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.
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.
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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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