Deconstructing the AMLA: The story so far and the gaps to fill (Part 2)

The last part of the Deconstructing AMLA explores the vulnerabilities of casinos.

The need to include casinos and identifying other gaps

While it is true that casinos serve as a profitable revenue stream for government and providers through taxation and licensing, it’s vulnerability to illegal activities such as money laundering and terrorist financing also pose a great threat to the credibility of the Philippine financial system.

Several senators, including Senators Sergio Osmeña and Ping Lacson who proposed amendments on RA 9160, acknowledged this reality and the need to further strengthen the countermeasures on regulation loopholes in the Philippine gaming industry, particularly casinos.

These loopholes were revealed through AMLC’s 1st Philippine National Risk Assessment on Money Laundering and Terrorism Financing (NRA) published in 2016. The NRA identified casinos to have the highest vulnerability rate among designated financial and non-financial institutions (DNFBPs) and remains to be a critical concern at a national level. The report echoed the same findings of FTAF’s report on the vulnerabilities of casinos and gaming sector published in 2009, highlighting the following risks of casinos:

  1. cash intensive transactions involving high volumes of large cash happening in quick paces;
  2. catering to several financial services such as accounts, remittance, foreign exchange, cash issuing etc. but is only regulated as “entertainment” venues and not as financial institutions;
  3. seasonal factors leading to high staff turnover and weakness in staff training; and
  4. conducting financial activities akin to financial institutions.

Atty. Dave Fermin Sevilla from the Gaming Licensing And Development Department of The Philippine Amusement and Gaming Corporation (PAGCOR), a government-owned corporation responsible for granting gaming licenses to casinos all over the country, maintained through a phone interview that the casinos they operate strictly follow the know-you-customer policy to prevent the risk of money laundering activities within their premises. However, this verification only covers casinos operated by PAGCOR.

Senator Panfilo “Ping” Lacson, one of the authors of Senate Bill No. 1256, stressed the vulnerabilities of casinos and the need to include it in the “covered institutions”.

Aside from the aforementioned casino activities, junket operators are also considered a vulnerability, considering their clout in the gaming industry. FTAF’s report reveals that casino-based tourism or “junkets” may use wire transfer to move funds on behalf of the clients. Complicit junket operators can also blend illicit funds with the pool of legitimate funds and create layers of obscurity around the source of ownership of money and identities of the players.

Furthermore, the International Narcotics Control Strategy Report Volume II published by the Bureau for International Narcotics and Law Enforcement Affairs in the United States stressed that weakness of implementation may be attributed to the insufficient cooperation among law enforcement agencies and the AMLC. This also applies to dealers of precious metals and stones which, despite being included in the AMLA, remains ineffectively regulated because of the absence of a single regulatory authority. The report also criticizes the country’s strict bank secrecy law, making it difficult for the ALMC to conduct its basic financial analytical functions and the lack of clear jurisdiction of the Bangko Sentral ng Pilipinas (BSP) over Money Service Businesses (MSB). The call for stronger measures becomes clear with these risks.
A financial nightmare and the fate of casinos

What fortune awaits the Philippines with the looming verdict of the FATF?

Experts have projected the repercussions of FTAF’s blacklisting, especially on the remittances of Overseas Filipino Workers (OWFs). In the case of blacklisting, financial authorities abroad would be compelled to shut down the services of Philippine banks and remittance centers. If this scenario transpires, OFWs will now have to have their remittances transferred through international banks requiring higher fees. The late Senator Miriam Defensor-Santiago, in a press release dated March 16, 2016, emphasized that the country is set to suffer higher financial transaction costs if blacklisted, not to mention an impending lesser value in foreign exchange currency rates.

In the case of casinos and the gaming industry, Atty. Sevilla expects the stricter provisions to cause apprehensions to players with the rigorous monitoring. These apprehensions may translate to lesser casino activities if subjected to the stringent government measures. This scenario appears to be favorable in terms of strengthened anti-money laundering measures. However, it must also be acknowledged that the booming gaming industry will also be at the risk of being compromised.

AMLA’s 15-year history shows that despite ceaseless efforts to impose stricter measures to the casino industry, it remains to be an institution susceptible to money laundering. With the proposed amendments still staggering in the upper house, the country barely has a month left before FTAF gives their final say. If our lawmakers fail to deliver a strengthened AMLA before the June 2017 deadline, will Filipinos be ready to face the consequences?


Note: The 17th Congress will have its sine die adjournment on June 2017.