Editor’s Note
This article highlights the Philippines’ continued inclusion on the FATF’s “gray list,” with casino junket operations cited as a key deficiency in its anti-money laundering and counter-terrorist financing controls. It underscores the regulatory pressure on casino operators to strengthen compliance measures.
However, industry lawyer Tonet Quiogue explains that the burden of AML/CFT compliance rests on casino operators as we expect the regulator to impose stricter requirements to address the weaknesses in their current systems.
In an interview with AGB, a partner from a Philippines-based law firm and an expert in the legal gaming space, Tonet notes that in a risk assessment study conducted by the PAGCOR Anti-Money Laundering Supervision and Enforcement Department (“PASED”) or the Junket Risk Assessment (“JRA”), the overall AML/CFT risk of junket operations was classified as “medium risk”, with significant improvements from 2017. While the JRA identified weaknesses in the conduct of these junkets, It is unlikely that junket operations will be banned, given the significant revenues generated by these operations. What can be expected is stricter supervision over casino licensees.
Tonet Quiogue
The gaming industry lawyer recalls that casinos were only included as covered persons in August of 2017 when the Philippine Anti-Money Laundering Act (AMLA) was amended by former President Duterte’s administration. Before that, there was no hard requirement for casinos to comply with the AMLA regulations. “This was the first major step that the Philippine government took to address AML compliance for casinos directly,” Tonet concludes.
After the formal inclusion of casinos as covered persons, regulations and standards were developed to prevent land-based casinos (who are the supervisors for junket operators) from being used for illegal activities. These regulations and standards were embodied in the Casino Regulatory Manual (CRM) issued by PAGCOR in 2018, and all casino operators authorized to provide junket operations were required to comply.
The CRM regulations on junkets included enhanced due diligence requirements on junket operators and their clients, information sharing, and other guidelines for casinos to follow as their minimum standards for establishing and implementing their AML policies.
Regarding the gray list issue on casino operations, the FATF stated that the Philippines has to demonstrate that it is working on “…implementing its action plans to address its deficiencies…” specifically, effective risk-based supervision of designated non-banking financial businesses and professions (including casinos) and show that Philippine regulators are using Anti-Money Laundering/Combating the Financing of Terrorists (AML/CFT) controls to mitigate risks associated with the operation of casino junkets.
In this context, Tonet indicates that with the issuance of the Casino Regulatory Manual (CRM) and its supplemental guidelines and memos, PAGCOR already has a robust legal framework on how junket operators should be regulated and supervised. However, “simply imposing the rules is not enough for the FATF.
In order to get removed from the gray list, Tonet predicts that PAGCOR has already taken action in response to the FATF’s classification.
Taking a look at the 2022 memo that PAGCOR provided to land-based casinos, which included a copy of a “Junket Assessment Risk” (JRA) that PAGCOR conducted through its enforcement and supervision department (PASED), “the JRA identified the risk level of junket operations after the implementation of the regulatory changes applied to casinos after 2018,” she mentions.
These areas include:
– Casinos are a cash-intensive business, often operating 24hrs per day, with high volumes of cash transactions taking place very quickly. Nine of the eleven land-based casinos with junket operations have cash transactions. The transportation of foreign currency or monetary instruments in the country is legal.
