Shadowy operators power Duterte’s offshore gaming boom
16 Oct 2019

It has created 470,000 jobs. It contributes over $11 billion to the economy. It has even sparked a diplomatic clash with China. The strange thing is, nobody is sure who fully owns it.

It’s not as though the Philippine offshore gaming operators who are transforming Manila, known collectively as POGOs, are invisible, although the owners are mostly anonymous, according to information gathered by the Nikkei Asian Review.

On even the most casual stroll through Makati, the capital’s financial district, hundreds of online casino workers can be seen streaming out of office towers, chatting among themselves in Mandarian and Cantonese as they come off their 12-hour shifts taking bets or luring gamblers in via WeChat.

While at work, staff appear online as croupiers and poker dealers, some of them scantily clad in lingerie to help keep the interest of punters based mostly in China, where online gambling remains illegal.

Branded the “most dangerous tumor in modern society, detested by people all across the world” by China’s government, the online casinos have no gaudy, flashing lights to draw customers and can only be played by people living outside the Philippines.

Yet of the 60 POGOs set up in the Philippines since 2016, most are registered either in the British Virgin Islands, or other tax havens including the Seychelles, Belize, Samoa and the Isle of Man, where the identities of company directors and owners are hidden from public view.

Only 15 POGOs are registered with the Bureau of Internal Revenue, and only six pay taxes according to Senator Joel Villanueva, an independent aligned with President Rodrigo Duterte and a staunch critic of the gambling industry. Meanwhile, only 16 POGOs are registered with the Philippine Securities and Exchange Commission, the corporate regulator, Nikkei has learned.

As these POGOs are registered in low-regulation, low-tax jurisdictions lie thousands of miles from the scrutiny of other agencies, such as the Securities and Exchange Commission, their presence in the Philippines raises the inevitable question: Who runs them, and are they just a front for money laundering?

In a statement to Nikkei, the Anti-Money Laundering Council revealed that it was already looking into the POGO industry to “understand peculiarities and trends in the flow of funds of online gaming operators and licensees” that will assist in the conduct of a money laundering and terrorism financing assessment of the sector.

“Included in this study is the determination of the volume of transactions of POGOs, both coming to and going out of the Philippines,” the AMLC said in a statement. “It also includes information about the origin and destination of such funds. These are helpful in assessing the extent of money laundering risks Pogos are exposed to taking into account the peculiarities of their operations.”

Senator Villanueva told Nikkei that in his view the Philippines as a whole was not benefiting from the sector.

“It’s only benefiting a small portion of the society, primarily the real estate [business],” Villanueva said, adding that he had already alerted authorities to “the risk of money laundering” posed by the rise of POGO operations in the Philippines.

In August, Villanueva passed a Senate resolution calling on the Labor, Employment and Human Resources Development Committee to investigate the offshore gaming industry, focusing in particular on the influx of foreign workers to service the industry, the prevalence of fraud and money laundering, and whether enough tax is being paid.

The gaming regulator, the Philippine Amusement and Gaming Corp. or Pagcor, which requires POGOs to submit an anti-money laundering plan, did not respond to requests for comment. Pagcor also declined to disclose who owned the business, citing local privacy protection laws introduced in 2012 that were intended to protect individuals’ personal data in the growing digital economy.

Stephen Cutler, director at Philippine tech consultancy Guide Meridian and a former U.S. FBI agent based in Manila, said that seeking registration in domains such as the British Virgin Islands, whose key selling points include low taxation and secretive banking rules, does not necessarily imply wrongdoing.

“But I would say that a BVI registration raises an eyebrow because why would they have BVI registration when they do business here?”

While mere registration in the British Virgin Islands did not automatically translate to a money laundering violation, the Anti-Money Laundering Council said possible tax evasion was a concern for all jurisdictions.

“The Financial Action Task Force standards consider tax crimes as a predicate offense for money laundering,” the AMLC told Nikkei.

Several other lawmakers have also signaled their intention to probe the industry.

“I call on our financial intelligence and law enforcement units to dig deeper into the personalities behind the gambling enterprise of both the POGOs and the casinos,” Representative Robert Ace Barbers said in a statement.

Barbers also urged Pagcor to ensure proper due diligence of the sector, arguing that organized crime and drug syndicates may be using offshore gaming as a vehicle for money laundering.

By Cliff Venzon, Nikkei Asian Review, 15 October 2019

Read more at Nikkei Asian Review

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