From grey list to green light

From being blacklisted in 2000 to greylisted in 2021, the Philippines has made significant strides in its battle against financial crimes. In a remarkable turnaround, the country has now reached a pivotal milestone: removal from the Financial Action Task Force (FATF) monitoring list.

This achievement was announced on Feb. 21, 2025, marking a new chapter in the Philippines' commitment to financial integrity and global security. The country's journey through the FATF listings has been challenging, marked by cycles of blacklisting and grey-listing.

Initially blacklisted in the early 2000s due to the absence of a strong Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) legal framework, the Philippines took its first step toward reform with the pas-sage of Republic Act 9160, also known as the Anti-Money Laundering Act of 2001.

This led to the country's removal from the blacklist in 2005. However, achieving full compliance was still challenging. Between 2008 and 2021, the country's listing status varied, often due to concerns about counter-terrorist financing laws and other regulatory gaps.

Despite these challenges, the Philippines showed resilience. In response to its 2021 greylisting, the country implemented a comprehensive action plan to address key AML/CFT deficiencies. It involved strengthening supervision of designated nonfinancial businesses and professions, cracking down on illegal money transfers, improving law enforcement's access to beneficial ownership information and safeguarding nonprofit organizations from misuse.

The collaborative efforts have led to the Philippines' removal from the greylist, highlighting the country's commitment, through the Anti-Money Laundering Council, to combating financial crimes and strengthening global financial security.

It must be emphasized that the Philippines' removal from the FATF greylist is more than just a symbolic victory. It signifies an exceptional strengthening of the country's financial system. For businesses and financial institutions, this development brings immediate and tangible benefits.

One of the most notable advantages is the reduction in the need for enhanced due diligence on cross-border transactions, which not only lowers operational costs but also streamlines processes. Moreover, the easing of reporting requirements also reduces administrative tasks, allowing entities to use resources more efficiently.

This makes the country's financial system more attractive to international investors, enhancing the Philip-pines' competitiveness. This shift is especially significant given the well-documented negative effects of grey-listing: studies indicate that countries on the FATF greylist often experience a decline in gross domestic product (GDP), reduced foreign direct investment (FDI) inflows and a lower FDI-to-GDP ratio.

For the Philippines, reversing these effects will pave the way for a more resilient and dynamic economy. Moreover, the removal from the greylist will help streamline and reduce the cost of remittance processing, providing direct benefits to overseas Filipino workers (OFWs).

With fewer regulatory hurdles and faster transaction times, OFWs will be able to send more of their hard-earned money back home, further improving their financial well-being. While the Philippines' removal from the FATF greylist is a remarkable feat, it is only the beginning of a long-term commitment to maintaining financial integrity.

To avoid future relisting, the country must keep enforcing strong measures to tackle emerging financial crime trends. Drawing from nearly 25 years of experience in exiting the FATF watch list and learnings from countries with strong, consistent AML/CFT frameworks — such as Australia, Canada and several EU nations — will be crucial.

This includes enacting forward-thinking legislation to stay ahead of emerging threats, reinforcing the enforcement and prosecution of financial crimes and conducting thorough national risk assessments to identify and address specific deficiencies.

Additionally, maintaining risk-based supervision across all sectors and fostering collaboration between the government and private sectors in implementing AML/CFT measures will be essential. Above all, maintaining strong political commitment to AML/CFT as a national priority will be crucial for protecting the country's financial system in the long term.

The key takeaway is that the Philippines' successful exit from the FATF greylist underscores the collective commitment of all stakeholders to maintaining a transparent financial system.

This achievement has boosted investor confidence and contributed to a more dynamic global market. How-ever, maintaining this success will require continuous compliance, proactive measures and the ability to adapt to emerging threats.

By doing so, the Philippines will ensure the long-term stability and resilience of its financial system.

Source: Manila Times

Guarantor's Rights and Obligations in the Philippines

In the Philippines, a guarantor plays a critical role in financial transactions, particularly in loans and credit arrangements. Acting as a guarantor is a significant responsibility that entails both rights and obligations under Philippine law, specifically governed by the Civil Code of the Philippines (Articles 2047 to 2081). Whether you are considering becoming a guarantor or seeking one for your loan, understanding these rights and obligations is essential to make an informed decision.

What is a Guarantor?

A guarantor is a person who agrees to be liable for another person's debt or obligation if that person (the principal debtor) fails to fulfill their obligation. This is commonly referred to as guaranty or suretyship. A guarantor essentially provides financial security to the lender by ensuring that the debt will be paid.

It is important to note that in the Philippines, guaranty and suretyship have distinct legal definitions:

• Guaranty: The guarantor is secondarily liable, which means they are only required to pay if the principal debtor fails to do so.

• Suretyship: The surety assumes direct and primary liability alongside the principal debtor.

This article focuses on the obligations and protections provided to guarantors, which predominantly fall under the concept of guaranty.

Rights of a Guarantor

1. Right to Be Informed

A guarantor has the right to be fully informed about the terms of the debt or obligation. This includes the loan amount, payment schedules, interest rates, and any other conditions that may affect the guarantor's liability.

2. Right to Demand Prior Exhaustion of Assets

One of the most important protections for a guarantor under Philippine law is the principle of benefit of excussion. This means that a guarantor cannot be compelled to pay the debt until the creditor has exhausted all legal remedies against the principal debtor's properties.

