FATF Blacklists Ecuador, Yemen, Vietnam, Upgrades Philippines

By Samuel Rubenfeld

The Financial Action Task Force said Friday (June 22, 2012) it added Ecuador, Yemen and Vietnam to its list of countries that haven't made sufficient progress in tackling money laundering and terrorist financing.

The three countries were slapped with a label saying they either didn't address deficiencies in fighting money laundering and terrorism finance, or that they didn't commit to an action plan with the FATF to deal with the issues.

"The FATF calls on its members to consider the risks arising from the deficiencies associated with each jurisdiction," it said in a statement.

Ecuador, Yemen and Vietnam have each, the FATF said, taken some steps toward fixing the problem, though none of them have done enough to prevent the blacklisting.

Countries that fail to implement FATF's recommendations run the risk of being labeled as high-risk or uncooperative jurisdictions, thereby making it even more costly and difficult for those nations to do business with the banking systems of FATF members. The FATF's members include the U.S., Mexico, France and the U.K.

The FATF's last plenary was in February, when it updated its recommendations to include tax evasion and smuggling as "predicate offenses" to money laundering. It met last week in Rome.

Turkmenistan was cited as having "largely met its commitments" under the action plan, and is therefore no longer subject to monitoring by the FATF, it said.

In addition, the FATF added Afghanistan, Albania, Kuwait and the Philippines to its list of countries seen as countries making progress toward implementing plans to fight terrorism finance and money laundering.

The countries on the so-called "gray list" have strategic deficiencies in their systems for fighting the issues, but they have committed to action plans and are making progress in dealing with them.

The Philippines is by far the most notable in the list, because it was identified in February after the last FATF plenary session as not having made sufficient progress, putting it on a so-called "dark gray" list.

This month, the Philippines enacted an amendment to its money laundering law and a law to combat the financing of terrorism, both of which were lauded by the FATF on Friday. It "strongly encourages" the country to pass another pending change to the country's money-laundering law.

The FATF's announcement Friday upgraded the Philippines from the "dark gray" list to the "gray list." More coverage of the Philippines is available here, here and here.

Calling the announcement "positive news…particularly for our overseas workers and our economy," the country's Anti-Money Laundering Council said in a statement that the pending legislation would expand the definition of money laundering under Philippine law and increase the predicate crimes to include bribery, human trafficking, tax evasion and environmental crime.

"The Philippines will continue to contribute and support the global efforts against money laundering and terrorist financing in keeping with its commitment to good governance and upholding peace and order," the statement said. 

Wall Street Journal 

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Philippines bests India in call centers

Aegis PeopleSupport workers at their workstations inside the company's offices in Makati City, near Manila, Philippines, Nov. 11, 2011. Many companies have moved their customer service lines to Manila to take advantage of workers who speak American English and are familiar with American culture. Photo: Jes Aznar, New York Times.

Filipino accents and knowledge of America are a big competitive advantage.

It's midnight in Manila, and the capital is slowly waking up to the start of another working day. At the Worldwide Corporate Center office block, thousands of young Filipinos are crowding into endless open-plan offices. Once seated, they quickly start answering the questions and calming the frustrations of vexed American consumers beginning their own day on the other side of the Pacific Ocean.

These Filipinos are call-center workers. To outsiders it is hardly a glamorous profession, yet -- despite the antisocial hours -- these men and women have every reason to be as well-motivated and cheerful as they seem. They are well-paid and know that they work at the heart of their country's most dynamic industry.

The rise of what is known as business-process outsourcing (BPO) in the Philippines has been nothing short of phenomenal. The very first calls weren't taken until 1997, but today the sector employs 638,000 people and enjoys revenues of $11 billion, about 5 percent of the country's GDP.

Last year the Philippines even overtook India, long the biggest call-center operator in the world, in "voice-related services." The country now employs about 400,000 people at call centers, India only 350,000.

The Southeast Asian upstart, with a population of 101 million, is unlikely ever to surpass the Indian behemoth of 1.2 billion people across the entire range of outsourcing offerings, which also include all kinds of information-technology services.

