SEC Commits to Sustainable AML/CFT Reforms as Philippines Moves to Exit FATF Grey List

​The Securities and Exchange Commission (SEC) reinforced its commitment to ensuring the sustainability of reforms that paved the way for the Philippines’ imminent exit from the “grey list” of the global anti-money laundering watchdog Financial Action Task Force (FATF)

​In a landmark development, FATF announced at its October 2024 plenary that “the Philippines has substantially completed its action plan,” composed of 18 items that had kept the country under increased monitoring since June 2021.

Failure to address the remaining action plan items would have put the Philippines at the risk of entering the blacklist. FATF member countries impose restrictions and additional checks, and possibly refusal, of financial transactions with countries in the blacklist. These result in failed transactions, delays, and costs that may be passed on to consumers.

Following its initial determination of the Philippines’ compliance with its action items, the FATF Asia/Pacific Joint Group will now proceed with an on-site visit early next year to verify that the implementation of anti-money laundering and combating of financing of terrorism (AML/CFT) reforms has begun and is being sustained, and that the necessary political commitment remains in place to sustain implementation in the future.

“This significant milestone demonstrates the Philippines’ strong commitment to tackling money laundering and terrorism financing by adopting crucial reforms aligned with global standards and best practices,” SEC Chairperson Emilio B. Aquino said.

“On our part, the SEC will continue investing in digitalizing and optimizing resources to ensure that the reforms we have implemented will be sustainable. We will also remain unwavering in our dedication to transparency and compliance, as we build on our gains and work alongside local and international partners to further strengthen our AML/CFT efforts.”

In assessing the Philippines’ progress in addressing AML/CFT concerns, FATF cited reforms enhancing and streamlining access of law enforcement agencies to beneficial ownership (BO) information and taking steps to ensure that BO information is accurate and up-to-date, and those demonstrating that appropriate measures are taken with respect to non-profit organizations (NPO) without disrupting legitimate NPO activity, among others.

The SEC, under the leadership of Chairperson Aquino, spearheaded such reforms through its active role in the Anti-Money Laundering Council, and in line with the whole-of-government approach adopted by the administration of President Ferdinand R. Marcos, Jr. through the National Anti-Money Laundering and Combating of Terrorism Financing/Counter-Proliferation Financing Coordinating Committee, headed by Executive Secretary Lucas P. Bersamin.

The SEC also contributed to the successful implementation of other key reforms demonstrating risk-based supervision of designated non-financial businesses and professions (DNFBPs); increase in the use of financial intelligence and an increase in ML investigations and prosecutions in line with risk; increase in identification, investigation and prosecution of TF cases; and effectiveness of the targeted financial sanctions framework for TF and proliferation financing.

For one, the SEC mandated the declaration of beneficial ownership in the General Information Sheets of all corporations and made the same available to the Philippine National Police, the Bureau of Internal Revenue, the Philippine Drug Enforcement Agency, the National Bureau of Investigation, and other law enforcement agencies.

In 2021, the SEC prohibited the issuance and sale of bearer shares and bearer share warrants through SEC Memorandum Circular No. 1, Series of 2021 to further promote transparency and curb the misuse of corporations for illicit activities.

To promote corporations’ compliance with their reportorial requirements, the SEC launched in 2023 an amnesty program that eventually helped raise the compliance rate from around 30% to nearly 70% in just two years. The Commission then imposed higher penalties, further underscoring the importance of transparency and disclosure requirements imposed on corporations.

The SEC has strategically invested in technology and human resources to enhance the effectiveness and sustainability of its AML/CFT reforms. Key initiatives include the development of the Electronic Filing and Submission Tool (eFAST) and the Electronic Simplified Processing of Application for Registration of Company (eSPARC), which enable not only ease of registration and compliance but also efficient data exchange. Since 2021, the Commission has received and fulfilled thousands of data requests in support of investigations concerning corporations and individuals.

Additionally, the SEC has partnered with the United Nations Office on Drugs and Crime and Open Ownership for the training of law enforcement agencies on the effective use of beneficial ownership in their investigations.

In parallel, the SEC has developed a sustainable regulatory structure aimed at reducing the terrorism financing risks associated with vulnerable NPOs while minimizing disruptions to the sector's legitimate activities, by assessing NPOs using a risk-based framework aligned with international standards and best practices.

Since 2022, the SEC has successfully conducted compliance audits of NPOs and worked to enhance their compliance, thereby mitigating the risk of exploitation by illicit actors. Additionally, the SEC has engaged in outreach efforts to promote good governance, so far holding over 138 seminars and workshops for 113,000 stakeholders.

Meanwhile, to ensure effective compliance with targeted financial sanctions (TFS), the SEC has established standards for compliance among its covered persons, who have demonstrated significant improvements in risk-based policies and TFS compliance mechanisms.

The SEC also partnered with regulatory bodies, law enforcement agencies, and non-profit organizations to conduct targeted audits, outreach activities, and workshops with financial institutions and DNFBPs to strengthen TFS understanding and implementation.

The AML/CFT measures adopted by the SEC have earned recognition from local and international partners, including the United Nations, for fostering a regulatory environment that effectively deters financial crimes while supporting sustainable growth.

“Looking forward, the SEC is committed to sustaining its AML/CFT reforms through enhanced supervision, continuous audits, and the inclusion of beneficial ownership registry initiatives within its strategic plan for 2023 to 2028,” Chair Aquino said.

“These measures underscore the SEC’s long-term commitment to protecting the financial system against illicit activities while supporting the Philippines’ journey toward a full exit from the FATF grey list.”