Philippines’ Grey List Status Hinders Investments

The Philippines remains on the Financial Action Task Force’s (FATF) grey list, hindering significant investments and undermining investor confidence.

The Paris-based FATF monitors compliance with anti-money laundering (AML) and counter-terrorism financing protocols. I Photo: FATF Facebook

The Paris-based FATF monitors compliance with anti-money laundering (AML) and counter-terrorism financing protocols.

A broker linked to foreign investment firms revealed that three major investors withdrew plans to invest in the Philippines, citing concerns tied to the grey list.

Similarly, an economist highlighted that issues related to environmental, social, and governance (ESG) standards and unresolved legislative gaps, such as bank secrecy laws, are deterring foreign direct investment (FDI).

While the Lower House has passed legislation to address bank secrecy, the Senate has yet to act. The law’s delay has compounded the country’s struggle to comply with FATF standards.

President Ferdinand Marcos Jr. recently emphasized the urgency of exiting the grey list, describing it as a critical step for boosting investor confidence and enhancing economic transformation.

In October 2024, the Bangko Sentral ng Pilipinas (BSP) recorded $529.68 million in net foreign investment outflows, reversing the $1.025 billion net inflows from September. While year-on-year inflows grew by 55.1%, gross outflows surged to $2.01 billion, with 44.2% directed to the United States.

Analysts attribute these outflows to the country’s unresolved AML deficiencies, particularly its restrictive bank secrecy laws, which prevent authorities from investigating flagged accounts.

This legislative gap is seen as a major barrier to the Philippines’ removal from the grey list.

President Marcos expressed optimism about the country’s potential delisting in 2025, citing efforts to address FATF concerns. He underscored the benefits of exiting the grey list, including smoother remittance processes for Overseas Filipino Workers (OFWs) and increased foreign investment.

However, financial experts warn that the legislative delays could exacerbate capital flight. One analyst questioned whether current inflows reflect genuine confidence or are part of a transient strategy by investors seeking quick returns.

With FATF officials set to visit next year, business leaders emphasize the importance of legislative action to address bank secrecy issues.

A comprehensive commitment to AML reforms could secure the country’s exit from the grey list and restore investor trust. For now, the Philippines’ inclusion in the FATF grey list remains a significant impediment to its economic growth and global financial standing.