FATF Status

The Philippines is on the FATF List of Countries that have been identified as having strategic AML deficiencies

Latest FATF Statement  -  23 February 2024

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, including by identifying and investigating TF cases. The Philippines should continue to work on implementing its action plan to address its strategic deficiencies, 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) enhancing and streamlining LEA access to BO information and taking steps to ensure that BO information is accurate and up-to-date; (4) demonstrating an increase in ML investigations and prosecutions in line with risk; and (5) demonstrating an increase in the prosecution of TF cases.

The FATF urges the Philippines to swiftly implement its action plan to address the above-mentioned strategic deficiencies as soon as possible as all deadlines expired in January 2023.

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 2022. According to that Evaluation, the Philippines was deemed Compliant for 8 and Largely Compliant for 29 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.

Overview

In 2021, the Philippines made efforts to strengthen its anti-money laundering/combating the financing of terrorism (AML/CFT) regime, but significant challenges remain.  Despite pandemic challenges limiting the Anti-Money Laundering Council’s (AMLC) opportunities for in-person engagement, the government set an aggressive goal to achieve improvements using a whole-ofgovernment approach.  Demonstrative of its commitment, the AMLC launched a series of actions to address noted AML/CFT deficiencies, including increasing its personnel.   

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                         34

World Governance Indicator – Control of Corruption             33

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 Philippines remains committed to improving its overall investment climate and sustaining economic growth. While potential challenges from global economic headwinds would impact the economy, sovereign credit ratings remain at investment grade, supported by the country’s sound macroeconomic fundamentals. Despite increased public debt and rising inflation, Philippine gross domestic product (GDP) grew by 7.6 percent in 2022. The Philippines is a net commodity importer and Russia’s invasion of Ukraine elevated fuel and food prices to record levels in 2022. Foreign direct investment (FDI) inflows shrank to USD 9.2 billion in 2022, down 23 percent from USD 11.9 billion in 2021. Since 2010, the Philippines has lagged regional peers in the Association of Southeast Asian Nations (ASEAN) in attracting foreign investment. The majority of FDI equity investments in 2022 targeted the manufacturing, information and communications technology (ICT), financial services, and real estate sectors.

Poor infrastructure, high power costs, slow broadband connections, regulatory inconsistencies, a cumbersome bureaucracy, and corruption remain disincentives to investment. The Philippines’ complex, slow, redundant, and sometimes corrupt judicial system inhibits the timely and fair resolution of commercial disputes. Traffic in major cities and congestion in the ports remain barriers to doing business.

The Philippines made progress this year in addressing foreign ownership limitations that constrained investment in many sectors. Amendments to the Public Services Act (PSA) opened previously closed sectors of the economy to 100 percent foreign investment. The PSA maintains foreign ownership restrictions in six “public utilities:” (1) distribution of electricity, (2) transmission of electricity, (3) water and wastewater pipeline distribution systems, including sewerage, (4) petroleum/m and petroleum products pipeline transmission systems, (5) seaports, and (6) public utility vehicles. The Retail Trade Liberalization Act (RTLA) reduced the minimum per-store investment requirement for foreign-owned retail trade businesses, from USD 830,000 to USD 200,000, and the quantity of locally manufactured products foreign-owned stores are required to carry. The amendments to Foreign Investment Act (FIA) eliminated restrictions of foreign ownership of export enterprises and opened up most areas except those subject to nationality requirements outlined in the Constitution and in the Philippines’ Foreign Investment Negative List (FINL).

In addition, the 2021 Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act reduced the corporate income tax from 30 percent to 25 percent for large firms, and 20 percent for small firms. The rate for large firms will be gradually lowered to 20 percent by 2025. CREATE also mandated fiscal incentives to be performance-based and time-bound and granted more authority to the Bureau of Internal Revenue (BIR), which narrowed eligibility for Value Added Tax (VAT) exemptions.

While the Philippine bureaucracy can be slow and opaque, the business environment has been notably better in special economic zones, particularly those available for export businesses operated by the Philippine Economic Zone Authority (PEZA). PEZA has received positive feedback for its regulatory transparency, no red-tape policy, and one-stop shop services for investors. Finally, the Marcos Administration, under its “Build, Better, More” infrastructure agenda, committed to maintain infrastructure spending to 5-6 percent of GDP and to encourage more public-private partnerships in infrastructure development.

Country Links

Anti-Money Laundering Council (AMLC)

Philippine Securities and Exchange Commission (SEC)

Central Bank of the Philippines (Bangko Sentral ng Pilipinas)

Department of Finance (DOF)