Grey List Philippines Financial Markets Activity PDF

Grey List Philippines Grey listing, financial term set by the Financial Action Task Force (FATF) puts country under stricter economic regulations. It means the country does not completely comply FATF’s standards to combat money laundering and terrorist...

Grey List Philippines Grey listing, financial term set by the Financial Action Task Force (FATF) puts country under stricter economic regulations. It means the country does not completely comply FATF’s standards to combat money laundering and terrorist financing, but is earnestly trying to. According to Chen (2024) Money laundering is an illegal activity that makes large amount of money generated by criminal activity, like drug trafficking or terrorist funding, such thing makes them looks from legitimate source. The money from the criminal activity is considered dirty, and makes them look clean through the process “launders” hence the name. Financial Institution employ anti-money laundering (AML) policies to detect and avoid or prevent such activities. Stated by Kagan (2024) Terror Financing is a three-step process of collecting, transmitting, and distributing funds coming from terror activities, without noticing it by the law enforcement. It involves raising money, either through illegal or legal channels, and laundering it from financial system to hide its origin and destination. And lastly funds are distributed to terror cells, to buy weapons, pay for suppliers, or advance the group goals. Law Republic Act No. 9160, otherwise known as the “Anti-Money Laundering Act of 2001” (AMLA), to protect the integrity and confidentiality of bank accounts and to ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity. Difference between Grey, Black, and White Listing Greylist- A country that is working with FATF to develop better action plans for AML and CFT (Combating the Financing of Terrorism), but does not currently meet its standards. Whitelist- A country that is compliant with AML and CFT guidelines, and actively working to maintain its compliance Blacklist- a country does not meet FATF standard for AML and CFT programs, and not working to improve or any effort to meets those criteria.  According to Philippines Daily Inquirer the Philippines has still not yet exit “Grey List” of FATF, which urged the country to address its insufficient defense against money laundering and terrorist financing. Meaning the Philippines is still under “increased monitoring,” specifically its development in resolving deficiencies within agreed time frames. FAFT stated, being on the list can restrict cross-border transaction and create reputational. Philippines is on the list since June 2021. What they trying is to avoid being to the “Black List”, which will result in tighter regulations and more expensive remittances, a lifetime for many Filipinos. Marcos bid to exit Grey List by October 2024. Effects of Greylist to the Philippines The effects of both money laundering and terrorist financing are severe and extensive. It can create international and local impact on business, economies, and nations. Sudden changes may happen in the assets and liabilities of financial institution that are unknowingly used in money laundering, which can make risk for the institution. The news or the money laundered of these financial institution will draws the attention of public authority. In that case the pressure on auditing will arise, and the institution reputation will be damaged. And bank and non-bank financial institution are have important role in the country economic development. Such financial institution consist of domestic capital and foreign capital to benefit economic development. Money laundering harm such development if financial institution employees carry out a relationship between money laundering and fraudulent activities, if this criminal activities occur in high frequency, criminal use financial institution to drain the money they obtain and negative affects them by customer, investors, and even the community will lose their trust on these institution. According to Anderson, Cohen, Arellanes (2023) being listed can restrict cross-border transactions, lead to harder for a state obtaining credit, and limits inward foreign investment. And analysis data between 2004 and 2014 shows that Grey-Listing by FAFT appears to lead to a reduction of up to 10% in payments received compare to unlisted countries. Analysis of bank inflow from 2010 to 2015 listing can significantly decrease cross border liabilities of approximately 16%. In recent study, it can effect also the capital inflows of a listed country and results decrease of investment inflows on average by 3.6% of GDP. Lastly due to this, it increase the cost due to enhance diligence, like corporate intelligence report from an external provider sourced and additional time for requirements from compliance team and relevant relationship managers. Grey-Listing can damages not only the economic of the country, people, or reputation of institution, but also the country itself. Cited Literature Chen J. (2024). The Prevention of money laundering has become international. Investopedia effort.https://www.investopedia.com/terms/m/moneylaundering.asp Kagen J. (2024). Combating the Financing of Terrorism (CFT): Definition, Benefits and Cost. Investopedia https://www.investopedia.com/terms/c/combating-financing-terrorism- cft.asp#:~:text=Terror%20financing%20is%20a%20three,the%20attention%20of%20law%20enf orcement. The Anti-Money Laundering Act of 2001 (R.A NO.9160) http://www.amlc.gov.ph/about- us#:~:text=9160%2C%20otherwise%20known%20as%20the,proceeds%20of%20any%20unlaw ful%20activity. Unit21. https://www.unit21.ai/fraud-aml- dictionary/greylisting#:~:text=FATF’s%20other%20lists%3F- ,What%20is%20Greylisting%3F,but%20is%20earnestly%20trying%20to. Philippines Daily Inquirer (2024, June 29). PH still on the money laundering “gray list”. INQUIRER.NET https://business.inquirer.net/466155/ph-still-on-global-money-laundering-gray- list Anderson J. Cohen J. Arellanes W.L. (2023, October 30). The Economic Impact of FAFT Grey- listing. Whitecase. https://www.whitecase.com/insight-alert/economic-impact-fatf-grey-listing