Identity Verification, KYC and AML Compliance in the Philippines
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Key takeaways
The Philippines was removed from the FATF gray list in February 2025, demonstrating its commitment to AML and KYC policies
Inconsistent implementation of PhilID and the diversity of official documents complicate identity verification for businesses in the Philippines
70% of financial fraud occurs post-onboarding, highlighting the need for continuous verification beyond initial KYC in the Filipino market
Didit offers advanced verification of Filipino documents, facial recognition, and AML screening, with a free and unlimited KYC plan for businesses
Recent policies adopted by the Philippines have demonstrated its commitment to preventing terrorist financing and money laundering. Since February 25, the Philippines is no longer on the Financial Action Task Force (FATF) gray list, the international organization that sets global standards for preventing illicit financial activities. How did it manage to leave this area of surveillance where it had been since 2021? Thanks to strengthening its identity verification processes (KYC) and anti-money laundering (AML) measures, primarily in casinos.
But what implications might this milestone have? The Philippines is confident that it will mean a reduction in due diligence measures on its banks and other financial institutions, which should facilitate international financial transactions, benefiting more than 10 million Filipino citizens living abroad. Plus, of course, attracting new investments to the country.
"Coming off the FATF gray list is an important step in strengthening the Philippine financial system and maintaining global confidence. The Government remains committed to ensuring long-term compliance with international standards," highlighted the Anti-Money Laundering Council of the Philippines in a statement after the celebrated news.
However, the country cannot relax. Institutions know that nearly 80% of fraud occurs after the onboarding phase. This requires local companies to maintain and continue developing robust anti-money laundering strategies, with AML Screening and Ongoing AML Monitoring strategies that go beyond customer identity verification, and, of course, not forgetting transaction monitoring.
The Legal Framework for KYC and AML in the Philippines: Regulatory Requirements
The Philippines has developed a robust regulatory framework to ensure proper customer identification and combat money laundering, which has allowed the country to leave the FATF gray list. This system has been refined over time, adapting to international standards and the specific challenges of the country.
Financial entities in the Philippines are required to implement rigorous customer identification procedures, transaction monitoring, and suspicious activity reporting. But what exactly are the laws governing these processes?
Republic Act No. 9160: Anti-Money Laundering Act of 2001
The foundation of the Philippines' AML/CFT legislative framework is found in Republic Act No. 9160, also known as the Anti-Money Laundering Act of 2001. This fundamental law, which came into effect on October 17, 2001, sets the guidelines for protecting and preserving the integrity of the country's financial system.
This regulation introduces key concepts such as the risk-based approach, customer due diligence (CDD) measures, suspicious transaction reporting, policies and procedures, and record keeping and training. This law explicitly prohibits the creation and maintenance of anonymous accounts and accounts under fictitious names, requiring financial institutions to establish and record the true identity of their customers through official documentation.
Republic Act No. 11055: Philippine Identification System
Republic Act No. 11055 established the Philippine Identification System (PhilSys), a unique identification system for citizens and foreign residents in the country. This law defines the guidelines for the issuance, management, and verification of PhilID, imposing strict rules on the use, access, and protection of data.
PhilSys was intended to simplify bureaucracy and reduce crime by providing a unique and reliable identification. However, its implementation has faced numerous challenges, including issues with documentation printing quality or logistical difficulties during its distribution. This was particularly visible during the Covid-19 pandemic.
However, although the goal was to simplify identification, many government agencies and private entities continue to require multiple forms of identification. This translates to each ID alone being considered insufficient.
Republic Act No. 11521: Strengthening the Fight Against Money Laundering
Republic Act No. 11521, which came into effect on February 8, 2021, represents the most recent amendment to the country's anti-money laundering policies. This update strengthens measures against money laundering, expanding the scope of obliged entities and incorporating FATF recommendations to address the deficiencies detected that led the Philippines to enter the known gray list of the organization in 2021.
The law establishes that companies must retain the data collected during the verification process for no less than five years. These due diligence obligations are fundamental for compliance with KYC and AML regulations, even when the information is processed, collected, and managed by third parties.
