Think-tank to Palace: Subject Pogos to cyber, laundering audit

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September 10, 2019

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AN infrastructure-oriented thinktank is urging Malacanang to order a comprehensive cybersecurity and money laundering audit of all Philippine Offshore Gaming Operations (POGOs) in the country.

“With President Rodrigo Duterte standing firm on allowing POGOs to operate despite Beijing’s state-level request to ban Chinese-led gaming operations, Malacanang should now order state agencies involved in preventing cybercrime and money laundering to assess the risks posed by POGO activities," said Terry Ridon, Infrawatch PH convenor and former House ICT committee member.

Pagcor audit grossly insufficient

Ridon said the third-party service provider engaged by the Philippine Amusement and Gaming Corp. (PAGCOR) to audit POGOs is grossly insufficient in view of the state-level cyber fraud and laundering concerns raised by Beijing.

“State-level concerns warrant a state-level response led by government law enforcement agencies. Government cannot rely on a private third-party auditor to address cyber fraud and money laundering undertaken by transnational criminal syndicates. It should be noted that what is subjected to public scrutiny are not only POGO licensees but the entire POGO industry led by Pagcor and other authorised agencies. Correspondingly, an entity engaged by Pagcor will be insufficient, if not unacceptable.”

Use of cryptocurrency in POGOs skirts money laundering controls

Ridon, who studied cybersecurity at the Harvard Kennedy School, said that government should investigate whether POGOs use cryptocurrencies to skirt money laundering controls for casino operations.

“Cryptocurrencies are currently not subject to any reporting mechanism for money laundering. Casino money laundering controls are limited only to cash transactions involving an amount in excess of Five Million Pesos (P5,000,000.00) or its equivalent in any other currency. But Bangko Sentral ng Pilipinas (BSP) Circular No. 944, series of 2017, explicitly declares that cryptocurrencies ‘do not have legal tender status.’ As such, a cryptocurrency equivalent of more than five million pesos per transaction is able to enter-and-leave the Philippine financial system without notice and limit by Philippine authorities.”

Ridon also said that Chinese-owned and operated cryptocurrency companies servicing POGOs have set up offices in Metro Manila’s financial hubs.

Pierce the corporate veil of POGOs

Ridon, a lawyer, slammed the ‘legalistic dishonesty’ of Pagcor when one of its employees ‘shamelessly’ denied before Congress that no POGOs are ‘operated by Chinese corporations because mostly the corporations are offshore companies which have local companies here in the Philippines.’

“Lulusot pa kayo eh. What is clear is that even if these are offshore companies, it cannot be denied that the beneficial owners of these companies are of Chinese origin, its employees are Chinese, its bettors are Chinese, and the entire operations are serviced by contractors which are mostly Chinese. So wag po sana natin pinaglololoko ang taumbayan.”

As such, Ridon also called on the Securities and Exchange Commission (SEC) to ‘pierce the veil’ of POGOs to expose the true ownership of these companies, and determine whether Chinese nationals had been undertaking illegal overseas gambling operations in the Philippines.

“By piercing the corporate veil of these POGOs, if Chinese nationals are found owning and operating these online gambling outfits, the Philippine government has absolutely no business dealing with these nationals and corporations.”


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