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Manila Bulletin devider Business devider POGOs have no AML/CTF compliance -- AMLC study

POGOs have no AML/CTF compliance -- AMLC study

Published Mar 10, 2020 12:00 am
By Lee C. Chipongian Philippine offshore gaming operators (POGOs) are not compliant with anti-money laundering/counter-terrorism financing (AML/CTF) rules and is a potential breeding ground for fraudulent activities, based on a study conducted by the country’s financial intelligence unit, the Anti-Money Laundering Council (AMLC). The AMLC study, “Understanding the Internet-Based Casino Sector in the Philippines: A Risk Assessment” strongly suggested a review of how regulators supervise POGOs and Internet-based casinos and service providers (SPs) and to have a regulatory assessment. This would also include the reevaluation of POGO licenses and the certificates of authority/operation of SPs with the end view of cancelling licenses and accreditation of those with “unfavorable records”. To give its supervision more teeth, several memoranda of agreements are recommended between appropriate government agencies (AGAs) -- which are the Philippine Amusement and Gaming Corporation (PAGCOR), Cagayan Special Economic Zone’s (CEZA), and the Aurora Pacific Economic Zone and Freeport Authority (APECO) – with the AMLC, Bangko Sentral ng Pilipinas (BSP) and law enforcement agencies to “identify and curb illegally operating casinos”. The study also recommended that the BSP issue guidance with the Securities and Exchange Commission, Insurance Commission, and AMLC, to their respective covered persons to conduct enhanced due diligence on Internet-based casinos and SPs. Internet-based casinos are considered as a growing sector which poses a potential threat and “may increase the risk to money laundering” based on suspicious transaction reports from 2013 to 2019 of SPs amounting to P14.01 billion. The Second National Risk Assessment of 2015 to 2016 already identified the casino sector as a high level of risk to money laundering. Based on AMLC data, in 2018, gross gaming revenue (GGR) rose by 22.5 percent year-on-year to P216.5 billion while arnings from Internet-based casinos accounted for 2.5 percent of the total GGR from 2017 to 2018. The study revealed the following quantitative and qualitative assessment, with conclusions: *There is a low level of AML/CTF awareness and regulation. Generally, POGOs and interactive gaming licensees (IGLs) are a lesser threat compared to their SPs. PAGCOR and AMLC jointly supervise POGOs on AML/CTF matters, thus POGOs are subject to the obligations under the AMLA, as amended. SPs, on the other hand, are merely accredited and not licensed by PAGCOR. The low level of AML/CTF regulation stems from jurisdictional issues. *There is an increasing level of threat to money laundering and other fraudulent activities. The number of investigations involving domestic Internet-based casino operators and SPs is growing. From 2017 to 2019, the recorded casino-kidnapping-related incidents totaled 63 cases. *There is a high number of unregulated or unsupervised SPs. As not all SPs are within the realm of AML/CTF supervision, they are prone to abuse and exploitation by criminal organizations. In 2019, local authorities shut down around 200 Internet-based casinos and SPs, illegally servicing online gaming operations. In the same year, the local government also ceased the operations of one of the largest SPs for Internet-based casinos. *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. *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 AMLC study covered 59 POGOs by PAGCOR, 218 SPs and three gaming laboratories, 24 CEZA IGLs and 18 interactive gaming support service providers. According to AMLC, the study also yielded these results and findings: *The POGOs have no AML/CTF compliance units. *The offices of the POGOs, local gaming agents, and authorized representatives do not exist in the registered addresses provided by PAGCOR. The SPs, however, are operating in the said addresses. 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. *There are no actual local agents and/or authorized representatives in the Philippines. 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. *The compliance officers of the POGOs cannot be located and contacted at the given addresses. The SPs are also unaware of the existence of these compliance officers.
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