Casinos weak link in Philippine AML/CFT regime, US says

The Philippines continues to be of primary concern when it comes to international money laundering and efforts to combat the financing of terrorism, with the country’s casinos a weak link in the chain, according to a U.S. State Department report.

“Money laundering is a serious concern due to the Philippines’ international narcotics trade, high degree of corruption among government officials, trafficking in persons, and the high volume of remittances from Filipinos living abroad,” says the 2016 International Narcotics Control Strategy Report (INCSR), which covers 2015. The report is an annual report by the Department of State to Congress prepared in accordance with the Foreign Assistance Act. It describes the efforts of key countries to attack all aspects of the international drug trade in Calendar Year 2015 and includes AML and financial crimes.

The report notes that the countries may be at risk because of a high level of transactions through the financial systems, or because of weak controls. 

However, the report makes particular reference to casinos in the Philippines.

“The Philippines faces challenges from sophisticated transnational drug trafficking organizations (DTOs), such as the “Hong Kong triads,” who use the Philippines as a drug transit country for cocaine and methamphetamine. These DTOs use the Philippine banking system, commercial enterprises, and particularly casinos, to transfer drug proceeds from the Philippines to offshore accounts.”

“Regionally, organized crime groups, such as Chinese triads, have infiltrated casino operations and have facilitated prostitution, narcotics trafficking, loan-sharking, and suspect junket and VIP gaming tours. International experts and observers note that the Philippine casino industry is a weak link in the country’s AML/CFT regime.”

The entry for Macau is far shorter, but points to the junket system as being an area of vulnerability.

 “This inherent conflict of interest, together with the anonymity gained through the use of the junket operator in the transfer and commingling of funds, as well as the absence of currency and exchange controls, present vulnerabilities for money laundering, encourages Chinese capital flight, and fosters underground financial systems such as fei-chien or “flying money,” it said.