On February 21, 2025, the Philippines was finally removed from the Financial Action Task Force’s (FATF) grey list where it had been for nearly four (4) years. The government celebrated the country’s removal and congratulated itself for its efforts to combat terrorist financing and money laundering.
But is following FATF standards and being removed from its lists really beneficial for the Philippines? Or is it being used to silence perceived opponents of the government like activists and development workers?
FATF and the Philippines
The Financial Action Task Force (FATF) is an intergovernmental organization created by the Group of 7 (G7) in 1989 to promote policies and standards against the misuse of the international financial system for illegal purposes. The 40-member body sets “international standards” for national authorities to follow in going after illicit funds linked to drug trafficking, illegal arms trade, cyber fraud and other serious crimes. The FATF is an international standard-setting body but not a regulatory authority. Countries are not automatically under its jurisdiction and the FATF only provides technical expertise and policy inputs to countries committed to its standards, whether through FATF membership or FATF-Style Regional Bodies (FSRBs).
The Philippines has a long history of being on FATF risk lists because of perceived deficiencies in compliance with its standards. This started with its inclusion in the FATF’s blacklist in June 2000 because of the absence of an anti-money laundering framework. From 2000 to 2025, the Philippines has mostly been on the FATF’s watchlist, grey list, dark grey list and blacklist. Removal from these risk lists has mostly, but not only, been upon passage of various laws: Anti-Money Laundering Act of 2001 (Republic Act or RA 9160), Terrorism Financing Prevention and Suppression Act of 2012 (RA 10168), Casino Law (RA 10927), Anti-Terror Act of 2020 (RA 11479), and amendments to some of these laws. In February 2025, a year after the Marcos government committed to FATF recommendations, the Philippines was deemed compliant and removed from the grey list.
The Anti-Money Laundering Council (AMLC) said this was from the accomplishment of action plan items including increased investigations and prosecutions relating to money laundering and terrorism financing, as well as cracking down on unregistered and illegal money transfer operators. This was celebrated by a few while development workers, human rights defenders, journalists and activists paid a heavy price from being considered terrorists under the Marcos and Duterte governments because of their principled dissent.
Exaggerated consequences, no real benefits
Being grey listed for serious deficiencies to counter money laundering and terrorist financing supposedly has grave consequences. This is said to include reduced foreign investor confidence, lower credit ratings, hindered international payments and increased borrowing costs. Being blacklisted is supposedly even worse and can lead to financial isolation, exclusion from international banking channels, and severe disruption of trade, investment and remittance flows. The justification for exerting such pressure is that non-compliance compromises the integrity of financial institutions and markets, undermining global efforts to combat financial crimes and abuse of the global financial system.
The FATF cannot impose economic sanctions, but its member countries can unilaterally or collectively take restrictive measures against countries deemed to be non-compliant. These would, if ever, be political decisions by individual countries and in extreme instances could go beyond the usual stricter requirements on transactions to include trade quotas, embargoes, tariffs, and asset freezes.
A 2021 study by the International Monetary Fund (IMF) claims that grey listing had a large and statistically significant effect, with capital inflows declining on average by 7.6% of gross domestic product (GDP). However, the impact of grey listing on individual countries is hard to pin down because of so many different factors coming into play and in very different country contexts. For example, the United Arab Emirates (UAE), the second largest economy in the Middle East, still thrived during its two years on the grey list and attracted high levels of foreign direct investment. Another example is Panama, grey listed for four (4) years yet managed to maintain and even increase its banking relationships, as its compliance functions were able to absorb the additional risk.
On the other hand, the positive impacts are hypothetical and do not remove the internal factors that affect economic growth or financial standing in global markets. The Philippines, for instance, has been in and out of FATF risk lists for almost 25 years yet remittances flowed continuously and only saw negative growth during the global pandemic lockdowns. (See Chart 1)
Similarly, foreign investments have continued to flow into the country to reach record highs both in absolute terms and relative to the size of the economy despite the supposed negative impacts of grey listing. (See Charts 2 and 3)
And yet, the Marcos Jr. administration was still alarmist about being on the grey list. Among the efforts it showcased to the FATF was its supposed determination to crack down on the alleged misuse of non-profit organizations, to the point of even having a “Project Exit Grey List”. This initiative involved ramping up judicial prosecutions through a slew of terror financing cases targeting human rights defenders, activists and progressive non-government organizations (NGOs).
A heavy price to pay
FATF’s original Recommendation 8 that labelled Non-Profit organizations (NPOs) as “particularly vulnerable to terrorist financing abuse” has since been amended in belated acknowledgment that not all NPOs pose a risk. Yet many governments continue to misuse FATF’s standards to justify crackdowns and suppress dissent and advocacy of groups.
A report by the National Union of People’s Lawyers (NUPL) and the Council for People’s Development and Governance (CPDG) revealed that FATF’s influence in policy development enabled the misuse of laws to terrorize civil society groups. One of the key findings exposes the use of the Anti-Terror Act (RA 11479) and Terrorism Financing Prevention and Suppression Act (RA 10168) against individuals even in the absence of proof or direct links to terrorist acts. With its broad definitions, the twin terror laws do not differentiate legitimate and illegitimate activities where even humanitarian work like paralegal services or financial assistance for basic needs can be wrongly classified as terrorism financing.
The report also found that the number of terrorism financing cases rose almost five-fold (371% increase) from 14 in 2023 to 66 in 2024 as the government intensified its prosecutions. These cases targeted civil society organizations, community journalists, religious groups, and human rights defenders through fabricated charges and with a state-backed pool of professional witnesses coerced into giving false testimonies.
This unchecked power has eroded due process, leaving multi-awarded NGOs like the Leyte Center for Development (LCDe) vulnerable to asset freezing and a long, exhaustive judicial process even without evidence of wrongdoing.
Misusing harsh foreign standards
Is the situation in the Philippines so much better now that it is off the FATF grey list? There doesn’t seem to be any substantial boost to the country’s progress, as much bigger issues are keeping the economy underdeveloped. Also, the government’s blind reliance on overseas remittances and foreign capital flows to sustain the economy will not significantly make a dent either. Worse, the government has shown its willingness to use compliance with foreign demands as an excuse to crack down on critical civic voices demanding reforms.
The FATF’s standards are too easily abused by governments who justify their harsh domestic actions as compliance to retain global financial or economic standing. These standards appear to have good intentions but the real test of this is if it candidly assesses and evaluates the harmful consequences of its recommendations. Too many countries have weaponized counterterrorism and terrorist financing laws against human rights defenders, activists and civil society groups to suppress political opposition, criminalize activism and restrict civic space.
Governments, like in the Philippines, need to be held accountable for their abuses and human rights violations. Yet while the FATF is an informal international standards-setting body in the sense of operating without legal authority, it nonetheless still exerts significant de facto power through financial, reputational, and diplomatic pressure. Thus, despite its informality, it must also be held accountable for the standards it sets.
Ultimately, efforts to prevent the misuse of financial systems for money laundering and terrorist financing will serve the public interest only if they target genuine financial crimes. But when AML/CTF (counterterrorism financing) compliance is reduced to mechanically implementing disproportionately harsh regulations or, worse, used to justify political repression, this is inconsistent with the pursuit of genuine development.
