In a historic shift in the global financial landscape, the Financial Action Task Force (FATF) announced the delisting of the Philippines from the “grey list,” while adding Laos and Nepal to this list. This indicates changing dynamics for the international community’s effort against money laundering and terrorist financing.
Philippines Reaches Compliance Milestone
The FATF’s decision to place the Philippines in its delisting happened approximately four years after the Philippines underwent high-level efforts to address the deficiencies of its anti-money laundering (AML) and counter-terrorism financing (CFT) frameworks. The country was first grey-listed in June 2021 over the apprehension of illicit financial flows, especially through Philippine Offshore Gaming Operators (POGOs).
In this regard, the reforms initiated by the Philippine government included shutting down POGOs and adopting stricter measures on casino junkets. These measures led to some FATF recognition of the Philippines’ substantial completion of its action plan concerning delisting.
FATF president Elisa de Anda Madrazo pointed at the progress made by the Philippines, stating that this country is now actively fighting against the risk of so-called “dirty money” being channeled through its casinos.
The delisting gives practitioners the opportunity to facilitate freer and cheaper worldwide transaction and remittance services for overseas Filipino workers – a huge relief for a nation with millions of its citizens working outside its borders.
Laos And Nepal Under Observation
Meanwhile, Laos and Nepal appear to be gravitating toward another category as they have been added to the FATF grey list, increasing the scrutiny given to them for strategic deficiencies in their AML and CFT regimes.
Laos: Addressing Sectors of High-Risk Category
In the case of Laos, FATF pinpointed a number of issues with inadequate regulatory oversight and ineffective risk-based supervision of sectors that are deemed high-risk, like casinos and Special Economic Zones. The country’s Financial Intelligence Unit has been strengthened indeed and bearer shares banned; however, major gaps remain. Being on the grey list means that Laos will be continuing to come under international scrutiny, with situations that could be detrimental to foreign investment and banking relationships.
Nepal: Political and Economic Implications
Nepal’s inclusion in its second grey list began from 2008 onwards. The FATF stated that the nation made little progress in legal and policy reforms to deter financial crimes, thus necessitating its inclusion in the grey list. Following this development came the political upheaval, with opposition parties clamouring for Prime Minister KP Sharma Oli’s resignation.
Meanwhile, Finance Minister Bishnu Paudel was confident to face the FATF’s questions and expressed his hopes for Nepal’s removal from the grey list before the given two-year deadline. Consequently, the grey listing may also economically affect Nepal, including possible drops in foreign investment and greater trouble accessing international financial assistance.
Regional Implications and Way Forward
The FATF’s latest updates tell the story of ongoing challenges and progress in AML/CFT efforts in the Asia-Pacific region; while the lifting of the Philippines off the grey list is a good sign, there is a need to keep watching and effect reforms in the cases of Laos and Nepal.
Countries placed under the grey list must cooperate with the FATF to rectify the strategic deficiencies identified in the agreed timeframes. Laos and Nepal have committed to implementing action plans to rectify these problems, and they will be followed closely with a view of expeditious delisting.
The FATF decisions remind members of the significance of sound financial systems and the global commitment to fighting financial crimes. Nations must continuously evaluate and strengthen their frameworks to conform to international standards in order to maintain the integrity and stability of the global financial system