Legal Brief: Global Pressure Drives AML Reforms in the Philippines, Pakistan

By Silas Bartels, Legal Writer

Editor’s note: In the latest installment of our series, the legal team reviews AML developments undertaken by the Philippines and Pakistan following evaluations by the Asia/Pacific Group on Money Laundering.

Despite challenges stemming from the COVID-19 pandemic, the Asia/Pacific Group on Money Laundering has continued to evaluate the anti-money laundering and counterterrorist financing regimes of nations across the region on behalf of the Financial Action Task Force, or FATF.

APG issued a follow-up report on Fiji’s AML compliance at the beginning of February after re-rating the AML and CTF frameworks of both Sri Lanka and Bangladesh in December.

After a 2019 evaluation found Pakistan’s defenses against financial crime lacking in several areas, APG noted in a follow-up report in September 2020 that the country’s assessment of money laundering and terrorist financing risks had markedly improved.

The follow-up report came a month after the National Assembly of Pakistan passed two amendments to ensure that limited liability partnerships and companies collect and hold readily available beneficial-ownership information. The latter amendment separately bans bearer shares after the APG noted their vulnerability to criminal exploitation.

Seven months earlier, in February 2020, Pakistan adopted legislation to align itself with FATF’s recommendations, update how money laundering is punished as a criminal offense and authorize the country’s financial intelligence unit to seek membership in the Egmont Group of FIUs.

In November 2019, the State Bank of Pakistan published guidance on managing the risks of trade-based money laundering and terrorist financing by developing internal controls, adequate know-your-customer procedures and trade-related risk profiles. The SBP gave firms until April 30, 2020, to comply with the obligations, then extended the deadline by six months.

The SBP and Pakistan’s Federal Board of Revenue published several new and amended regulations in 2020 aimed at enhancing compliance with global standards, including AML rules for real estate agents, accountants and other designated non-financial businesses and professions, and AML and counter-proliferation regulations for all supervised entities.

Most recently, on Jan. 27 of this year, the SPB further amended its AML and counter-proliferation rules to provide more clarity on the implementation of certain measures recommended by FATF.

APG separately evaluated the Philippines in 2019 and re-rated the country’s compliance with three of FATF’s recommendations in September of last year. On Nov. 3, 2019, less than a month after APG published a report on its 2019 evaluation, Sen. Francis Pangilinan introduced the Deposits Disclosure Act to improve the transparency of deposits and combat financial crimes enabled by bank secrecy.

In February 2020, the International Monetary Fund published a report on economic developments in the Philippines, reiterating that the country risks inclusion on FATF’s list of jurisdictions with serious AML deficiencies despite its efforts to staunch the flow of illicit proceeds through its gaming sector.

International pressure and the prospect of being listed prompted a flurry of actions, including calls for new legislation to grant the Anti-Money Laundering Council, or AMLC, additional powers to investigate suspicious transactions relating to real estate developers and online gaming firms.

On July 3, 2020, President Rodrigo Duterte signed the Anti-Terrorism Act into law, strengthening the Philippines’ policies against terrorism and bringing the country into compliance with U.N. Security Council resolutions against the crime.

The AMLC noted that the legislation constituted a direct response by Philippine lawmakers to the APG’s criticism the prior year.

Lawmakers pushed for additional AML reforms in October, weeks after the AGP’s follow-up report found that the Philippines still rated as compliant with only eight of the 40 FATF Recommendations.

Sen. Imee Marcos emphasized that the Philippines could face financial hardship by failing to amend the Anti-Money Laundering Act, while Sen. Grace Poe stressed the importance of amendments that would categorize tax crimes as money-laundering predicates, extend AML rules to real estate developers, and grant the AMLC more power to impose sanctions.

Duterte signed the Act Further Strengthening the Anti-Money Laundering Law on Jan. 29. The AMLC followed two days later by publishing new regulations on targeted financial sanctions provided by the new legislation, and issuing a public notice on Feb. 9 to inform real estate market participants of their new AML obligations.

Topics : Anti-money laundering , Counterterrorist Financing
Source: Philippines , Pakistan
Document Date: February 23, 2021