However, this right can be waived if:

• The guarantor expressly renounces the benefit of excussion.

• The guarantor acts as a surety (i.e., assumes primary liability).

3. Right of Subrogation

If the guarantor pays the debt, they are entitled to recover the amount paid from the principal debtor. This is known as the right of subrogation, which allows the guarantor to step into the creditor's position and collect the debt from the original borrower.

4. Right to Reimbursement

A guarantor who pays the creditor is entitled to reimbursement from the principal debtor, including any interest or damages incurred as a result of fulfilling the guaranty.

5. Right to Refuse Unfavorable Modifications

If the creditor and debtor alter the terms of the original obligation without the guarantor's consent (e.g., increasing the loan amount or extending the loan term), the guarantor may be released from their obligation.

Obligations of a Guarantor

1. Secondary Liability

In a guaranty agreement, the guarantor is only liable when the principal debtor defaults. The guarantor's obligation begins when the debtor fails to meet their obligation after the creditor has attempted to collect from them.

2. Payment of the Debt

If the principal debtor fails to pay, the guarantor must fulfill the debt or obligation, including interest and any applicable penalties, up to the limit specified in the guaranty agreement.

3. Notification of Default

While the guarantor is not obligated to monitor the debtor constantly, they must be prepared to fulfill their commitment if the creditor notifies them of the debtor’s default.

4. Liability for Additional Costs

The guarantor may also be liable for additional costs, such as legal fees or collection expenses, if specified in the guaranty agreement.

5. Compliance with the Terms of the Agreement

The guarantor must comply strictly with the terms and conditions of the guaranty agreement, including timelines for payment and any collateral requirements.

When Can a Guarantor Be Released from Their Obligation?

A guarantor can be released from their obligation under the following circumstances:

1. Expiration of the Guaranty: If the guaranty specifies a time limit and that period has lapsed.

2. Payment by the Debtor: If the principal debtor fulfills their obligation, the guarantor's liability is extinguished.

3. Alteration of the Contract: If the creditor and debtor change the terms of the agreement without the guarantor’s consent.

4. Waiver of Rights: If the creditor waives their right to demand payment from the guarantor.

5. Extinguishment of the Principal Obligation: If the debt or obligation is extinguished, the guarantor is no longer liable.

Key Considerations Before Becoming a Guarantor

Becoming a guarantor is a serious financial commitment, and it is crucial to evaluate the following before signing any agreement:

• Understand the Terms: Carefully review the loan agreement and guaranty contract.

• Assess the Debtor’s Ability to Pay: Evaluate the borrower’s financial stability and capacity to repay the debt.

• Know Your Risks: Be aware that you may need to pay the debt if the debtor defaults.

• Set Limits: If possible, specify the maximum amount and duration of your liability in the guaranty agreement.

• Seek Legal Advice: Consult with a lawyer to understand your rights and obligations fully.

Final Thoughts

While acting as a guarantor can help a friend, family member, or business partner secure a loan, it is not without risks. Understanding your legal rights and obligations under Philippine law will help you protect yourself and make an informed decision.

Always remember that being a guarantor means putting your financial future on the line, so it’s crucial to approach this role with caution and knowledge.

If you find yourself in a situation where you need to act as a guarantor or seek one, take the time to review all the terms and seek professional legal advice when necessary. In the world of financial commitments, being informed is your best defense.

Source: ZRE

Sun Life survey highlights inflation challenges for retirees in Asia

Retirees in the Philippines are struggling financially amid high inflation, according to a Sun Life Asia survey.

Many of them lament past financial decisions, citing inadequate savings, poor investment choices and early retirement as key sources of regret.

Results of the survey, "Retirement Reimagined: Facing the Future with Confidence" — comprising 3,500 respondents across Asia, including the Philippines — showed 73 percent of Filipino retirees regretted not saving enough, 47 percent wished they had invested more wisely and 38 percent felt they retired too early.

A significant 25 percent said they have been caught off guard by the high cost of living, with 77 percent citing increased general living expenses and 46 attributing it to health care costs.

Despite efforts in savings, the Filipino participants admitted failure in financial preparation. While a number of them managed to save at least 10 percent of their income for retirement, 37 percent said they did not save at all and 21 percent did not foresee their retirement expenses, forcing them to cut back on spending or seek financial support from their respective families.

Inflation has worsened the situation. The Philippines is suffering more from high inflation rates than the Asian average, the survey said.

Consumer price growth hit a 14-year high of 8.7 percent in January 2023, which led the Bangko Sentral ng Pilipinas to tighten its monetary policy.

To date, inflation has settled within the 2.0- to 4.0-percent target range of the central bank at 3.4 percent and the average core inflation to around 2.4 percent, following the four-year low of 1.9 percent in September.

Carla Gonzalez-Chong, Sun Life Philippines chief client experience and marketing officer, stressed the value of financial literacy in addressing these challenges.

"Financial literacy remains key," she said. "We are committed to this advocacy to help more Filipinos overcome the obstacles and enjoy quality lives in their golden years."

The survey also revealed a growing trend among young Filipinos to delay retirement in response to rising living expenses.

Some expect to retire at an average age of 65, significantly later than the current retirees' average of 58. Many younger workers have postponed their retirement plans, with 59 percent citing the necessity of sufficient savings and 46 percent mentioning the demands of covering for increasing expenses.

Source: Business World and Sunlife