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Remote betting lifts money laundering risk

International

Homg Kong - In a VIP room reserved for high-spending gamblers at City of Dreams Manila casino in the Philippine capital, many of the players are nowhere to be seen. They’re not even in the country. 

Instead, they’re placing bets by telephone, a practice banned in other gaming centres such as Singapore, Australia and Macau, but legal in the Philippines. Young men and women sitting at tables at the casino, many from China and dressed in smart black uniforms, chat in Chinese over mobile-phone headsets, placing wagers on behalf of their long-distance clients. Video cameras on the ceiling broadcast the action on the tables for gamblers who are watching, mostly from China.

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Philippine casinos reported as much as 110 percent increases in VIP revenue from high-rollers from $27 billion in bets placed last year and possibly far more if off-books betting were tallied. Phone betting, also known as betting by proxy, has grown to account for as much as 85 percent of the business at some VIP rooms used by big spenders, according to people familiar with the operations who asked not to be identified as they’re not authorized to speak publicly.

“There’s been a huge upswing in players using proxy betting,” said Shaun McCamley, Bangkok-based partner at gaming consultancy Global Market Advisors, who said it’s especially popular among gamblers in China. “A customer can sit in an office in downtown Shanghai, call associates of a casino, tell them to place bets and watch it in real time.”

The casinos’ operations are raising the risks of money laundering, according to a US government report in March. And Philippines gambling operations are causing concern in China, where authorities have sought to halt billions of dollars worth of outflows that have pushed down the value of the currency and drained capital reserves.

Philippine authorities in late April arrested 55 Chinese nationals wanted in Beijing for alleged involvement in an online gambling syndicate north of Manila. “Proxy betting has always been a huge risk because you can’t possibly know your customer, and you can’t perform any normal due diligence,” said David Green, a principal with Newpage Consulting and a former gaming regulator in Australia. “If there are tainted funds, they can be cleaned and issued back to the proxy or the player.”

Criminal groups already take advantage of Philippine casinos to transfer “illicit proceeds from the Philippines to offshore accounts," the US State Department said in its International Narcotics Control Strategy Report in March, citing the country’s gaming palaces “high risk for money laundering.”

Last year, in one of the largest bank thefts in history, a ring of hackers stole $81 million from Bangladesh’s foreign reserves that were routed through a Philippine casino, a junket operator and a gaming-room promoter.

Subsequently, a Senate Blue Ribbon Committee recommended that casinos be included among institutions monitored for money laundering and that regulators be empowered to look into bank accounts of casino operators suspected of unlawful activity.

While the Philippine Amusement and Gaming Corp, the casino regulator also known as Pagcor, permits phone betting, many other gambling centres ban it because of money-laundering concerns. Macau eliminated betting by proxy last year citing the risk. Not all Philippine casinos engage in proxy betting.

Unlike banks, insurance companies and other finance-related firms that must comply with the Philippines’ anti-money laundering law, casinos are exempt from such reporting requirements an issue the US State Department called “an especially critical concern."

Philippine casinos such as City of Dreams Manila and Solaire Resort and Casino don’t run proxy betting operations themselves and instead rely on so-called junket operators companies that offer credit to players in China and other countries, as well as employ staff who communicate with them by phone. 

When gamblers in other countries place bets by phone with junket operators in the Philippines, their identities are hidden to the casino operators that allow proxy betting, said Global Market Advisors’ McCamley. While Philippine law requires proxies to submit to the regulator the passport information of the people placing bets, there’s no verification process nor information about where the money they’re betting originated, he said.

“There’s no vetting, there’s no know-your-customer requirements," he said. "It’s very high risk.”

VIP Bets

Bets in VIP rooms accounted for almost half of total 2016 gaming revenue for Bloomberry Resorts Corp., which operates the largest casino resort in the Philippines, Solaire in Manila, according to its annual statement. The contribution of VIP bets will exceed 50 percent this year, Morgan Stanley forecasts.

Phone gamblers from China, Korea and beyond are contributing to the company’s increased revenue, along with growing numbers of Chinese tourists to the Philippines, Bloomberry Resorts Chairman  Enrique Razon said in an interview on April 20. Bloomberry didn’t otherwise respond to questions about its anti-money-laundering and know-your-customer practices.

VIP volume may grow as much as 40 percent at the Solaire resort, Razon said in an interview Monday with Bloomberg Television’s Haslinda Amin in Los Angeles. One risk the industry faces, he said, is a crackdown by the Chinese government.

“Now if China is able or successful in curtailing the sending out of funds by VIP players, that should slow the sector,” Razon said.

At City of Dreams Manila, operated by the local unit of Melco Resorts & Entertainment Ltd., the volume of bets by high-stakes players more than doubled last year to 327 billion pesos ($6.6 billion), compared with 31 percent growth for mass tables that attract casual gamblers.

Melco said in an emailed statement that it complies with the country’s anti-money-laundering rules and works closely with the regulator, Pagcor, as well as the local government on matters that affect the Philippine gaming industry.

Even Higher

The actual amount of bets placed using proxies is even higher than the official data from casino operators, according to several people familiar with the Philippine industry. That’s because proxy betting makes it easier for gamblers to place side bets with junket operators and agents that are unrecorded.

The total amount of side bets may be five or six times the size of reported proxy bets, according to the people. “The agent and the player may agree that while play against the house is denominated and recorded in Hong Kong dollars, they will side bet as if that play had been in US dollars,” according to a Global Market Advisors report published in August.

“The agent assumes the operational risk or expense of the house in case the player wins, and collects the money in case he or she loses.” Phone betting isn’t the only way the Philippines is trying to attract long-distance gamblers. The regulator issued 35 licenses for online betting operations restricted to foreigners outside the country, Andrea Domingo, chairman and chief executive officer of Pagcor, told a Senate hearing in February.

The government expects to “ make a lot of money” from these licenses, Domingo said. After taking office last June, President Rodrigo Duterte launched a campaign against operators of illegal online gambling to deter Filipinos from betting.

In the past, China’s long-distance VIPs would have placed their bets closer to home, in Macau. Now that proxy betting is illegal in the world’s largest casino hub, the Philippines has become the new destination, according to Alex Poon, an analyst in Hong Kong with Morgan Stanley. 

“Proxy betting keeps gaining popularity after Macau’s ban of phone usage,” he said.

Read also: SA gamblers' secret weapon 

The Okada Manila, a $2.4 billion new resort that opened in late March, finds the Macau ban “gives us additional opportunities,” Steve Wolstenholme, managing director of the casino resort’s operator, said in an interview. 

“We diligently adhere to nationally and internationally established practices to ensure that we meet or exceed the required financial monitoring practices in all areas of our business,” said the company, which has just started operating a VIP room.

The Philippine government is aware of the money-laundering risk posed by proxy betting, according to Pagcor’s Domingo. It approves licenses to proxies who can legally help customers bet by phone, and junket operators also need to get licenses to operate legitimately in the country.

“Our people are there. They are watching. We have our monitors, the closed-circuit TVs,” said Domingo. Players “are being watched 24 hours a day.” Back at the City of Dreams casino, several VIP-room staff said they’re eager to field the phone calls, as well as go online, to facilitate the betting. One employee summarizes the philosophy: The casino provides whatever betting method the client wants.

 

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