The Financial Action Task Force (FATF), in its 2006 report "Annual Review of Non-Cooperative Countries and Territories 2005-2006," indicates that owing to amendments in the 2001 Anti Money Laundering Act (AMLA), the FATF removed the Philippines from its list of Non-Cooperative Countries and Territories in 2003. The report adds that subsequent changes enacted by the Philippines' authorities resulted in the FATF ending its formal monitoring of the Philippines in 2006. In its 2004 Article IV Consultation report (published in 2005), the International Monetary Fund points to a number of laws and amendments that are in place in order to prevent the financial sector from being used as a conduit of money laundering. The U.S. Department of State, in its 2007 "International Narcotics Control Strategy Report," notes that the Philippines has made significant progress in recent years, but points to several deficiencies in the anti-money laundering/combating the financing of terrorism regime, most notably the lack of an anti-terrorism law. Furthermore, the report notes that terrorist financing is only broadly criminalized and the Philippines has no comprehensive legislation on freezing of assets used for criminal activity. The AMLA established a Financial Intelligence Unit (FIU), the Anti Money Laundering Council (AMLC), which is part of the Egmont Group. According to the FATF's 2006 report, the AMLA has signed Memoranda of Understanding with other foreign FIUs. However, there is insufficient information publicly available as to Philippines compliance with the FATF's 40 Recommendations and 9 Special Recommendations.

General Overview

According to the Financial Action Task Force's (FATF) 2006 "Annual Review of Non-Cooperative Countries and Territories 2005-2006," the Philippines was removed from the list of Non-Cooperative Countries and Territories (NCCT) after having implemented amendments in 2003 to the 2001 Anti-Money Laundering Act which improved the Philippines anti-money laundering (AML) regime. Furthermore, the report notes that the FATF ended its formal monitoring of the Philippines in February 2006. However, information provided in the U.S. Department of State's (DoS) 2007 "International Narcotics Control Strategy Report 2007" indicates that the Philippines lacks an anti-terrorism law and notes that terrorist financing is only broadly criminalized. The report also notes that the Philippines has no comprehensive legislation on freezing and forfeiture of assets.

In 2001 the Government of the Republic of the Philippines (GORP) enacted the Anti-Money Laundering Act, according to the U.S. DoS 2007 report. The DoS further noted that in 2002 the Philippine government enacted the implementing rules and regulations (IRR) for the AMLA, thereby establishing an anti-money laundering (AML) regime. However, the 2007 U.S. DoS report cautioned that the FATF has assessed this legislation to be inadequate and recommended that the Philippines amend the laws to align them more closely with international practices. The DoS notes adds that the GORP took these FATF recommendations to heart and enacted amendments to the AMLA (2001) in March 2003.

The AMLA has criminalized money laundering and established the Anti-Money Laundering Council (AMLC) - the Philippines' Financial Intelligence Unit, according to the FATF's 2006 report. In 2007, the U.S. DoS noted that the AMLA "also imposed identification, record keeping, and reporting requirements on banks, trusts, and other institutions regulated by the Central Bank." The DoS report went on to add that the amendments to the AMLA (Republic Act No. 9194 of March 2003) "lowered the threshold amount for covered transactions from 4,000,000 pesos to 500,000 pesos; expanded financial institution reporting requirements to include the reporting of suspicious transactions, regardless of amount; and authorized the Central Bank pf Philippines (Bangko Sentral ng Pilipinas, or BSP) to examine any particular deposit or investment with any bank or nonbank institution in the course of a periodic or special examination."

The AMLC became part of the Egmont group in 2005, according to the FATF's 2006 report. In its 2007 report, the U.S. DoS noted that the authorities have "made significant progress enhancing and implementing its amended anti-money laundering regime," but cautioned that there are still issues that need to be addressed in terms of establishing an effective AML regime. The DoS report mentioned that, to achieve compliance with international standards, the Philippines authorities must enact and implement an anti terrorism law, criminalize the financing of terrorism, and enact more comprehensive legislation regarding freezing of assets. In addition, the BSP should be given adequate authority and power to sanction non complying financial institutions.

The Principles

1. Legal Systems and Related Institutional Measures

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Although there is descriptive information regarding the Philippines anti-money laundering (AML) and Combating the Financing of Terrorism (CFT) regime, there is insufficient information publicly available as to the country's compliance with this Principle. The Anti-Money Laundering Act (AMLA) of 2001 criminalized money laundering and established the Anti-Money Laundering Council (AMLC), which is the Philippines' Financial Intelligence Unit. The U.S DoS's 2007 report, "Money Laundering and Financial Crimes," notes that the 2001 AMLA was insufficient to comply with international standards, and adds that, in order for the Philippines to be removed from the FATF's NCCT list, it had to make significant amendments to the AMLA. The DoS report further notes that amendments to the AMLA that were passed in 2003 permitted the Philippines' removal from the NCCT list. The 2006 FATF report indicates that in February 2006, following changes that were enacted by the Philippines' authorities, the FATF ended formal monitoring of the country.

The drawbacks pointed out by the 2007 U.S. DoS report as to Philippines anti-money laundering (AML) and Combating the Financing of Terrorism (CFT) regime were that the country had not yet enacted an anti-terrorism law and had only broadly criminalized the financing of terrorism. The report adds that, although the Philippine House passed an anti-terrorism bill in 2006, the legislation still awaits approval by the Senate. In the meantime, however, the government has taken measures that broadly address the criminalization of terrorist financing which includes the Republic Law and the Revised Penal Code. The DoS report further states that the Philippines' rules on freezing and forfeiture of funds are not very comprehensive. Nonetheless the report indicates that the AMLC has the power to freeze funds with the approval of the Court of Appeals. Furthermore, other government authorities, such as the Bureau of Customs and the Philippine National Police, are permitted to temporarily seize property that was used for criminal purposes. According to the U.S. DoS report of 2005, the Supreme Court has issued a new criminal procedure rule covering civil forfeiture, asset preservation, and freeze orders that provides clear guidelines to the AMLC on the procedure regarding freezing of funds.

