‘FATF gray list exit to boost entry of foreign investments’

“For businesses, this means renewed trust from foreign investors, who now view the Philippines as a secure and stable destination for capital. We can anticipate increased foreign direct investments, bigger remittance inflows, lower transaction costs and a more competitive market for international partnerships.”

MANILA, Philippines — The country’s exit from the Financial Action Task Force (FATF)’s gray list is expected to strengthen foreign investor confidence, enhance correspondent banking relationships and streamline cross-border transactions.

Banking leaders in the Philippines have expressed their optimism about the positive impact of the gray list exit on the country’s financial sector and economy.

HSBC Philippines president and CEO Sandeep Uppal welcomed the development, emphasizing that exiting the gray list would facilitate faster and lower-cost cross-border transactions, reduce compliance burdens and enhance financial transparency.

“This is a much welcome development for HSBC Philippines, both for our internal and external stakeholders, as we deal with a lot of cross border transactions,” he told The STAR.

“Banking processes will become faster and smoother, hence customer experience will be better,” he said.

Security Bank president and CEO Sanjiv Vohra also told The STAR that the Philippines’ removal from the gray list sends a strong signal of financial stability to international investors.

“For businesses, this means renewed trust from foreign investors, who now view the Philippines as a secure and stable destination for capital. We can anticipate increased foreign direct investments, bigger remittance inflows, lower transaction costs and a more competitive market for international partnerships,” he said.

The FATF gray list includes jurisdictions that require increased monitoring due to strategic deficiencies in their anti-money laundering and counter-terrorism financing (AML-CFT) measures.

The Philippines had been on the list due to concerns about its financial oversight and regulatory frameworks. Exiting the list signifies that the country has made significant progress in strengthening its AML/CFT regime.

Paul Favila, CEO and country head at Citi Philippines, expressed great satisfaction with the country’s removal from the gray list, calling it a highly anticipated development.

He said that Citi had been closely monitoring the situation, including working with the US Embassy, and was confident that all necessary steps had been taken to achieve this outcome.

“The government has stated this is a very important objective because we don’t want any added concerns to the other concerns that we have,” he told reporters in a recent briefing.

Favila said the exit would streamline various processes moving forward. The move could also attract new investors who had previously been hesitant due to concerns about the country’s status.

He also noted that while foreign financial institutions will continue to maintain rigorous compliance measures, the heightened scrutiny against the Philippines that previously slowed transactions may ease due to the exit.

“This could lead to more efficient fund flows in and out of the Philippines, benefiting both businesses and the economy,” Favila added.

One of the most significant implications of the country’s exit from the FATF gray list is the revitalization of correspondent banking relationships.

Many international banks impose stricter due diligence measures on transactions involving countries on the gray list, leading to higher costs and slower processing times. Now that the Philippines is no longer under increased monitoring, banks can expect more seamless transactions and improved access to global financial services.

Vohra said that this development will benefit the banking sector by reducing restrictions and compliance costs. “With fewer restrictions, faster processing times, and reduced compliance costs, we’re now better positioned to facilitate international trade and finance.”

He also said that a strengthened financial reputation can contribute to improved credit ratings and a more stable currency. As a result, businesses and consumers in the Philippines stand to gain broader access to global markets, which would drive sustainable economic growth.

Strategies to prevent future gray listing

Despite the positive milestone, banking leaders recognize the need for continued vigilance to ensure the Philippines does not return to the gray list. Moving forward, local banks must refine their compliance strategies and strengthen collaborations with regulators.

Uppal said it is a broad sectoral responsibility to maintain strong internal controls and cooperation within the financial industry in addressing money laundering.

“As an international bank, we have always been committed to implementing control standards across all jurisdictions we operate in,” he said, adding that the bank is guided by best practices from multiple jurisdictions, including the United Kingdom, European Union, Hong Kong and the US.

The bank has also partnered with the Anti-Money Laundering Council (AMLC) through an information sharing protocol, which allows it to receive intelligence reports that enhance existing controls.

HSBC Philippines is also an active member of the Association of Bank Compliance Officers where member banks help each other raise concerns and challenges with regulators, comply with regulatory requirements and arrange training sessions, among others.

“As part of the private sector, HSBC Philippines remains to be supportive to the regulators, compliant with the AML/CFT obligations and collaborative with other players in the industry to contribute to the collective effort to strengthen the country’s AML/CFT regime,” Uppal added.

Security Bank has also pledged to maintain strong compliance frameworks under the leadership of the Bangko Sentral ng Pilipinas and AMLC. This includes refining risk assessments, integrating advanced transaction monitoring technologies and enforcing strict customer due diligence measures.

“Rather than major changes in strategy, it’s essential to continue collaborating with regulators and law enforcement on current AML strategies. This will help local banks maintain global AML standards,” Vohra said.

“Ongoing cooperation between the private sector and regulators is key to preventing the Philippines from being placed back on the FATF gray list,” he added.

The removal of the Philippines from the FATF gray list is a testament to the concerted efforts of regulators, financial institutions, and policymakers to strengthen the country’s financial integrity.

While this achievement paves the way for increased foreign investment and economic stability, maintaining this progress will require continuous commitment to compliance and transparency.