U.S. says Philippine AML rules sketchy despite 2016 heist

Mar 07, 2017 Newsdesk Latest News, Philippines, Rest of Asia, Top of the deck  

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Five locations in the Asia Pacific region that have sizeable legal casino gaming industries are mentioned as “countries/jurisdictions of primary concern” in the 2017 International Narcotics Control Strategy Report from the United States’ Department of State.

Neither Macau, nor Australia, nor Singapore – Asia Pacific jurisdictions mentioned in last year’s report – are identified in the 2017 list of places of primary concern.

But – as in 2016 – the Philippines received extensive commentary and extensive criticism.

The 2017 report notes in particular that – a year on from a US$81-million cross-border online theft of money, making use of the Philippines’ banking system and allegedly involving cash clean up via some of the country’s casinos – such gaming venues are still not covered by the country’s Anti-Money Laundering (AML) Act.

“The most pressing AML deficiency is the continuing non-inclusion of casino operators and other DNFPBs [designated non-financial businesses and professions] as covered entities. Legislation to correct this deficiency has been languishing for many years,” said the U.S. State Department.

In early February it was reported in the Philippine media that the country’s upper legislature, the Senate, had moved closer to adding coverage of casino business to the terms of the country’s AML Act. This was on the basis that a Senate panel had begun analysing three different bills on the matter.

The latest U.S. report reiterated that the Philippines’ bank secrecy provisions “are among the world’s strictest,” requiring investigators to obtain a court order to access bank records in most cases.

“This makes it difficult for the [country’s] AMLC [Anti-Money Laundering Council] to perform its basic financial analytical functions and inhibits the ability of law enforcement to proactively pursue money laundering cases in the absence of a link to a specific predicate crime,” said the State Department.

The report recounted that the 2016 cyber-heist had seen “US$81 million of Bangladesh central bank funds laundered through Philippine casinos with the participation of a remittance agent”.

The U.S. document added, regarding the Philippines’ AML track record in general: “The continuing lack of prosecutions and convictions is not surprising since only 49 cases have been filed since the AMLC began operating in October 2001.”

Southeast Asia

In discussion of another casino jurisdiction – Cambodia in Southeast Asia – the State Department said: “Cambodia’s non-financial sectors, including – most significantly – the gaming and real property industries, are unregulated or under-regulated.”

It added: “Although gaming is illegal for Cambodian citizens, Cambodians often participate in illegal gaming.”

The report added there were 57 legal casinos in Cambodia. It noted Poipet – a town on the Cambodian side of the country’s border with Thailand – had 10 casinos, and it had been estimated a daily average of US$12 million in cash had crossed the international border in 2015 destined for the Poipet gaming venues.

“No casino located in Cambodia has ever submitted a cash or suspicious transaction report to CAFIU [the Cambodia Financial Intelligence Unit],” claimed the 2017 International Narcotics Control Strategy Report.

The State Department said, regarding AML weaknesses in Cambodia’s neighbour Laos, which has a number of casino resorts: “Major deficiencies include legal persons not being covered under existing legislation, though this should change with the new penal code, expected in mid-2017.”

But the document added: “Money can easily be laundered in Laos’ cash-based economy, remote casinos remain a vulnerability, and large real estate developments are thought to be another vehicle for large-scale laundering. Authorities are poorly equipped to investigate. Central government control and ability to investigate outside of the capital can be inconsistent.”

The 2017 report noted that while Malaysia – which licences a single casino resort at Genting Highlands outside the capital Kuala Lumpur – had a “high degree of technical compliance with international standards on combatting money laundering,” several “deficiencies” remained.

“Malaysia has not effectively targeted high-risk offences (other than fraud) or foreign-sourced threats in its prosecution of money laundering,” said the U.S. report.

“Malaysia has preferred to pursue other criminal justice measures, particularly confiscation, rather than money laundering prosecutions. Additionally, the sanctions imposed for money laundering have been low and have not been demonstrated to be effective,” it added.

Russia

Regarding the Russian Federation, where licensed casino gaming is only allowed in special zones designated for the purpose – one based near the Russian Pacific port of Vladivostok – the U.S. State Department noted the country’s financial intelligence unit, the Federal Financial Monitoring Service (also known as Rosfinmonitoring) now published in English “a fraction of the information it previously made available”.

The report connected the deteriorating situation to the use of U.S. sanctions following Russia’s annexation from Ukraine in March 2014 of the Crimea region.

“Changes to Russian law may also have created vulnerabilities rather than closing them,” suggested the U.S. State Department analysis.

“PEPs [politically-exposed persons] are now subject to less stringent reporting requirements for foreign currency transactions.”

The reported further stated: “Russia loosened restrictions on the use of crypto-currencies in July 2016. In addition, despite concerns, it is now possible to open a bank account in Russia without being physically present.”

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