Countries/Jurisdictions of Primary Concern - Philippines
The Republic of the Philippines is integrated into the international financial system but is not a regional financial center. The Philippines is increasingly becoming an important financial player in Asia, with an economy growing steadily at 6 percent annually. Money laundering is a serious concern due to the Philippines’ international narcotics trade, high degree of corruption among government officials, trafficking in persons, and the high volume of remittances from Filipinos living abroad. The Philippines faces challenges from sophisticated transnational drug trafficking organizations (DTOs), such as the “Hong Kong triads,” who use the Philippines as a drug transit country for cocaine and methamphetamine. These DTOs use the Philippine banking system, commercial enterprises, and particularly casinos, to transfer drug proceeds from the Philippines to offshore accounts. Other transnational criminal organizations, including groups based in Africa, are expanding their presence throughout East Asia and will likely continue to exploit the Philippine financial system to launder and transfer drug trafficking proceeds. Insurgent groups in the Philippines’ south engage in money laundering through ties to organized crime, deriving funding from kidnapping for ransom and arms trafficking, and potentially narcotics.
The Philippine Amusement and Gaming Corporation (PAGCOR), a government-owned entity, issues licenses to operators and regulates the rapidly expanding Philippine gaming industry. PAGCOR uniquely operates its own casinos in addition to serving as the industry’s overseer. PAGCOR reported gross revenues equivalent to about $920 million for calendar year 2014. Regionally, organized crime groups, such as Chinese triads, have infiltrated casino operations and have facilitated prostitution, narcotics trafficking, loan-sharking, and suspect junket and VIP gaming tours. International experts and observers note that the Philippine casino industry is a weak link in the country’s AML/CFT regime.
The high volume of formal and informal remittances from overseas Filipinos provides a channel for money laundering. Cash remittances, from the more than 10 million Filipinos working and/or residing abroad, are equivalent to 8 to 9 percent of the gross domestic product (GDP) of the Philippines. Improvements in the financial services industry now enable banks and official money remitters to capture approximately 90 percent of the remittances sent by the diaspora.
The Philippines is a leader in the use of cell phone technology for funds transfers. The Government of the Philippines uses this technology for government-to-persons payments, such as its Conditional Cash Transfer Program, and supports its development for broader financial inclusion efforts. The technology systems that telecommunications firms use to facilitate financial transfers are subject to Philippine Central Bank study and approval.
The Philippine Economic Zone Authority (PEZA) regulates about 326 economic zones throughout the country (216 of these are classified as “IT Parks and Centers” due to the Philippines’ status as a haven for call centers). Local governmental units, the government-owned Bases Conversion Development Authority, and the Subic Bay Metropolitan Authority regulate a handful of other zones. The PEZA economic zones are well regulated; however, smuggling is a concern for the locally-regulated zones. In addition, the Philippine Central Bank exercises regulatory supervision over three offshore banking units and requires them to comply with reporting provisions and other banking rules and regulations.
