Top executives from the Spectrum Gaming Group believe that the move to ban offshore gaming operators (POGOs) in the Philippines could go a long way towards getting the nation removed from the Financial Action Task Force’s (FATF) grey list. Fredric Gushin and Paul Bromberg share their opinions on what the ban could mean and what will happen next.
The recent decision by the Marcos Administration to ban Philippine Offshore Gaming Operators (POGOs), latterly known as Internet Gaming Licensees (IGLs), was a bold and unprecedented measure.
The pressure to do something about the POGOs had been building for quite some time. The Philippines was placed on the “Grey List” of Money Laundering Countries by the Financial Action Task Force (FATF) almost two years ago and was having difficulty in taking affirmative measures to get off the list—one of the primary issues raised by the FATF related to the role of POGOs.
Offshore online gaming is perceived by governments and law enforcement worldwide to be one of the highest risks for money laundering.
In the Philippines, the specific concerns lay in the failure by the licensing agencies to conduct the necessary due diligence of applicants and the failure to identify beneficial ownership of these companies and their parent companies. In addition, the methods by which POGOs operate raised major money laundering issues, including their source of funding, payment methodologies and other similar issues1.
POGOs had been a source of revenue for the Philippines—though the actual amount and true benefit has been disputed—but President Marcos framed the requirement for a ban correctly in that they have negatively impacted on the country’s reputation and caused multiple domestic criminal and social issues.
In addition to the Philippines, other countries licensing offshore online gaming have also run into regulatory and law enforcement issues with the FATF in the past. Malta and Gibraltar have both been on and off the “Grey List” for many years. Curacao has recently modified its oversight of online gaming companies licensed in its jurisdiction under pressure from the Netherlands to comply with international standards of licensing and regulation.
The new system is about to be implemented in the next several months. In Asia, Cambodia has also been on and off the “Grey List” for, among other issues, its thriving online gaming operations in Sihanoukville. Laos has recently again been placed on the “Grey List” for the second time in ten years.
It is not just the FATF that is trying to encourage compliance with Anti-money laundering (AML)-related issues in both casino and online gaming. International organizations have been ratcheting up pressure on countries that license offshore online gaming. For example, the UN Office of Drugs and Crime published its “Report on Casinos, Money Laundering and Transnational Organized Crime in East and Southeast Asia” in January 2024 while The Journal of Economic Criminology issued a report in June entitled “Defining and Estimating the Illegal Gaming Market – a Scoping Review”, which addressed some of the same issues2.
These reports discuss problems relating to casinos and, more importantly for the purposes of this article, online gaming. The intersection between online gaming, transnational criminal enterprises, human trafficking and illegal narcotics trafficking has been known by law enforcement for a long time. These reports respectively highlight how junkets have become the effective bankers for Organized Crime – meaning in Asia primarily triads creating safe havens for money laundering.
Unregulated and under regulated casinos run by junkets serve as a useful channel to collect funds between players/junkets related to credit issuance and are determined to circumvent traditional and effective casino controls. Online casinos are an attractive opportunity for criminals and organized crime to hide illegal funds as casinos and regulators often have a “Heads Down” approach: this is what seems to have taken place in those countries on the “Grey List”.
As Spectrum has noted over the years at several ASEAN Gaming Summits, money laundering is a critical component of these illegal activities, which is why these countries have been placed on and off the Grey List over several years. Being placed on the FATF Grey List has a negative impact on a country’s reputation and on its ability to undertake US dollar banking transactions, and is thus designed to strongly encourage countries to take requisite action to implement laws, regulations and oversight of the banking, gaming and financial sectors, which face a high degree of risk related to money laundering.
POGOs will be effectively banned at the end of this year. In the interim and going forward, it will be important to see if PAGCOR and other governmental agencies have the “governmental will” to assure the public that the ban is being maintained. Another question is whether the ban will also be applied to the Cagayan Special Economic Zone and Freeport (CEZA).
Although Cagayan has not been specifically mentioned, government scrutiny should also be paid to its operations and the continuation of licensing of online gaming companies or online gaming operations there should also be curtailed or it will be perceived as yet another significant loophole or circumvention of the country’s efforts to meet its AML requirements.
As for the online gaming companies themself, do not fear: they will find another “safe haven” in which to operate—perhaps in Cambodia again, Myanmar, or further afield in Vanuatu. The same circumvention efforts will certainly be repeated in other jurisdictions. In due course, perhaps other countries will also find themselves on the FATF “Grey List” and encouraged to address these same issues.
There is no doubt that the actions taken to ban POGOs is a significant step in the right direction to bring the Philippines in line with the Combating Terrorist Financing (CTF)/AML regulatory regime and general practices of other countries, and thus removal from the “Grey List”.
That said, other steps clearly need to be taken related to junket licensing, such as in-depth background investigations and identification of beneficial ownership. Moreover, the government must ensure a higher level of regulation for the Philippine Inland Gaming Operators (PIGOs) and PAGCOR’s own planned online gaming operations. However, the POGO ban counts as one win for proper public policy.
Fredric E. Gushin is CEO, Paul Bromberg is Senior Vice President of Investigations and Research at Spectrum Gaming Group
- A number of other concerns raised by the FATF included, but was not limited to, the use of junkets in casinos and the failure to file suspicious transaction reports for the scope and volume of gaming that exists in the Philippines. ↩︎
- The United States Institute of Peace – Transnational Crime in Southeast Asia – A Growing Threat to Global Peace Security May 2024. ↩︎
