State-run Philippine Amusement and Gaming Corp. (Pagcor) has ordered all regulated casinos and gaming entities to tighten safeguards against illicit capital flows. The directive follows a state assessment which revealed that the sector remains highly vulnerable to financial crime.

In a July 13 advisory, the state gaming regulator instructed operators to immediately integrate the findings of the latest Casino Sector Risk Assessment (CSRA) into their institutional risk frameworks. The review, which spanned 2021 to 2024, concluded that the local gaming industry faces elevated exposure to money laundering (ML) and terrorism financing (TF) threats that current internal controls struggle to mitigate.

“The sector remains materially exposed to proceeds from serious predicate crimes, particularly where high-value transactions, cash activity, VIP or junket relationships, electronic gaming, remote channels, or weak controls are present,” the report stated, which Pagcor attached to its advisory.

According to Pagcor, a high ML risk rating reflects a combination of a high-threat environment and medium-high vulnerability across the sector. The report identified the main drivers of this risk as cash-based transactions, high-risk clients and intermediaries, complex business operations, exposure to serious criminal activities, inconsistent compliance among regulated entities, and lingering offshore-style activities.

Similarly, casinos face a medium-high risk of terrorism financing, even though no confirmed cases involving Pagcor-regulated entities were recorded during the review period. While the report noted that "casinos are not assessed as a primary TF channel," the medium-high rating implies they remain vulnerable to “later-stage misuse” after illicit funds have already bypassed primary channels like banks or remittance centers.

“Casinos are peripheral to the principal TF transmission channels, but may still be exposed when funds that moved through banks, remittance channels, e-money, money service businesses, informal transfer systems, or intermediaries later enter casino activity,” the report explained.

The assessment also flagged a critical lack of visibility into the financial backgrounds of high rollers and third-party intermediaries.

“High-value play, intermediated customer relationships, foreign patronage, and complex settlement arrangements can reduce transparency over the source of funds, beneficial ownership, and the true person controlling the activity,” the report stated. These vulnerabilities are primarily concentrated in land-based casinos, which remain a “high-impact” segment due to their scale and heavy reliance on foreign VIP clients.

Pagcor identified several serious crimes that generate the illicit funds seeking entry into the casino sector, including illegal drug trafficking, fraud, estafa, cybercrime, environmental offenses, and tax evasion. The regulator noted that while these funds might not enter casinos directly, they are often “layered” through banks or digital payment platforms before being introduced into gaming activities for conversion.

To counter these threats, the advisory requires all regulated gaming entities to update their institutional risk assessments to reflect the new sectoral findings. Pagcor warned that failure to comply may result in a more severe “supervisory or enforcement response” during future audits.