Growth expected to explode

Yet, given its extraordinary growth so far, it is hard to ignore the Philippines' projection that its BPO industry could add another 700,000 jobs by 2016 and generate revenue of $25 billion. At that point the industry would make up a tenth of the country's GDP.

As in the call-center business so far, some of these new jobs will come at the expense of India. However, India's relationship with the Philippines in back-office work is more complex than the numbers suggest.

The main reason for the success of the Philippine call centers is that workers speak English with a neutral accent and are familiar with American idioms, which is exactly what their American customers want. Of these, many have taken to complaining bitterly about Indian accents, which no amount of "voice neutralization" coaching seems to have overcome. As a result, some Indian firms have been helping to move jobs to the Philippines by setting up call centers in Manila and other parts of the country.

Infosys and Wipro, as well as scores of other Indian firms, now have substantial operations there. And they aren't drawn to Manila by cheap labor: Wages in the Philippines are slightly higher than in India, since the Filipino accent commands a premium.

It also helps that the country has a big pool of well-educated workers. The million or so Filipinos who graduate every year have few other options to choose from, besides emigrating. Working in a call center is considered a middle-class job: New recruits start at $470 a month.

The big question is whether the Philippine BPO industry, having conquered the call-center market, can now move up the value chain. To keep growing rapidly, and profitably, it needs to capture some of the more sophisticated back-office jobs, such as those processing insurance claims and conducting due diligence. In these businesses, called knowledge-process outsourcing and legal-process outsourcing, India still rules supreme.

Integreon offers a glimpse of what the future may hold. The firm occupies only a few discreet, very secure offices. It employs 300 people in Manila, 40 of them lawyers who help multinational law firms with litigation. Familiarity with America helps.

"It makes it very easy for us to do legal research for American firms," says Benjamin Romualdez, the firm's country manager.

This sort of operation is new in Manila, but Romualdez expects that he can find the skilled workers to double his workforce in the next five years. Western banks also have discovered the Philippines. JPMorgan Chase now has more than 25,000 workers on its payroll in the country, many of whom do much more than answering phones.

In short, the Philippines is set to compete with India across the BPO board.

StarTribune 

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USS Louisville - US submarine docks at Subic Zambales

A nuclear-powered attack submarine of the United States Navy arrived yesterday for a port call in Subic Bay, Zambales amid tension between the Philippines and China over Panatag (Scarborough) Shoal.

The USS Louisville would replenish supplies and give its crew an opportunity to take their rest and relaxation, according to a statement from the US embassy.

The embassy said the routine port call "highlights the strong historic, community, and military connections between the United States and the Republic of the Philippines."

The USS Louisville is the second US attack submarine that visited the Philippines since Washington announced plans to boost its presence in the Asia-Pacific region.

The first was the USS North Carolina that docked in Subic Bay last May 2012.

The port call was made as China and the Philippines are in a standoff near Panatag Shoal, located 124 nautical miles from the coast of Masinloc, Zambales.

The military, however, clarified that the visit of the Louisville has nothing to do with the territorial dispute between the Philippines and China.

"(The ship) has no mission in the Philippines except replenishment. That was stated in its diplomatic clearance. They have no activity involving the Philippine Navy," said Navy spokesman Col. Omar Tonsay.

He said there is nothing unusual even if the Louisville's visit came just a month after North Carolina's port call.

"I don't see anything unusual there if they will just replenish here in the Philippines. It's normal for ships to replenish," Tonsay said, adding that it was the US that sought clearance for the port call.

USS Louisville will dock in Subic Bay until June 30. The fast attack Los Angeles-class submarine is the fourth US ship to bear the name of the city of Louisville, Kentucky.

Journalists were not allowed to cover the visit of the submarine, which was commissioned on Nov. 8, 1986 at the Naval Submarine Base in New London, Connecticut.

The Louisville is 360 feet long, weighs 6,900 tons, and is armed with sophisticated MK48 torpedoes and Tomahawk cruise missiles.

