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Martial Law in Mindanao: Philippines Struggles to Combat Money Laundering and Terrorism Financing

The ongoing martial law in Mindanao has highlighted the country’s struggle to combat money laundering and terrorism financing. Despite significant improvements in its anti-money laundering and counter-terrorism financing measures, the Philippines still faces challenges in preventing and prosecuting these crimes.

Main Sources of Illicit Proceeds

According to a recent report by the Asia-Pacific Group on Money Laundering (APG), corruption and organized crime are among the main sources of illicit proceeds in the country. The 2017 National Risk Assessment (NRA) revealed that 20% of the annual budget is lost due to corruption, while organized crime groups operate a robust shadow economy, laundering money from:

Drug and human trafficking
Tax crimes
Cybercrime

ISIS-Affiliated Groups’ Fundraising Strategies

The report also noted that ISIS-affiliated groups rely on these predicate offenses and others, such as kidnapping, to raise funds and facilitate their operations. The Philippines’ cash-and-remittance-based economy, under-resourced authorities, and legislative and procedural hurdles further exacerbate the problem.

Need for Improved Coordination and Cooperation

The APG report highlighted the need for improved coordination and cooperation among government agencies, regulatory bodies, and private sector stakeholders to effectively combat money laundering and terrorism financing. While the country has made significant progress in its technical compliance with international standards, there are still challenges in:

Accessing records held by banking institutions protected under bank secrecy legislation
Implementing risk-based supervision

Challenges Faced by Financial Intelligence Unit (FIU)

The report also noted that the Philippines’ FIU, the Anti-Money Launderling Council (AMLC), has received a large number of suspicious transaction reports (STRs) but lacks the necessary resources to thoroughly investigate them. The FIU’s analytical capability is also being improved, but it remains critically understaffed.

Recommendations

The APG report recommended that the Philippines:

Strengthen its financial intelligence capabilities
Improve access to records held by banking institutions
Enhance cooperation among government agencies and private sector stakeholders to effectively combat money laundering and terrorism financing

Martial Law in Mindanao: A Necessary Evil or a Recipe for Disaster?
Philippines’ Fight Against Terrorism Financing Hampered by Lack of Resources
Corruption Remains a Major Obstacle to Effective Anti-Money Laundering Measures in the Philippines

Sources

Asia-Pacific Group on Money Laundering. (2019). Mutual Evaluation Report of the Philippines.
Philippine Government. (2017). National Risk Assessment.