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Diokno says easing bank secrecy not a must to exit FATF ‘gray list’

LEGISLATION to weaken the bank secrecy law would be “welcome” though such an easing is not among the key milestones expected by the Financial Action Task Force (FATF), Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said, noting that effective implementation of anti-money laundering and counter-terrorism financing (AML/CTF) measures are of a higher priority. 

“The Philippines has addressed technical deficiencies, that is adequate AML/CTF laws such as Anti-Terrorism Act (ATA) of 2020 and Republic Act 11521 which further amends the Anti-Money Laundering Act. They are already in place. Thus, there are no other legislative measures expected as Congress has already delivered what was required of them,” Mr. Diokno, who is also the Anti-Money Laundering Council (AMLC) chairman, said in an online briefing Thursday. 

“The proposed amendments to the bank secrecy law primarily aim to assist the BSP and other supervisors and law enforcement agencies since the Anti-Money Laundering Council (AMLC) is already exempt from the effects of the bank deposit secrecy laws… Nevertheless… any action by Congress that can dilute the bank deposit secrecy laws, is a welcome development in the fight against money laundering and terrorism financing,” he added.

House Bill 8991 seeks to allow the central bank to look into the accounts of bank officials and employees when there are sufficient grounds for fraud, subject to approval from the Monetary Board. The bill is pending at the committee level. 

Mr. Diokno has noted that the International Monetary Fund identified the Philippines and Lebanon hindering anti-money laundering efforts via strict bank secrecy rules. He noted that Lebanon eased its bank secrecy law in May 2020, leaving only the Philippines as the last holdout.

The FATF on Friday added the Philippines to a “gray list” of jurisdictions that are subject to increased monitoring to ensure they make progress in implementing AML/CTF measures.

This listing comes with the responsibility to submit progress reports thrice a year, with the Philippines handing in its first report to the global dirty money watchdog in September. Failure to show effective implementation may prompt the FATF to subject the Philippines to countermeasures that may impact the flow of funds, including investment and remittances.

“The country has been identified as a ‘jurisdiction under increased monitoring’ generally because the Philippines will need time to implement new AML/CTF laws, regulations and other relevant issuances to demonstrate their effectiveness,” Mr. Diokno said.

Senator Grace S. Poe-Llamanzares, who chairs the Committee on Banks and Financial Intermediaries, said the panel will ask the AMLC to submit a report to the Senate on efforts and challenges in implementing AML/CTF measures.

“We expect a substantial update from the AMLC on the concrete steps and direction we are taking to ensure progress on our compliance,” Ms. Poe said in a statement Thursday. She noted remittances sent by overseas Filipino workers should be spared undue costs and delays, a possible outcome when countermeasures are imposed on the Philippines.

Mr. Diokno said he has not yet observed any changes to the cost of doing business since the country’s inclusion on the gray list.

“The BSP will continue to monitor developments in this space and closely engage industry to provide necessary guidance and assistance to our supervised financial institutions,” he said.

“We are confident that the Philippines will exit the gray list by January 2023. The Philippines will actively work with the FATF and will swiftly resolve the identified deficiencies within the timeframe through the cooperation of all agencies concerned,” Mr. Diokno added.

Republic Act 11521 which gave the anti-money laundering law more teeth, went into force on Jan. 29, only days before the Feb. 1 deadline set by the FATF to show tangible progress on AML/CTF issues. Republic Act 11479 or ATA was passed in July 2020, introducing stricter regulation of terrorism and proliferation financing.

The FATF will monitoring the implementation of 18 action plans with timetables of 12-18 months for each outcome. AMLC Executive Director Mel Georgie B. Racela has said these particular action plans are confidential and will involve various government agencies.

“Should the Philippines fail to meet the deadlines in accomplishing the 18 action items, the FATF may consider calling on countries to impose countermeasures against the Philippines. Let me make this very clear, accomplishing these 18 action items should be the concern of the entire country,” Mr. Diokno said.

Executive Order 68 in 2018 created the National Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Coordinating Committee (NACC) which has laid down the Philippine strategy for 2018-2022. It involves the National Bureau of Investigation, the Philippine National Police, the Philippine Drug Enforcement Agency, and the Philippine Amusement and Gaming Corp. and others. — Luz Wendy T. Noble

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