The standoff in Panatag Shoal started on April 10 after Chinese maritime surveillance ships barred the Philippine Navy from arresting Chinese fishermen who were caught poaching and illegally harvesting endangered marine species in the area.

Manila had protested Beijing's actions in the shoal, which is within the Philippines' 200-nautical mile exclusive economic zone as provided by the United Nations Convention on the Law of the Sea (UNCLOS).

China maintained that it has sovereignty over the area even if it is a signatory of the UNCLOS.

Aside from Panatag Shoal, the Philippines is also claiming several islets, shoals, reefs and sandbars in the Spratlys group of islands, which is also being claimed in whole or in part by China, Vietnam, Malaysia, Brunei, and Taiwan.

Early this month, US Defense Secretary Leon Panetta said the US is planning to deploy a majority of its naval fleet to the Pacific by 2020.

Speaking to the delegates of the Shangri-La Dialogue in Singapore, Panetta said the move is in line with US efforts to boost its presence in the Asia Pacific.

He said the US naval assets would be realigned from a roughly 50-50 split between the Pacific and the Atlantic to about 60-40 split between those oceans.

Panetta said the move would involve key assets including six aircraft carriers, cruisers, destroyers, littoral combat ships, and submarines.

The US official claimed that the deployment was not meant to challenge China, which has been wary of Washington's plan to boost its presence in the region.

Panetta, nevertheless, said the US is "paying close attention" to developments at Panatag Shoal.

Information sharing not necessary

Meanwhile, Foreign Affairs Secretary Albert del Rosario said sharing with the US the information on Chinese intrusion in Philippine waters may not be necessary since Washington already has very sophisticated intelligence equipment.

Responding to a question during the Joint Membership Meeting of the Makati Business Club and the Management Association of the Philippines last month about how the Philippines shares with the US information about Chinese intrusion, Del Rosario said, "I think we do not have to send pictures to the US."

US Ambassador Harry Thomas Jr. said on Thursday that there is no doubt and no question that his government stands by its commitments under the Mutual Defense Treaty (MDT).

Asked about questions and doubts raised on US support to the Philippines on the issue of maritime dispute because of deep economic ties between the US and China, Del Rosario said it is an opinion everybody is entitled to.

"We stand by our treaty commitment. It's amazing to me that people would question that," Thomas told the media during the first Kapihan sa Embahada.

He said the US is concerned about the events in the West Philippine Sea (South China Sea), including the tensions surrounding Panatag Shoal, emphasizing that Washington opposes coercion by any nation to advance its claim and the US clearly supports the Code of Conduct between China and ASEAN.

But Thomas did not provide a categorical answer when asked about the provision in the MDT on an attack on one party being considered an attack on the other, saying it is hypothetical and the US hopes for de-escalation and no violence in the disputed waters.

"All we can say (is) we stand by our commitments and I'm not going to change that. The Secretary of State, the President of the United States have also said we stand by our treaty commitments," he said.

US embassy Political Counselor and acting Deputy Chief of Mission Joy Yamamoto said, "The language of the MDT demonstrates our very strong commitment to the Philippines."

Yamamoto and Thomas said the US supports settlement of the disputes in the West Philippine Sea towards the use of a rules-based regime in accordance with international law and the International Tribunal on the Law of the Sea (ITLOS).

Yamamoto said, "We've been very consistent throughout the dispute in supporting international law and settlement of this kind of dispute under international law, so we would support China and the Philippines settling the issue through international means."

China had accused the US of creating tensions in the region and repeatedly warned that territorial disputes over the West Philippine Sea were issues between China and claimant countries.

Beijing said it would not allow US involvement in territorial disputes.

The ambassador said the US has been very clear that it takes no side in territorial disputes or cross-cutting claims between several states, not just China, but urged all parties to sit down and iron out disputes in a peaceful and legal manner.

Although the US position is not to get involved in territorial disputes, Secretary of State Hillary Clinton recently testified before the Senate Foreign Relations Committee hearing concerns on the US accession to UNCLOS, where she said Chinese claims exceeded what was permitted by the UNCLOS.

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