The AMLC is composed of the Governor of the Central Bank, the Commissioner of the Insurance Commission, and the Chairman of the Securities and Exchange Commission. The AMLC is established as an independent agency by law and, in the words of the U.S. DoS report of 2007, it is responsible for "receiving, maintaining, analyzing, and evaluating covered and suspicious transactions." In its 2006 report, the DoS noted that the AMLC and other law enforcement authorities made progress in tracking and seizing illicit funds. According to the DoS's 2007 report, "the AMLC had received more than 6,200 suspicious transaction reports (STRs) involving 13,474 suspicious transactions, and had received over 72 million covered transaction reports (CTRs)." The report adds that there are presently "90 prosecutions underway in the Philippine court system that involved AMLC investigations or prosecutions, including 33 for money laundering, 22 for civil forfeiture, and the rest pertaining to freeze orders and bank inquiries." According to this 2007 report, in 2006 the Philippines recorded its first money laundering conviction.

The 2007 U.S. DoS report notes that the Philippines is a party to the 1988 United Nations (UN) Drug Convention, the UN Convention against Transnational Organized Crime and to all 12 international conventions and protocols related to terrorism, including the UN International Convention for the Suppression of the Financing of Terrorism.

2. Preventive Measures - Financial Institutions

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There is insufficient information publicly available as to Philippines compliance with this Principle. The U.S. DoS report of 2007 notes that the AMLA imposed "identification, record keeping, and reporting requirements on banks, trusts, and other institutions regulated by the Central Bank, insurance companies, securities dealers, foreign exchange dealers, and money remitters." The report further states that the 2003 amendments to the AMLA resulted in several measures that resulted in the Philippines' removal from the FATF's NCCT list. These legislative enhancements include lowering the threshold for covered transactions from 4,000,000 pesos to 500,000 pesos; including the reporting of suspicious transactions regardless of amount; giving the BSP the authority to examine all or any deposit with banks and nonblank institutions; and ensuring institutional compliance with the AMLA. According to the report, financial institutions are required to maintain records of transactions for a period of five years.

The DoS report adds that the Anti-Money Laundering Council received 6,200 suspicious transaction reports (STRs) and over 72 million covered transaction reports (CTRs). However, the report indicates that there is still uncertainty as to whether all financial institutions are fully complying with AML requirements, since the BSP lacks any formal enforcement mechanism with regard to compliance with reporting requirements. The report points to the Philippines' "privacy issues," which disallow the BSP's examination of documents of covered institutions. Rather, it is required to wait on the AMLC review process, causing delays in the process. Further, the AMLA and the bank secrecy act, exempts officers, employees, representatives, agents, consultants, and associates of financial institutions from civil or criminal prosecution for reporting covered transactions.

In its 2004 "Report on the Observance and Standards and Codes (ROSC)," the International Monetary Fund (IMF) notes that the BSP does have measures in place to prevent money laundering in banks. In its 2004 Article IV Consultation report (published in 2005) the IMF points to a number of laws and amendments that are designed to prevent the financial sector from being used as a conduit of money laundering. Apart from the Anti-Money Laundering Act (as amended), the BSP has issued policy guidelines to ensure banks have anti-money laundering checks in place.

3. Preventive Measures - Designated non-Financial Business and Professions

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The 2007 U.S. DoS report states that, starting in 2006, "the AMLC requested the chain of casinos operated by the state-owned Philippine Amusement and Gaming Corporation (PAGCOR) to submit covered and suspicious transaction reports, but it has not yet done so." However, there is insufficient information publicly available as to Philippines compliance with this Principle.

4. Legal Person and Arrangements & Non-Profit Organizations

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There is insufficient information publicly available as to the Philippines' compliance with this principle. However, in its 2007 report, the U.S. DoS notes that there are over 5,000 nongovernmental organizations (NGOs) in the Philippines that are not covered under the AMLA. However, there is insufficient information publicly available as to Philippines compliance with this Principle. The DoS report adds that there is little oversight or regulatory control over the setting up and operations of charitable and nonprofit entities, either by the Securities and Exchange Commission (SEC) or other regulatory bodies. The report states that "because of their ability to circumvent the usual documentation and reporting requirements imposed on banks for financial transfers, NGOs could be used as conduits for terrorist financing without detection." Moreover, these NGOs do not practice prescribed accounting rules. Hence, there is little or no verification of their financial records. However, the report does mention that the authorities are aware of the growing problems within this sector and are working towards implementing measures to address it.

5. National and International Co-operation

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The Philippines is a party to the 1988 United Nations (UN) Drug Convention, the UN Convention against Transnational Organized Crime and to all 12 international conventions and protocols related to terrorism, including the UN International Convention for the Suppression of the Financing of Terrorism. The U.S. DoS's 2007 report notes that, although the AMLC requires a court order to freeze funds of terrorist organizations that appear on the UN 1267 Sanctions Committee's consolidated list and the list of Specially Designated Global Terrorists designated by the United States, in the past the AMLC has frozen funds at the behest of the UN Security Council, the United States, and other foreign governments. The report also indicates that the Philippines is a member of the Asia Pacific Group on Money Laundering (APG) and the AMLC is a member of the Egmont group. In its 2006 report, the FATF noted that the Philippines has signed Memoranda of understanding with several foreign Financial Intelligence Units. In spite of the above information, however, there is insufficient information publicly available regarding Philippines compliance with this Principle.