Philippine casino proxy betting is AML loophole: U.S.

Apr 11, 2018 Newsdesk Latest News, Macau, Philippines, Rest of Asia, Top of the deck  

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The Philippines’ tolerance of casino proxy gambling, involving bets placed on behalf of someone not physically present in a gaming venue, was one of the “ongoing deficiencies” of the country’s anti-money laundering (AML) system. So said the 2018 edition of the United States Department of State’s International Narcotics Control Strategy Report.

The report acknowledged however that with effect from last year – in response to the 2016 incident whereby US$81 million stolen from the Bangladesh central bank had found its way into the Philippines’ banking system, with some of the cash allegedly cleaned up via some of the country’s casinos – Philippine gaming venues were now covered by the country’s Anti-Money Laundering Act.

But the U.S. State Department’s 2018 report noted: “Although the Anti-Money Laundering Act now covers casinos, ongoing deficiencies include the high (US$100,000) single-transaction reporting threshold, the non-inclusion of junket operators as covered entities, and the exclusion of non-cash transactions for AML reporting purposes.”

The document added: “Furthermore, the Philippines currently allows proxy gambling, a practice that permits a gambler to place bets via telephone or the Internet rather than going into a casino.”

The analysis further stated, referring to the country’s casino regulator: “Additionally, the government-owned Philippine Amusement and Gaming Corporation plays a dual role as both a gaming establishments operator and the licensor/regulator of the Philippines’ rapidly expanding gaming industry, raising conflict-of-interest issues.”

An August 2016 research paper from consultancy Global Market Advisors LLC said proxy betting had a legitimate place on casino floors as a relatively cheap-to-establish product that could bring incremental gains to venues’ gaming revenues – but it needed “robust regulation” in order to be accepted.

Several investment analysts covering the gaming industry have told GGRAsia they think much of the growth in VIP gross gaming revenue (GGR) in the Philippines market in the past few years has come from proxy betting product.

Macau proxy guidelines

In Macau, the local regulator – the Gaming Inspection and Coordination Bureau, also known by its Portuguese acronym DICJ – in May 2016 issued specific instructions banning the use of mobile telephones at tableside, meaning proxy betting is now widely regarded as off limits to Macau casinos.

Brokerage Sanford C. Bernstein Ltd said in a note shortly before Macau’s guideline on proxy betting: “While regional markets may have some regulatory arbitrage opportunities against Macau (e.g. lower tax rate, more lenient gaming regulation and anti-money laundering requirement), over the medium-term, we believe that Macau and China authorities may exert pressure on junket operations that aim to lure gamblers into the regional markets.”

The high single-transaction threshold in Macau for casino transactions was also flagged as a concern in the U.S. report for 2018, as it had been in past reports.

“Gaming entities are subject to threshold reporting for transactions over approximately US$62,640 (MOP500,000) under the supplementary guidelines of the Gaming Inspection and Coordination Bureau. Macau should lower the large-transaction report threshold for casinos to US$3,000 to bring it in line with international standards,” said the analysis, produced by the Bureau of International Narcotics and Law Enforcement Affairs.

The report also noted of Macau: “Only a handful of money laundering convictions have been obtained in recent years.”

The U.S. assessment noted that Cambodia had “major deficiencies” in its anti-money laundering system, also indicating that nation had 57 legally-permitted casinos.

“No casino located in Cambodia has ever submitted a cash transaction report, and the volume of filed suspicious transaction reports (STRs) is very small, reportedly less than five out of an estimated 2,000 STRs filed in 2017,” said the U.S. report.

The analysis said that Vietnam – an emerging market for large international-standard casino resorts and that is poised to experiment with letting some locals inside some of them in order to gamble – had in 2017 prosecuted its first money laundering case.

“To improve further, Vietnam needs to continue to build up its AML capabilities,” stated the report.

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