NEDA, AMLC differ over whether Philippine financial crime greylisting due to POGOs

The Philippines was included in global financial crime watchdog the Financial Action Task Force's (FATF) "grey list" due to the continued operations of Philippine Offshore Gaming Operators, an official of the National Economic Development Authority said Tuesday.

However, Philippine Anti-Money Laundering Council (AMLC) Executive Director Matthew David said POGOs were not specifically mentioned in the action items that the FATF had recommended to the Philippines for its removal from the greylist.

In her presentation during the Senate ways and means committee hearing, NEDA Undersecretary Rosemarie Edillon said the agency identified at least two possible economic costs of POGOs.

The first one was China's "threat" of prohibiting its nationals from visiting the Philippines as tourists.

"One is the statement of China when they said that they will intensify the crackdown on cross-border gambling on claims that it serves as a venue for fraudulent transactions and illegal recruitment of Chinese workers so they adopted what they called a blacklist of cross-border gambling tourism destinations," Edillon said.

"So what they threatened to stop was actually, first, the tourism, the Chinese tourists coming into the Philippines and they have singled out Cambodia and the Philippines for that matter. Cambodia actually quickly banned the industry but the Philippines did not heed China's call," she added.

In 2019, Edillon said there were 1.7 Chinese tourists in the Philippines and they contributed roughly .07 percent of the gross domestic product (GDP).

In a statement, the Chinese Embassy said Ambassador Huang Xilian reiterated during a meeting with Senate President Juan Miguel Zubiri and other senators Beijing's policy on and firm opposition to POGO.

The Embassy further said crimes induced by and associated with POGO not only harm China’s interests and China-Philippines relations, but also hurt the interests of the Philippines.

"It is therefore widely believed that social costs of POGO far outweigh its economic benefits to the Philippines in the long run and POGO should be tackled from the root so as to address the social ills in a sweeping manner," it added.

On the 'tourist blacklist' remarks, the Chinese Embassy said tourism is an important component of practical cooperation between China and the Philippines which has helped further deepen long-time friendship between the two peoples.

"Before the COVID-19 pandemic close to two million Chinese nationals traveled to the Philippines in 2019, making China the second largest source of tourists. We expect more Chinese tourists to come to this country after the pandemic," it added.

Apart from this, Edillon said another potential cost of POGOs was the inclusion of the Philippines in FATF's greylist.

"The Financial Action Task Force has placed the Philippines in the greylist and they have also singled out POGOs, saying that there's low awareness and regulation of anti-money laundering and counter-terrorism financing and there's the growing threat of money laundering and other fraudulent activities, the number of unregulated or unsupervised service providers and the low level of beneficial ownership identification," Edillon said.

While the observation of a low level of beneficial ownership identification was not limited to POGOs, Edillon said this implied lesser foreign investments due to the cost of doing business in the country.

"What this means essentially is for foreigners wanting to transact business in the Philippines, they will have to exert special due diligence. So just as we are trying to attract more foreign investments, so it actually adds to the cost of doing business with the Philippines. There will be additional clearing times because of the fact that we are in the greylist," she said.

These assessments were based on the AMLC's statement in March 2020 which showed that P14 billion of P54 billion POGO transactions between 2017 and 2019 "were dubbed as suspicious transactions."

Edillon said the government is eyeing the removal of the Philippines from the FATF's greylist on or before January 2023.

18 action items

However, AMLC's David clarified that, though the country was greylisted, the FATF did not specifically mention POGOs in its 18 action items for the Philippines.

David explained that the FATF had required the AMLC to conduct "effective risk-based supervision" of Designated Non-Financial Businesses and Professions (DNFBPs), which includes POGOs and their service providers.

David added the following were the AMLC's findings after their examination and compliance checking:

• One POGO was rated vulnerable to money laundering and terrorism financing
• 20 POGOs were found grossly inadequate when it came to compliance with AMLC's guidelines regarding money laundering and terrosism financing
• Six POGOs were rated non-cooperative

"Again po, POGOs are not per se mentioned in the action items of the FATF regarding the 18 recommendations that they have required us to do. But as AMLC, we are required to conduct effective risk-based supervision on the DNFBPs which include POGOs and service providers of POGOs," he said.

Earlier, Senator Juan Edgardo "Sonny" Angara disclosed a 2020 AMLC report which showed that some service providers (SPs) of POGOs were linked with entities that were alleged to be beneficiaries of fraud and drug-related money.—DVM/AOL, GMA News