Philippines urged to sustain reforms as risk assessment flags risks

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February 26, 2026 | 12:00am

MANILA, Philippines — One year after the Philippines exited the Financial Action Task Force (FATF) gray list, a government risk assessment warned that reforms must be sustained and deepened as vulnerabilities in the country’s financial system persist despite measurable progress in combating money laundering and related crimes.

The third National Risk Assessment (NRA) on money laundering, terrorism financing and proliferation financing said the country’s removal from the FATF list in February 2025 was a major milestone that reduced frictions in cross-border transactions and boosted investor confidence, but stressed that reforms supporting the delisting should not lose momentum.

The report said authorities need to continue strengthening supervision of higher-risk sectors, improve beneficial ownership transparency and modernize controls as financial transactions increasingly shift to digital platforms.

These priorities will guide the National AML/CTF/CPF Strategy for 2026 to 2030.

At the core of the assessment is a warning that while the country’s anti-money laundering framework has improved, risks remain significant as criminal groups adapt and exploit both traditional and emerging channels.

“The government remains committed to sustaining and deepening reforms beyond the country’s exit from the FATF gray list,” the report said.

“The risks identified in this NRA, particularly around high-impact predicate crimes, cross-border channels and emerging technologies, will continue to shape the agenda for the coming years,” it stated.

The NRA identified illegal drug trafficking, fraud including cyber-enabled scams, environmental crimes and tax offenses as the dominant sources of illicit proceeds, noting that these activities generate substantial volumes of funds that require laundering through both formal and informal channels.

Authorities said digital finance and virtual asset channels have emerged as fast-growing risk vectors, driven by the rapid adoption of e-money, remote onboarding and online remittances.

While these innovations helped expand financial inclusion, they also introduced risks such as money mule schemes, account takeovers and cross-border virtual asset transfers.

Banks remain central to the financial system and are considered relatively well controlled due to stronger supervision and compliance measures.

However, the assessment flagged higher vulnerabilities in casinos, real estate developers and brokers, money service businesses and virtual asset service providers, citing their exposure to high-value transactions, cash-intensive operations and cross-border flows.

Cross-border risks also remain elevated, particularly in remittance flows, international wire transfers and digital payment channels.

The report noted that while foreign financial intelligence units generally do not consider the Philippines a high-priority source of illicit funds, domestic indicators show recurring cross-border typologies linked to fraud, drug trafficking and online scams.

The NRA also pointed to persistent structural vulnerabilities, including a large informal and cash-based economy that creates opaque channels for illicit funds, uneven quality of suspicious transaction reporting across sectors and gaps in beneficial ownership transparency that limit real-time verification of corporate ownership.

Beyond money laundering, the assessment rated terrorism financing risk at medium, citing weakened domestic terrorist groups and stronger intelligence coordination but noting residual risks in selected areas and remittance channels.

It also rated proliferation-financing risk at medium, highlighting uneven awareness and implementation of sanctions obligations among trade and logistics actors.

Overall, the assessment rated the Philippines’ money laundering risk as medium-high, combining a high threat level with medium national vulnerability.

The report said the risk environment remains significant but manageable, provided reforms are sustained and enforcement efforts remain focused on high-impact sectors, emerging technologies and evolving criminal typologies.