AML laws seen lacking teeth

Casino operators in the Philippines have been attending workshops on how to comply with the country’s new anti-money laundering regulations, though some industry experts say the rules are still are not strong enough.

On July 14, 2017, President Rodrigo Duterte signed the amended Anti-Money Laundering Act (AMLA) of 2001 to include casinos under the definition of “covered persons” when it comes to AML. This includes land-based, ship-board and online operations.

Philippine regulators — the Philippine Amusement and Gaming Corp (PAGCOR), the Cagayan Economic Zone Authority and the Aurora Pacific Economic Zone and Freeport — drafted a 23-page document that lists the new systems that casino operators needed to put in place to ensure illicitly obtained cash is not laundered through the institutes. The rules came into force in Jan.

The changes follow the audacious 2016 heist that saw $2 billion stolen from Bangladesh’s central bank. From that amount $81 million found its way into accounts at the Rizal Commercial Banking Corporation (RCBC) in the Philippines before disappearing into the casino industry, which at that time was exempt from local AML laws.

Solaire, operated by Bloomberry Resorts Corp, said about $29 million of the funds from the heist came to the casino and most was transferred to the accounts of two junket operators.

Nearly two years later, there is no word on who was responsible and Bangladesh Bank has been able to retrieve only about $15 million, mostly from a Manila junket operator.

According to investigators from the National Bureau of Investigation, the perpetrators likely chose the Philippines because of the weakness of its money laundering laws.

Now, under the amended AMLA law, gaming operators must report any single casino cash transaction that involves more than PHP5 million (US$100,000) or its equivalent in any other currency. Each individual casino will also be required to establish internal programs for the prevention of money laundering to match ones currently implemented by financial institutions.

This inclusion of casinos was one of the recommendations of the Financial Action Task Force (FATF), a global anti-money laundering and anti-terrorism watchdog in order to avoid the potential blacklisting of the Philippines following the Bangladesh incident.

According to Senator Francis Escudero, chairman of the Senate committee on banks, the new law will put more teeth into the existing AMLA.

However  Ben Lee, managing partner at IGamiX Management & Consulting, doubted the amendment will have much effect.

“The AML threshold is over high for a relatively low volume market. The threshold is similar to Macau’s but the level of bets and volume are vastly different. It’s merely a cosmetic band-aid for all the reasons above. The AML should be lower and in line with the banking AML requirements,” he said.

Casinos will have three months after the new anti-money laundering act comes into force to join the Anti-Money Laundering Council’s reporting system.

Previously legislators had argued that casinos needed to be excluded to avoid hampering the growth of the industry, which was only just beginning to expand beyond venues controlled by Pagcor. With strong growth seen in the sector in recent years, that argument was no longer valid.

Arnold Salvosa, vice-president of PAGCOR is confident the new rules won’t affect future profits.  “The entry into the Philippines in the coverage of the AML is still only one aspect in the gaming industry. The prediction is that the Philippines will grow by more than 9 percent in combined gross gaming revenue especially as Entertainment City continues to open up,” he said.

Mel Georgie Racela, executive director of the AMLC Secretariat pointed to the fact that introducing new AML frameworks in other jurisdictions had not harmed profit.

“I want to cite the study done by PricewaterhouseCoopers. In Singapore in 2013 when they adopted the Casino Control Act, their gaming market amounted to S$5.8 billion it then grew to $7 billion. I think the Philippines will be the same- no negative impact,” he said.  

According to PAGCOR, this amendment won’t have a big impact on the casinos of Entertainment City as most of the international operators already have their own in-house system guarding them against money laundering in accordance with their head offices.

“We already had comprehensive KYC systems in place, even prior to the new AML law coming into effect. There will be more administrative work, but the additional costs aren’t material,” a Solaire spokesperson said.

Resorts World Manila also says it will have no problem complying.

“We geared up four years ago,” says Chief Operating Officer Stephen Reilly. “We brought in some experts to teach us exactly what we need to do, so we’re very, very ready for it.”

Salvosa says that it’s the state-owned PAGCOR affiliated casinos that will have to adjust.

“They have already started with the requirements for implementation and are undergoing training given by the AMLC. Immediately after that they will be designing their own internal training modules and will start building their internal money laundering procedures,” he said.

Casinos will first be asked to establish policies and procedure in accordance with AMLA, which will be written into their respective programs. The casino boards of directors are the ones ultimately responsible for ensuring compliance with AMLA. The appropriate government agencies will be there to test if casinos are cooperating. AMLC can also wield authority to conduct their own compliance check.

“We will use this as a last option because we lack human resources but we will not hesitate to exercise this if necessary,” AMLC’s Racela said.

Salvosa said one the main concerns from players is the requirement to divulge information before being able to gamble.

“We have to take measures to soften the impact. We will implement an information drive where we will inform our players that they have nothing to fear and that their information would be safeguarded and not unnecessarily disclosed. There will initially be questions and reluctance,” he said.

Another concern from casino operators and customers is the requirement for customer identification. “Casinos in the Philippines are located inside or in striking distance of restaurants or shops, unlike the set up in Singapore where you cannot enter the gaming area without passing through a certain door. We will now require customer identification documents upon entry. We are trying to discuss this with our government agencies as to how we can address this concern,” Racela added.