FATF AML Deficiency List
US Dept of State Money Laundering assessment
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Non - Compliance with FATF MER Recommendations
The Philippines is on the FATF List of Countries that have been identified as having strategic AML deficiencies
Latest FATF Statement - 21 October 2021
Since June 2021, when the Philippines made a high-level political commitment to work with the FATF and APG to strengthen the effectiveness of its AML/CFT regime, the Philippines has taken steps towards improving its AML/CFT regime, by developing and implementing guidance on delistings and the unfreezing of assets for targeted financial sanctions related to PF. The Philippines should work to implement its action plan, including by: (1) demonstrating that effective risk-based supervision of DNFBPs is occurring; (2) demonstrating that supervisors are using AML/CFT controls to mitigate risks associated with casino junkets; (3) implementing the new registration requirements for MVTS and applying sanctions to unregistered and illegal remittance operators; (4) enhancing and streamlining LEA access to BO information and taking steps to ensure that BO information is accurate and up-to-date; (5) demonstrating an increase in the use of financial intelligence and an increase in ML investigations and prosecutions in line with risk; (6) demonstrating an increase in the identification, investigation and prosecution of TF cases; (7) demonstrating that appropriate measures are taken with respect to the NPO sector (including unregistered NPOs) without disrupting legitimate NPO activity; and (8) enhancing the effectiveness of the targeted financial sanctions framework for both TF and PF.
Compliance with FATF Recommendations
The last follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in the Philippines was undertaken in 2021. According to that Evaluation, the Philippines was deemed Compliant for 8 and Largely Compliant for 27 of the FATF 40 Recommendations. It remains Highly Effective for 0 and Substantially Effective for 1 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.
US Department of State Money Laundering assessment (INCSR)
Philippines is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.
The Philippines’ growing economy and geographic location within key trafficking routes place it at elevated risk of money laundering and terrorism financing. Recent growth in the online gaming industry also presents increased risk. Corruption and human trafficking constitute some of the principal sources of criminal proceeds. Insurgent groups operating in the Philippines derive funding from kidnapping for ransom and narcotics and arms trafficking. Additionally, the large volume of remittances from Filipinos living abroad increases the monitoring burden on AML authorities.
Despite the challenges, the Philippine government is improving its AML posture. The government took additional steps in 2019 to build the capacity of its FIU and interagency cooperation. The Philippines should build on the recent efforts to improve interagency coordination and seek to bolster its financial investigations and criminal convictions.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 34
World Governance Indicator – Control of Corruption 31
High corruption levels severely restrict the efficiency of businesses operating in the Philippines. Extensive bribery within the public administration and vague and complex laws make foreign companies vulnerable to extortion and manipulation by public officials. Favoritism and undue influence are widespread in the courts, leading to time-consuming and unfair dispute resolution, and to an uncertain business environment. Corruption plagues the customs administration, and fraud routinely occurs for companies when filing import and export documentation. The Anti-Graft and Corrupt Practices Act criminalizes active and passive bribery, extortion, abuse of office and conflicts of interest. Giving gifts, except for gifts of insignificant value given in line with local customs, is prohibited. Facilitation payments are not addressed by anti-corruption regulations and private sector bribery is not criminalized. The legislative framework for fighting corruption is scattered and is not effectively enforced by the weak and non-cooperative law enforcement agencies. For further information - GAN Integrity Business Anti-Corruption Portal
The economy has been relatively resilient to global economic shocks due to less exposure to troubled international securities, lower dependence on exports, relatively resilient domestic consumption, large remittances from about 10 million overseas Filipino workers and migrants, and a rapidly expanding outsourcing industry. The current account balance has recorded consecutive surpluses since 2003, international reserves remain at comfortable levels, and the banking system is stable.
Efforts to improve tax administration and expenditures management have helped ease the Philippines' debt burden and tight fiscal situation. The Philippines has received investment-grade credit ratings on its sovereign debt under the AQUINO administration and has had little difficulty financing its budget deficits. However, weak absorptive capacity and implementation bottlenecks have prevented the government from maximizing its expenditure plans, which the administration has been working to address. Although it has improved, the low tax-to-GDP ratio remains a constraint to supporting increasingly higher spending levels and sustaining strong growth over the longer term.