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Identity Verification in the Philippines: A Challenge for Businesses
Verifying the identity of individuals in the Philippines presents unique challenges that businesses must overcome to comply with regulations and protect against fraud. The poor implementation of the national identification system has created a fragmented landscape, in which companies must know how to navigate between different types of documents, with different levels of security and reliability.
This poses a significant challenge for banks and fintechs operating in the Philippines, especially for the many that still believe that fraud only occurs during the onboarding phase. This mindset neglects the objective fact that most fraudulent activities occur after the user has been initially verified, which underscores the need for continuous monitoring beyond the initial KYC.
It is also a challenge for international companies, as it is difficult to adhere to regulations from different jurisdictions that may even be contradictory to each other. This scenario creates a significant operational and financial burden, especially for organizations that still rely on manual processes to verify user identity and monitor transactions.
Challenges in Document Verification in the Philippines
Document verification in the Philippines presents significant challenges due to the diversity of official documents in circulation in the country. Unlike other countries with centralized and standardized identification systems, the Philippines maintains multiple documents issued by different government agencies, each with its own security features, formats, and adoption levels.
A particular challenge is the transition to the national PhilSys ID. Although designed to unify the country's identification, its implementation has not been straightforward: design, printing, and logistical problems. The result is inconsistent adoption, where many entities continue to request different forms of identification due to the lack of consistency of a single document.
The lack of standardized formats and security features complicates the development of automated systems capable of effectively verifying all types of Filipino identification.
Key Documents for Identity Verification
Filipino identification documents present a complex variety that verification systems must thoroughly understand. Among all the documents, the most important are:
Filipino identification documents present a complex variety that verification systems must thoroughly understand. Among all documents, the most important are:
- Philippine Passport: Considered an official government-issued identification, internationally recognized and issued by the Department of Foreign Affairs (DFA). It incorporates advanced security features such as biometric data, holograms, and microprinting.
Additionally, we can find several types of passports: the most common are ordinary, diplomatic, and official. Each has different covers.
- National Identity Documents (PhilID): The current documentation system coexists with and replaces the known as UMID (Unified-Multipurpose ID) or Identification Card. Managed by the Philippine Statistics Authority (PSA), it includes biometric details, a unique identification number, and other security mechanisms.
- Driver's License: Issued by the Land Transportation Office (LTO), it includes the holder's photo, signature, license type, and other relevant data. It has security features such as holograms or barcodes.
- Residence Permit: There are different documents (students under 18, tourists, or temporary residence permits, among many others). They have security measures such as photography or an NFC chip.
Didit: Transforming Identity Verification and KYC/AML Compliance in the Philippines
In a country where identity verification challenges and non-compliance consequences are severe, Didit is revolutionizing the landscape with a solution that addresses these issues. We offer the first free and unlimited KYC plan, tailored to the needs of the Asian country, to simplify regulatory compliance without sacrificing exceptional user experience or wasting thousands of dollars per month.
The combination of technologies we combine is adapted to specific local challenges. An AI-powered development that helps offer fully automated onboarding.
- Document Verification. Our algorithms are trained to validate various Filipino identity documents, from the new PhilID to passports. The system detects inconsistencies and extracts information accurately, adapting to the country's complex documentary reality.
- Facial Recognition with Liveness Detection. We implement customized models that go beyond simple photographic comparison. We offer three distinct liveness detection methods that ensure the person being identified is really who they claim to be and is present at the time of verification.
- AML Screening and Ongoing AML Monitoring (optional): We perform real-time checks against more than 250 global datasets. This process allows companies to comply with capital prevention requirements and their amendments, detecting Politically Exposed Persons (PEPs) and checking various watchlists and sanctions.
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What Official Documentation Does Didit Verify in the Philippines?
Didit works with documentation from over 220 countries and territories. Among the documents we verify in the Philippines, the most important and used in the country are:
- PhilID, UMID or Identification Card
- Philippine Passport
- Driver's License
- Residence Permit
In addition to document verification, we combine it with biometric technology, offering a system that allows compliance with local and international regulations, which raises the standard of identity verification in the Philippines.
The best part? While other solutions charge for each verification, making compliance costly and limited, Didit offers a free and unlimited KYC plan; the only one in the market. This democratization of technology allows companies of all sizes operating in the Philippines to comply with regulations without compromising their finances.
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