[Finterest] Getting off the FATF grey list. What does this mean for Philippine economy?

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MANILA, Philippines – No less than President Ferdinand Marcos Jr. is celebrating after the Philippines officially got itself removed from the Financial Action Task Forces (FATF) grey list — a label that no country wants, but somehow keeps coming back.

At a ceremony in Malacañang on May 5, 2025, Marcos handed Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona a plaque of recognition for his role in cleaning up the country’s financial reputation. Remolona, who chairs the Anti-Money Laundering Council (AMLC), stood beside Executive Secretary Lucas Bersamin, who also heads the National Anti-Money Laundering/Counter-Proliferation Financing/Counter-Terrorism Financing Coordination Council.

The Philippines’ latest stint on the grey list started in February 2021, due to what the Financial Action Task Force (FATF) called “strategic deficiencies” in its anti-money laundering and counter-terrorism financing frameworks. And it wasn’t the first time the country landed in financial hot water; the Philippines was blacklisted in 2000, cleaned up enough to get removed from the list in 2005, and then was greylisted in 2010 and 2021.

The push to get removed from the list was long and deliberate. Back in 2021, then-BSP governor Benjamin Diokno noted the Philippines had made a “high-level political commitment” to the FATF. But it wasn’t until February 2025, under the Marcos administration and the leadership of Remolona, that the country finally got the all-clear.

“For us Filipinos, exiting the grey list means a simpler, more affordable financial system of transaction,” said President Marcos during the March 5 ceremony. “It means our OFWs can send money home at a lower cost. It also means that our businesses face fewer hurdles in securing international financing.”

But what does that really mean for the economy? Let’s dig in.

What are the consequences of being on the FATF’s grey list?

According to a BSP press release on May 6, the delisting is expected to improve cross-border transactions by lowering compliance costs and increasing transparency. It could also encourage international banks to re-engage with the Philippines, potentially boosting access to competitive financing for both businesses and consumers.

But why is being removed from the FATF such a big deal anyway?

Let’s start at the FATF. Created by the G7 nations in 1989, the FATF serves as an international watchdog combatting money laundering and terrorist financing. Although the FATF has no formal enforcement powers, its influence is significant.

“While the FATF does not call for the application of enhanced due diligence measures, its members and other jurisdictions may consider a country’s greylisting in their risk analysis when dealing with the country and/or its nationals,” the AMLC said in February 2024.

In other words, the FATF, on its own, doesn’t actually hand out fines or slap countries with direct penalties. Instead, its grey list acts like a red flag waved in front of banks, investors, credit rating agencies. Once a country lands on that list, it becomes subject to extra scrutiny.

In practice, this heightened scrutiny translates to longer compliance checks, additional documentation, and, in some cases, reduced willingness to engage. Financial institutions may choose to avoid doing business altogether when they want to limit how much risk exposure they have to certain countries or regions.

Related to this, the greylisting can influence the country’s credit rating. A lower credit rating raises borrowing costs for the government and can deter foreign direct investment, creating a ripple effect across the economy. (READ: Philippines aims for ‘A’ credit rating by 2028. Here’s why it matters.)

We’ve already seen how this affects other countries. Rating agency DBRS Morningstar warned that Malta’s 2021 grey-listing could, if prolonged, “have long-lasting implications for Malta’s attractiveness as a small financial hub and a destination of foreign investment.” After Kenya was grey-listed in 2024, credit rating agency Moody’s quickly noted elevated risks for Kenyan banks and cut ratings on several major banks, citing the FATF action as a contributing factor (alongside other economic issues).

These poor ratings are part of the reason why foreign investors and banks shy away from greylisted countries, which are deemed riskier. History has already shown that being added to the FATF grey list leads to significant reductions in capital inflows and foreign investment. An International Monetary Fund (IMF) Working Paper, which analyzed 89 emerging and developing economies from 2000 to 2017, found grey-listing causes a “large and statistically significant” drop in capital inflows. On average, total capital inflows fall by about 7.6% of GDP, including a decline in foreign direct investment (FDI) inflows of 3%, portfolio inflows by 2.9%, and other investment inflows by 3.6% of GDP. (READ: [In This Economy] What explains anemic foreign investments in the Philippines?)

Grey-listing can also add friction on day-to-day cross-border transactions. Banks and payment providers in other countries often respond to a grey listing by tightening scrutiny or even severing certain correspondent banking relationships to avoid regulatory trouble. This leads to more paperwork, higher transaction costs, and payment delays for the grey-listed country’s businesses and expatriates. (READ: In a boon for OFWs, FATF removes Philippines from ‘gray list’)

For this reason, the Philippines’ removal from the grey list is being welcomed as a positive step for overseas Filipinos and their families. In a statement on May 6, Migrant Workers Secretary Hans Leo J. Cacdac said, “It’s good news for our OFWs and their families as the removal of the Philippines from the FATF grey list means lower remittance fees for our modern-day heroes.”

The Department of Migrant Workers also noted that the exit from the list could ease documentation requirements for international transfers, improving access to financial services for OFWs and businesses alike. Philippine banks and institutions may also face fewer restrictions when engaging with global financing partners, broadening access to international capital and improving the ease of doing business across borders.

What did the Philippines do to get off the list — and at what cost?

So how did the Philippines make it off the list anyway?

The BSP cites enhanced regulatory frameworks and cooperation among government agencies as factors. Measures included stricter registration of remittance services and tighter enforcement of financial sanctions. A key part of this is the passage of the Anti-Financial Account Scamming Act (AFASA) law that the BSP had been pushing for a long time.

“Through concerted reforms, government agencies fortified the integrity of our financial system and reaffirmed our nation’s commitment to combating financial crimes,” said BSP Governor Remolona during the Malacañang ceremony.

But human rights groups say this came at a price. According to data from the National Union of Peoples’ Lawyers and the Council for People’s Development and Governance, there was a 371% increase in terror financing complaints in 2024 — many targeting activist non-government (NGO) organizations and human rights defenders. The Philippine Center for Investigative Journalism uncovered a police memorandum referring to this crackdown as “Project Exit the Greylist.” (READ: Philippines is off the financial ‘gray list’ — but at what cost to human rights?)

“Philippine authorities appear to be stepping up terrorism financing prosecutions to get off of FATF’s ‘grey list’ and its potential financial cost,” said Bryony Lau, deputy Asia director at Human Rights Watch. “This seems to be the government’s latest bad reason to bring baseless charges against civil society groups and activists.”

Critics have argued that the FATF’s processes lack sufficient human rights safeguards. A 2019 United Nations report warned that governments could misuse the FATF’s recommendations to implement “wholesale measures that strictly regulate civil society.” The FATF revised one of its recommendations in 2023 to caution against such abuse when investigating NGOs, but civil society groups say that guidance came too late. – Rappler.com

Finterest is Rappler’s series that demystifies the world of money and gives practical advice on managing your personal finances