Leaving behind the perception and bias built up with too many Hollywood/Las Vegas and Hong Kong god of gambling movies over the years, if I take a quick straw-poll now, do you think it is easy to launder money through casinos?
If your answer is No, what about if I add another factor that casinos are not subject to the effects of money laundering regulations?
Don't think Singapore. Think Philippines.
Then perhaps, intuitively, you may be swayed towards answering Yes to the question.
What's the Story?
Further to my previous post last week First Corporate Money Mule Nabbed In Singapore, 2 Philippines news articles caught my attention recently (1) PHL Risks Return To Dirty Money Watch List by BusinessWorld Online on 2 March 2016; and (2) PAGCOR: Hard To Launder Money In Casinos by Inquirer.Net on 7 March 2016.
There are apparently news reports suggesting that $100 million was laundered through bank accounts of 3 casinos in the Philippines and the regulators are said to be investigating the case now.
Under FATF Recommendations, DNFBPs, who are required to perform due diligence and comply with relevant AML/CFT rules, refer to
Real Estate Agents
Dealers in Precious Metals and Stones
Lawyers, Notaries, Other Independent Legal Professionals and Accountants
Trust and Company Services Providers
I didn't follow this closely back in 2013 but a little surprised that in the Philippines, Casinos (and quite possibly Real Estate Agents) seem to be excluded as "Covered Persons" in the last AML law amendment in February 2013 (AML Act 2001 (Amended)). I wonder why?
According to a FATF Statement dated 22 February 2013, FATF had expressed "concerns that the casino sector in the Philippines continues to be unregulated for AML and CFT purposes and is still not subject to AML/CFT requirements and urges the Philippines to promptly and effectively address this outstanding deficiency.". Note also that Philippines was once on FATF High Risk, Non-Cooperative Countries List.
What's My Point?
This post is not to pick on the Philippines or to comment on the merits/demerits of the particular case in question.
Risks of ML/TF exist everywhere. Where regulations are reactive and only play catchup years on, it is no wonder tons of money/resources are often plough back into the system to make things right eventually. It works the same with banks, FIs and DNFBPs as well. We call it remediation.
The rules of engagement are quite simple: regulators set the boundaries and the participants play within that defined boundaries. Where the boundaries are lacking or direction set is unclear, participants often create industry practices and norms on their own that need to be validated and acceptable by the regulators at an early stage where possible.
That's where Compliance function comes in to assist in navigating the murky regulatory landscape.
Separately, when you look at Country Risk as part of your risk assessment, would you consider the fact that Philippines is lower risk because it is not on FATF's NCCT list? Or would you consider Philippines as higher risk?
What do you think?
By the way, I wasn't too sure if the "$100 million" referred to in the articles above is in PHP or US$. For an industry that brings in yearly gross casino revenue of circa more than PHP 100 billion (approx US$ 2 billion) according to PAGCOR Data, if the reference to $100 million is in PHP, then that's 0.1% only. Seems a little low by gut feel. If it is in US$, that's almost a 5% of the gross revenue, which seems like a big number to me. I think it is the former though. By the by, PAGCOR is amongst the top 3 contributors to Philippines Government revenue circa PHP 30 billion in 2015 (Source from PAGCOR).