Economic growth has accelerated, averaging 6.0% per year from 2011 to 2015, compared with 4.5% under the MACAPAGAL-ARROYO government; and competitiveness rankings have improved. The Philippines has not sustained steady growth in foreign direct investment, which continues to lag regional peers.
Although the economy has grown at a faster pace under the AQUINO government, challenges to achieving more inclusive growth remain. The unemployment rate has declined somewhat in recent years but remains high, hovering at around 6.5%; underemployment is also high, ranging from 18% to 19% of the employed. At least 40% of the employed work in the informal sector. Poverty afflicts about a quarter of the population. More than 60% of the poor reside in rural areas, a challenge to raising rural farm and non-farm incomes. The AQUINO administration has been working to boost expenditures for education, health, transfers to the poor, and other social spending programs. Infrastructure remains underfunded and the government is relying on the private sector to help with major projects under its Public-Private Partnership program. Continued efforts are needed to improve governance, the judicial system, the regulatory environment, and the overall ease of doing business.
Notable achievements over the past year include passage of laws that liberalized the entry of foreign banks into the country; partially relaxed the cabotage law by allowing foreign vessels to ply import and export cargo within the archipelago; and passage of anti-trust legislation. Substantial progress has also been made towards passage of a Customs Tariff and Modernization Act to meet international standards and commitments, with strong prospects of enactment into law before President AQUINO steps down from office. However, the Philippine Constitution and other laws restrict foreign ownership in important activities/sectors - such as land ownership and public utilities.
Agriculture - products:
sugarcane, coconuts, rice, corn, bananas, cassava (manioc, tapioca), pineapples, mangoes; pork, eggs, beef; fish
electronics assembly, garments, footwear, pharmaceuticals, chemicals, wood products, food processing, petroleum refining, fishing
Exports - commodities:
semiconductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, fruits
Exports - partners:
Japan 21.1%, US 15%, China 10.9%, Hong Kong 10.6%, Singapore 6.2%, Germany 4.5%, South Korea 4.3% (2015)
Imports - commodities:
electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics, grains, chemicals, plastic
Imports - partners:
China 16.2%, US 10.8%, Japan 9.6%, Singapore 7%, South Korea 6.5%, Thailand 6.4%, Malaysia 4.8%, Indonesia 4.4% (2015)
Investment Climate - US State Department
The Philippines is becoming a more attractive destination for foreign direct investment (FDI). The country’s growing middle class quickly spends its disposable income in a stable political environment, helping gross domestic product soar to an average growth of 6.2 percent over the last six years. FDI reached USD 5.72 billion in 2015. The United States contributed more than any other country, at USD 731 million. The majority of investment inflows are in manufacturing, finance and insurance, real estate, wholesale and retail trade, and construction.
Thanks in part to a large, educated, English-speaking workforce, the Business Process Outsourcing (BPO) and tourism industries have experienced tremendous growth in recent years, with no signs of a slowdown. The Philippines has improved its investment climate under the Aquino Administration, making strides in good governance, transparency, and accountability. Major international credit ratings agencies have upgraded the Philippines’ sovereign credit ratings to investment grade, citing robust economic performance, continued fiscal and debt consolidation, and improved governance.
Still, improvement is needed. The Philippines lags behind most ASEAN nations in attracting FDI because of limits on foreign ownership in many sectors of the economy (the Philippines was ranked number 8 of 10 ASEAN countries as a percentage of GDP in 2014). Poor infrastructure, including high power costs and slow broadband connections, regulatory inconsistency, and corruption are major constraints to investment. The Philippines’ complex, slow, and sometimes corrupt judicial system inhibits the timely and fair resolution of commercial disputes. In addition, traffic and port congestion are a regular cost of business. Investors report the Philippine bureaucracy can be difficult and opaque, and business registration and procedures are slow and burdensome. Many report a more predictable business environment within the special economic zones, particularly those available for export businesses which are operated by the Philippine Economic Zone Authority (PEZA), which is known for its regulatory transparency, no red-tape policy, and “one-stop shop” services for investors.
Overall, the investment climate of the Philippines has improved in recent years. If the country can maintain its reform momentum, particularly after a new president takes office in June 2016, continue to improve its infrastructure and relax foreign ownership limitations, the prospects for investment into the Philippines will continue to brighten.
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