After much wrangling, legislators in the Philippines have approved amendments that they hope will be tough enough to meet the standards demanded by the Financial Action Task Force (FATF), the international organisation charged with cracking down on money laundering.

If the new anti-money laundering amendments had not been approved, the FATF would almost certainly considered imposing sanctions on the Philippines that would have caused delays in export letters of credit (L/Cs) and documentary credits used for imports for raw materials and capital equipment.

Workers' remittances

The FATF have yet to say whether the legislators in the Philippines have made sufficient changes to the country's rickety anti-money laundering laws to stave of sanctions.

Apart from having a direct impact on L/C business, the imposition of sanctions by FATF will put the Philippines at risk of having negative advisories issued against its banks which would result in longer processing time and higher fees for transactions from abroad - thus putting the massive US$6-7 billion of annual inflows from overseas workers that have kept the economy afloat at risk.

Meanwhile the Bankers Association of the Philippines had warned that many offshore banks would end correspondent services for their Philippine counterparts, hurting exporters and importers and that foreign banks operating in the Philippines may even decide to pull out if FATF sanctions proved excessively costly.

FATF concerns

Legislators approved the amendments to Philippine anti-money laundering legislation just minutes before the FATF imposed February deadline.

The Paris-based organisation had criticised loopholes in the Philippines 2001 anti-money laundering law, saying it could be exploited by groups funnelling large sums of money through the financial system to finance international terrorist activity or to hide criminal activities.

A FATF plenary meeting is reviewing the blacklist in Paris this week and is expected to issue a fresh report on the status of non-cooperative countries, according to officials.

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