Moody’s Warns of Ongoing Financial Crime Risks in the Philippines Despite FATF Grey List Removal

Investment bank Moody’s has acknowledged that while the Philippines’ recent removal from the Financial Action Task Force (FATF) grey list represents a major advancement in the fight against financial crime, continued vigilance is necessary in sectors beyond traditional finance, particularly in online gaming and cryptocurrency. Moody’s cautioned that these industries still pose significant risks that could undermine the country’s progress in combating money laundering and terrorism financing.

Choon Hong Chua, Head of the Financial Crime Practice Group for Asia-Pacific and the Middle East at Moody’s, emphasized that exiting the FATF grey list reflects the Philippines’ significant improvements in strengthening its anti-money laundering (AML) and counter-terrorism financing (CTF) frameworks. “The Philippines has enhanced inter-agency coordination and implemented comprehensive reforms,” Chua stated. “However, money laundering risks are not easy to sweep out entirely. Businesses such as online gaming and cryptocurrency would be areas beyond the financial sector that would require continuous oversight to mitigate potential risks.”

The Philippines’ removal from the grey list marks a critical milestone, bringing an end to over three years of heightened scrutiny by the FATF. The country had been placed on the grey list in June 2021 due to 18 identified deficiencies in its AML and CTF systems. After implementing extensive reforms to address these shortcomings, the FATF determined that the Philippines had met all necessary requirements to be delisted. This development not only reinforces investor confidence but also strengthens financial stability in the Philippines, which plays a key role in Southeast Asia’s financial sector.

Despite these improvements, the FATF has urged the Philippines to continue refining its AML and CTF measures, particularly in identifying and prosecuting terrorism financing cases. The organization stressed that although the country has made considerable progress, ongoing efforts are required to ensure counter-terrorism financing policies remain robust without unintentionally hindering legitimate non-profit organizations (NPOs).

The FATF also pointed out that industries such as online gaming and cryptocurrency, which are not subject to the same stringent regulations as traditional financial institutions, present emerging challenges in the fight against financial crime. Due to the ease of cross-border transactions and the anonymity they offer, these sectors are increasingly being exploited for illicit financial activities, including money laundering.

In line with efforts to tighten oversight of the online gaming sector, the Philippines has already taken decisive action by completely banning Philippine Offshore Gaming Operators (POGOs). Additionally, a new legislative initiative has been introduced to examine the risks associated with cryptocurrency. Senator Sherwin Gatchalian has submitted a resolution calling for a reassessment of cryptocurrency use in the country, echoing the concerns raised by Moody’s. Gatchalian emphasized the need for stricter regulations, citing the frequent use of cryptocurrencies in scams and cross-border money laundering operations.

By fLEXI tEAM