ON JUNE 8, I wrote an article in which I mentioned that the Philippines ranks 115th (out of 172 countries) in Transparency International’s corruption league table. I suggested that the Philippines should also rank around 115th if a financial sector corruption league table were developed.
According to Paris-based Financial Action Task Force (FATF) we are, by international comparisons, in much worse shape than I believed.
On June 25, the Philippines, South Sudan, Haiti, and Malta were put on the ‘gray-list’ of countries which are perceived to lack the financial controls necessary to operate with satisfactory probity.
This is disappointing. We were put on the gray list several years ago but by 2013 we were deemed to have strengthened our legislative framework and controls sufficiently to be taken off this list. Therefore, the opinion of the FATF is that we have gone backwards in the last few years.
What are the consequences?
They include the fact that funds entering the Philippines may well be under more scrutiny than before. For example, remittances from OFWs may be subject to irksome challenges so that it could be necessary to prove that the money has been obtained legally.
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What can be done?
The Security and Exchange Commission (SEC) has proposed that our stringent bank secrecy law should be relaxed. This could help to allay criticism that secrecy can be used as cover to hide illicit funds.
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I wonder if the Philippines’ involvement in the Wirecard accounting fraud scandal has contributed to our lower stranding in the international financial community. In this scandal, P100 billion ($2 billion) was involved. BPI and BDO were both participants because its officials created fake documents which purported to show, untruthfully, that large funds were deposited with these banks.
It is gratifying that Bangko Sentral ng Pilipinas (BSP) is meeting the challenge of demonstrating to FATF that we should be delisted from the ‘gray list’. BSP Governor Benjamin Diokno has said that passing compliant legislation is not enough. ‘We have to demonstrate effectiveness’, he said.
Diokno also said that a government-wide approach was needed. This has been shown in the Wirecard problem where the NBI led the way with significant fact-finding. BSP can, however, be criticized for not getting hold of the problem earlier and with more decisiveness.
We need success stories where fraudsters are caught quickly./PN
