FATF’s ‘gray list’

The issue of money laundering continues to haunt the Philippine financial system.

So serious is the problem that immediately after the New Year celebration, President Marcos met with government officials concerned to address the inclusion of the Philippines in the “gray list” of the Financial Action Task Force (FATF), an intergovernmental organization established to combat laundering and terrorism financing.

That listing, which has been in effect since 2021, means the Philippines is not fully compliant with the guidelines and procedures the FATF has laid down to put an end to those illegal activities.

The FATF has expressed concern about, among others, the Philippines’ failure to address the risk of money laundering in casinos and the lack of prosecution of terrorism funding cases.

If the Philippines fails to get out of the gray list by the end of 2024, it risks being downgraded to the FATF’s black list, which would result in the imposition of more stringent requirements and higher transaction costs on the billions of dollars that Filipinos working and living abroad send to their families here.

Apparently, the two laws earlier enacted to comply with the FATF’s demands, namely, the Anti-Money Laundering Act of 2001 (Amla) and the Terrorism Financing Prevention and Suppression of 2012, fall short of expectations with regard to their enforcement.

Initially, casinos were exempted from the Amla because their inclusion would supposedly adversely affect their profitability and, in the process, reduce their contributions to various social causes.

Under pressure from the FATF, however, Congress enacted Republic Act No. 10927 in 2017 to include land, ship and internet-based casinos with respect to their cash transactions that are related to gaming operations.

The responsibility of ensuring that casinos scrupulously comply with antimoney laundering regulations rests with Philippine Amusement and Gaming Corp. (Pagcor), a government-controlled corporation tasked to regulate their operation.

The challenge to Pagcor is to enforce the antimoney laundering rules on disclosure on the movement of money in casinos without losing the patronage of high rollers who want to keep their identity and activities under wraps for security and tax purposes.

On the other hand, the prosecution of more terrorism funding cases is a law enforcement issue that has to be handled in accordance with existing laws and judicial regulations.

A terrorist act is an act “intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict when the purpose of such act is … to intimidate a population, or to compel a government or an international organization to do or to abstain from doing any act.”

Note the precise and clear-cut description of that crime. All those elements have to be proven beyond reasonable doubt before any person can be convicted of that offense.

And for a person to be guilty of financing terrorism, he or she must have, directly or indirectly, provided, collected or used property or funds or made them available so they can be used, or with the knowledge that they will be used, to “carry out or facilitate the commission of any terrorist act or by a terrorist organization.”

Some of the methods usually used to finance terrorism are engaging in kidnap for ransom, trafficking in illegal drugs and currency smuggling, whose proceeds fund terrorist activities.

Based on the criteria laid down by the law, the prosecution of terrorism funding is not a walk in the park for the police and government prosecutors.

Unlike murder and other heinous crimes where their prosecution has long-standing procedures and precedents, that of terrorism funding is practically virgin territory for our law enforcement authorities.

Despite these challenges, however, the government has no choice but comply with the demands of the FATF or the Filipino families who depend on their relatives for financial sustenance may suffer from undue delay in their remittances.

That may result in unwanted adverse economic and political consequences. INQ

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