistic that the Philippines will not return to the list of countries identified as risks to the international financial system, as it remains confident that amendments to the anti-money laundering law will be passed soon.
In a virtual briefing on Friday, Bangko Sentral Governor Benjamin Diokno recalled that the country’s Financial Action Task Force (FATF) 2019 assessment saw gaps in its laws and regulations on money laundering and financing of the counterterrorism.
FATF is the international policy-making body that sets standards and promotes the effective implementation of measures to combat money laundering and terrorist financing.
The Philippines is under a 12-month observation period by the FATF on money laundering, which was supposed to end in October, but was extended until February 2021 in light of the coronavirus pandemic.
The Anti-Money Laundering Council (AMLC) has said that the observation period is the last chance for the government to address deficiencies to avoid gray listing.
According to Diokno, also president of the AMLC, one of the FATF recommendations for the Philippines is to amend the Republic Law 9160, or the “Anti-Money Laundering Law of 2001.” He said the government was already working to amend the law through Senate Bill 1412 and House Bill 6174.
“If any of the proposed amendments is not approved and implemented before February, the Philippines will be included in the gray list of the FATF,” warned the head of BSP.
But “we remain optimistic that the gray list can be avoided, as none other than the president himself has certified the bills” as priority measures, he said.
The AMLC has said that the gray list would have a negative impact on the reputation of the Philippine economy and the cost of doing business with its citizens, both as an individual and as a legal entity.
The countries currently on the gray list are the Bahamas, Botswana, Cambodia, Ghana, Iceland, Mongolia, Pakistan, Panama, Syria, Trinidad and Tobago, Yemen, and Zimbabwe. Those on the so-called blacklist are Iran and North Korea.
Once the Philippines has been grayed out, the European Union (EU) will require its members to immediately impose Enhanced Due Diligence (EDD) on Filipino citizens and businesses transacting through EU channels. An EDD will involve additional costs and additional paperwork or justification for the subject person or entity.
“The additional costs and paperwork could push banks and financial institutions to do a cost-benefit analysis to determine whether or not to continue their business. If the costs outweigh the benefits, it could result in risk reduction or bank elimination, ”AMLC said.
The AMLC also said that these additional costs would be charged to Filipino citizens and businesses in the form of higher interest rates or processing fees. Additional paperwork and justifications also mean delays in processing transactions.
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