GGRAsia – Philippines must strengthen junket AML controls: watchdog

Philippines must strengthen junket AML controls: watchdog

Mar 22, 2023 Newsdesk Latest News, Philippines, Top of the deck

Anti-money laundering (AML) controls in the Philippines’ casino sector need to be strengthened, says an analysis report by the country’s AML watchdog. The body pointed the finger at the junket system, highlighting its “inherent vulnerability” to money-laundering and terrorism-financing risks.

The Philippines’ Anti-Money Laundering Council (AMLC) produced the document, dated January 2023, but only made available in the watchdog’s website on Tuesday. It featured an analysis of more than 7,400 suspicious transaction reports associated with casino junkets.

The report identified “four notable typologies” of activity involving junket operators and potentially linked either to money laundering or terrorism financing. These were: non-reporting by junkets to casino operators of transactions, in violation of existing agreements; involvement of junket operators in “criminal conspiracy”; purchase of chips with small-denomination currency, followed by modest gambling actions; and conduct of financial transactions not commensurate with declared source of funds.

“The substantial volume and value of suspicious transactions associated with casino junkets underscore the junket system’s inherent vulnerability to money-laundering and terrorism-financing risks,” the AMLC concluded.

“Suspicious transaction reports filed by high-risk integrated resorts echo the need to strengthen the AML/CFT [anti-money laundering and countering the financing of terrorism] controls in the casino sector,” the watchdog added.

The AMLC noted in particular risks associated with “the heavy use of physical cash by casino players, coupled with the non-reporting of covered and suspicious transactions by certain casino junket operators.” The body said such practices contributed to the “vulnerability of high-risk integrated resorts to money-laundering risks.”

In October last year, the Paris-based Financial Action Task Force issued an update on countries and places that were on its so-called “grey list” in relation to what it calls “strategic deficiencies” in AML/CFT efforts: the Philippines remained on the list.

The Financial Action Task Force said at the time the country should “continue to work on implementing its action plan to address its strategic deficiencies,” including by “demonstrating that supervisors are using AML/CFT controls to mitigate risks associated with casino junkets.”

Examples of suspicious cases

The AMLC used two sets of data for its analysis. The first set included a total of 3,308 suspicious transaction reports. It was generated by pooling all reports filed by various institutions between September 2018 and January 2023, and extracting those containing the keyword ‘junket’ in the narrative field. The sample referred to transactions consisting in an aggregate value of PHP17.79 billion (US$325.8 million).

The second set of data totalled 4,110 suspicious transaction reports, referring to the reports filed from December 2021 to September 2022 by the four integrated resorts in the Philippines labelled by the local authorities as having the “highest risk” for money laundering or terrorism financing. The names of the four properties were not disclosed. That second sample referred to transactions with an aggregate value of PHP17.59 billion.

Based on the suspicious transaction reports collected, the AMLC document described in detail some case studies of suspected money laundering within the Philippines. They were instances where junket activity was identified in the process. The watchdog’s report did not disclose the identities either of the people or the entities linked to the case studies.

Two cases were said to be tied to junket operators that had not fulfilled their obligations under the Philippines’ Anti-Money Laundering Act of 2001. The cases involved the same casino. Each of the junkets was found to be submitting daily reports to the casino operator stating they had not recorded any suspicious transactions during their activities at the property. But internal investigations by the casino operator eventually revealed a series of reportable transactions made by several individuals, and that had not been included in either junkets’ daily reports.

Neither of the junkets furnished the casino operator with an “explanation or reason” for its failure to declare these transactions, stated the AMLC document.

Another case featured in the AMLC document related to purchase of chips with small-denomination currency, followed by modest gambling actions. It referred to a Malaysian player that had purchased gaming chips totalling PHP1.5 million, using for that 14,970 PHP100 bills and three PHP1,000 bills. After gambling for about two hours, he “proceeded to the cage where he attempted to redeem PHP1.04 million but cancelled the transaction after realising he would be refunded with his original PHP100 bills”.

The player eventually “went to a separate cage a few minutes later and successfully redeemed PHP0.25 million”, stated the report. The document added that the individual returned to the property the following day and used PHP1.1 million in funds to win a total of PHP1.31 million. The earnings were eventually transferred to a cage linked to a junket operator.

“Notably, [the player] was previously the subject of five similar suspicious transaction reports that were submitted to the AMLC”, noted the document. But there was “no other information available” on the player that could help identify the source of the money the person used for gambling, the watchdog’s report noted.