Fighting Illicit Financing in Southeast Asia

Abstract

This chapter assesses how the Financial Action Task Force's (FATF) noncomplier list has transformed the ways that Thailand and the Philippines fight illicit financing. While the sources of opposition may vary, the case studies illustrate that the FATF noncomplier list is a powerful tool for shifting the politics of compliance. In Thailand, the noncomplier list forced the government to prioritize passing tougher laws on illicit financing. In the Philippines, the government passed almost every major piece of anti-money laundering legislation while on the FATF list or under direct threat of listing. If the case studies showcase the power of unofficial market enforcement, they also highlight some of the potential downsides to this approach. When Thailand was on the FATF noncomplier list, its government was confronting a multitude of political threats as well as natural disasters—serious issues that required substantive responses. Yet the FATF forced Thailand to prioritize passing legislation on combating illicit financing and possibly delayed other important policy programs. In the Philippines, market enforcement may have hurt some of the most vulnerable members of society.