POGOs lack compliance with anti-money laundering measures, says AMLC

Philippine Offshore Gaming Operators (POGO) lack compliance with measures against money laundering, the Anti-Money Laundering Council (AMLC) said on Tuesday.

Citing the results of its study “Understanding the Internet-Based Casino Sector in the Philippines: A Risk Assessment,” the AMLC said that POGOs' low-level compliance with anti-money laundering/counter-terrorism financing (AML/CTF) measures “stems from jurisdictional issues.”

“Though foreign POGOs and interactive gaming licenses (IGLs) may be subject to the AML/CTF framework of foreign jurisdictions where they are situated, the AMLC and appropriate government agencies that is, PAGCOR (Philippine Amusement and Gaming Corp.), CEZA (Cagayan Economic Zone Authority), and the Aurora Pacific Economic Zone and Freeport Authority (APECO), may still conduct onsite/offsite compliance-checking on these foreign Internet-based casinos through their representative office/compliance office or local agent,” the AMLC said.

The AMLC’s conduct of onsite compliance-checking on POGOs found that the offices of the POGOs, local gaming agents, and authorized representatives do not exist in the registered addresses provided by PAGCOR.

The service providers, however, are operating in the addresses provided.

“It must be noted that SPs are distinct from POGOs. SPs are those who offer services, such as gaming software, content streaming, and other components of gaming operations, to qualified POGOs,” the AMCL said.

The council also found that there are no actual local agents and/or authorized representatives in the Philippines.

It said that a foreign-based operator is required to appoint a local gaming agent, who will represent the said foreign-based operator in the Philippines.

“In turn, these local agents or authorized representatives are obligated to complete the documentary requirements during application for gaming operations,” AMLC said.

No compliance officers, units

The anti-dirty money body also found that POGOs' compliance officers cannot be located and contacted at their given addresses.

The service providers are also unaware of the existence of these compliance officers, it said.

“POGOs have no anti-money laundering/counter-terrorism financing (AML/CTF) compliance units,” AMLC said.

Crimes, anonymity

The council also cited in its study an increasing level of threat of money laundering and other fraudulent activities.

“The number of investigations involving domestic Internet-based casino operators and service providers is growing,” the AMLC said, referring to congressional probes on alleged criminalities linked to POGOs.

It also noted that from 2017 to 2019, the recorded casino-kidnapping-related incidents totaled 63 cases.

The study also noted a high number of unregulated or unsupervised service providers.

“As not all SPs are within the realm of AML/CTF supervision, they are prone to abuse and exploitation by criminal organizations,” AMLC said.

The council said there is a low level of beneficial ownership identification.

“Because the use of gaming accounts is not closely regulated by POGOs, the level of anonymity is high. Thus, accounts may be used for money laundering and fraudulent activities,” AMLC said.

However, it said, the threat of terrorism financing within the Internet-based casino sector is generally low.

“Based on available records, there is no concrete evidence that links Internet-based casinos to terrorism and terrorism financing,” the council said.

Based on suspicious transaction reports from 2013 to 2019, the sectoral risk assessment reveals that the estimated value of proceeds, involving Internet-based casinos and service providers, amounted to P14.01 billion.

In 2017, President Rodrigo Roa Duterte signed into law Republic Act (RA) No. 10927, known in local parlance as “the casino law,” designating casinos, including Internet- and ship-based ones, as covered persons under the Anti-Money Laundering Act of 2001, as amended. 

The sector is rapidly expanding, with its gross gaming revenue (GGR) reaching P216.5 billion in 2018, a 22.5% increase from 2017.

Earnings from Internet-based casinos represent around 2.5% of the total GGR from 2017 to 2018.

Internet-based casinos are where non-Filipino gaming patrons located outside the Philippines play and place bets through gaming websites or standalone mobile applications.

Winnings are paid out mostly through debit cards or wire transfers facilitated by online gaming operators and payment solution providers, according to the AMLC.

The council’s sectoral risk assessment covers PAGCOR’s 59 POGOs, 218 service providers, and three gaming laboratories as well as the CEZA’s 24 interactive gaming licensees (IGLs) and 18 interactive gaming support service providers (IGSSPs).

Due to the gaps in the sector, the AMCL study recommends the following actions to be accomplished with a timeframe, which are now being implemented:

• Increase the level of AML/CTF effectiveness of compliance and supervision through training and workshops;
• Revisit the supervision of POGOs and SPs, conduct a regulatory assessment, and enforce actions;
• Reevaluate the licenses of POGOs and the certificates of authority/operation issued to SPs; and recommend the cancellation of licenses of POGOs/certificates of accreditation of SPs with unfavorable records;
• Execute memoranda of agreements between AGAs and AMLC, Bangko Sentral ng Pilipinas (BSP), law enforcement agencies, and other relevant agencies to identify and curb illegally operating casinos;
• Issue guidance from supervisors, that is, the BSP, Securities and Exchange Commission, Insurance Commission, and AMLC, to their respective covered persons to conduct enhanced due diligence on Internet-based casinos and SPs; and
• Disseminate the study to supervising agencies, AGAs, and law enforcement agencies.

“The study serves as a tool to inform stakeholders on the risks to money laundering of Internet-based casinos and to guide decision-makers in crafting policy initiatives,” AMLC said. — BM, GMA News