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Banks Brace For FATF Sanctions In Philippines

by Mary Swire, Tax-News.com, Hong Kong

17 September 2001

According to an article in the Philippine Star, local banks are warning that trade, investments, credit access and even travel could be hurt once industrialized nations carry out their threat to levy sanctions over the country’s failure to outlaw money laundering.

The country is facing a Sept. 30 deadline to pass the proposed law or face sanctions from the Financial Action Task Force (FATF), a Paris-based anti-money laundering initiative by industrialized nations.

The Bankers Association of the Philippines (BAP) said it anticipated both trade and non-trade related sanctions from Oct. 1 unless Congress redoubled efforts to pass the bill when it resumes sessions on Sept. 24.

Sanctions that are threatened on non-trade transactions include the following:

  • Remittances of individuals to relatives and other parties in the US or FATF member country may be scrutinized to determine the legality of such transactions from a US-FATF member country perspective, resulting in unnecessary delay in processing and final payment to the beneficiary. Conversely, remittances of individuals based in the US-FATF member country into the Philippines will also be scrutinized.
  • Scrutiny of deposit accounts maintained by Filipino citizens in the US-FATF member country that could result in unnecessary questioning, and in extreme cases, closure of accounts.
  • Filipino citizens travelling to these countries will be subjected to questions regarding the amount of currency being brought into that particular country.
  • Failure to declare might lead to the confiscation of the currency, or deportation of the individual. In the US for instance, those bringing in more than $10,000 in cash or traveller’s checks should declare this at the port of entry.
  • Issuance of non-immigrant visas may be delayed due to the possibility of increased questions at the application stage regarding source of funds for travel, reasons for entering the US or other FATF member countries.

Trade transactions will also likely to suffer needless delays and other inconveniences. For instance, there could be scrutiny of importation made by Philippine resident companies, particularly with regard to modes of payment that could lead to delays in the processing of payments and delays in the delivery of goods. Also, incoming remittances from exports may face scrutiny in remitting countries that could result in delayed payments for exporter goods.

At the same time, governments of FATF-member countries could issue warnings within their countries to exercise extreme caution when investing in projects or companies in the Philippines as they may unwittingly be involved in money laundering or other illegal activities. To proceed with such investments, regulators may subject the investment and profits from such investment to increased scrutiny.

Moreover, the US and other FATF member countries may decide to limit the provision of grants to the Philippines, as well as in supporting Philippine requests for loans from international agencies such as the IMF.

The Congress is now trying to rush the passage of an anti-money laundering bill while Bangko Sentral ng Pilipinas Gov. Rafael Buenaventura and Finance Secretary Jose Isidro Camacho are trying to get a reprieve from the FATF officials in Japan. They will try to convince them that a law will be passed shortly.

The salient points of the framework of the bill include criminalizing money laundering, setting up a monitoring system for reporting of covered transactions, designation of implementing agencies, limited access to deposits as it relates to money laundered accounts and willingness to provide information and cooperation.

The timely passage of the bill which aims to criminalize the traffic of funds from illegal activities is crucial for the Philippines to avoid stiff sanctions that could eventually cripple the economy.

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