According to Global Financial Integrity, the Philippines is ranked number eight in the world regarding the amount of illicit outflows primarily due to abusive trade mis-invoicing, a form of trade-based money laundering (TBML). Under-invoicing or undervaluation of imports is also a significant problem in the Philippines. Recently, there also have been instances of over-valuation of imports in the Philippines.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: YES
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: List approach
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Universal, commercial, thrift, rural, and cooperative banks; offshore banking units and quasi-banks; pawn shops and dealers in precious metals and stones; insurance, reinsurance, and pre-need companies, agents, and brokers; mutual benefit associations and holding companies controlling any authorized insurer; trust funds/entities; securities broker/dealers, sales representatives, consultants, and managers; investment houses and mutual funds; foreign exchange dealers, money changers, remittance/transfer agents, and electronic money issuers; entities dealing in currency, financial derivatives, cash substitutes, and similar monetary instruments; and lawyers and accountants
Number of STRs received and time frame: 133,046: January 1 - October 31, 2015
Number of CTRs received and time frame: 30,844,366: January 1 - October 31, 2015
STR covered entities: Universal, commercial, thrift, rural, and cooperative banks; offshore banking units and quasi-banks; pawn shops and dealers in precious metals and stones; insurance, reinsurance, and pre-need companies, agents, and brokers; mutual benefit associations and holding companies controlling any authorized insurer; trust funds/entities; securities broker/dealers, sales representatives, consultants, and managers; investment houses and mutual funds; foreign exchange dealers, money changers, remittance/transfer agents, and electronic money issuers; entities dealing in currency, financial derivatives, cash substitutes, and similar monetary instruments; and lawyers and accountants
money laundering criminal Prosecutions/convictions:
Prosecutions: 0: January 1 - October 31, 2015
Convictions: 0: January 1 - October 31, 2015
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
The Philippines is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/countries/n-r/philippines/documents/mutualevaluationofthephilippines.html
Enforcement and implementation issues and comments:
The Anti-Money Laundering Council (AMLC), the Philippines’ financial intelligence unit, continued its efforts throughout 2015 to secure passage of an amendment to include casinos in the Anti-Money Laundering Act (AMLA). Progress has been slow as national elections near and because of extensive lobbying from the casino industry. Considering unsuccessful attempts in the past, the inclusion of casinos under the Philippines’ AML/CFT regime may not occur absent sustained international pressure.
The Philippine Congress did not approve the inclusion of real estate agents in the expanded list of covered institutions under amendments to the AMLA. Instead, a provision authorizes the AMLC to require reports and other documents from the government’s Land Registration Authority and the Registries of Deeds. The AMLC and the government agencies concerned have yet to finalize operational and technical details/arrangements to implement reporting of real estate transactions.
The AMLC has pursued efforts to collect additional information from dealers of precious stones and metals. However, despite inclusion as covered entities in the 2013 AMLA amendments, these dealers have not begun sending reports to AMLC. There is no single government authority regulating jewelry dealers. The industry’s current status poses challenges for coordinating, monitoring, and enforcing their obligations under the AMLA. AMLC continues to consult with the industry association on operational and technical details/arrangements to implement reporting and other requirements.
As a form of customs fraud, TBML severely impacts revenue collection. TBML is also commonly used around the world in various forms of underground financial systems. According to a 2015 survey, the Philippines Bureau of Customs is believed to have major corruption issues. Corruption undoubtedly enables some fraudulent trading practices. The Philippines has a new Trade Transparency Unit (TTU) that uses data and analytics to spot anomalies in trade that could be used to trigger TBML investigations.
The Bureau of Customs remains a paper-driven organization. The Bureau of Customs’ lack of automation for import transactions continues to foster an organization rife with corruption. The customs brokers operate within the seaport facility with impunity. Change within the Bureau of Customs has been slow as there are underlying forces, both internal and external, to prevent any substantive changes.
The non-profit sector remains without effective oversight as there is no single supervisory authority. Consequently, monitoring is weak due to insufficient coordination and limited resources of regulatory bodies.
Limited human and financial resources coupled with corruption and lack of will constrain enforcement. Only 49 AML cases have been filed since the AMLC began operating in 2001. Historically, the volume of prosecutions and convictions has been virtually nil, and once again in 2015, there were no prosecutions or convictions. Philippine agencies charged with AML/CFT authority continue to receive assistance to build institutional and technical capabilities for monitoring, investigation, prosecution, and enforcement. The Government of the Philippines should demonstrate its political will to advance its AML/CFT regime by enforcing its laws, including by taking steps to enforce reporting and other AML/CFT requirements for real estate agents, precious metals and stones dealers, and jewelers. The government should include casinos and other forms of gaming in its AMLA. The Philippines also should provide effective supervision of non-profit organizations. The Government of the Philippines should combat corruption within customs and provide the necessary resources and mandate to its TTU.