U.S. STATE DEPARTMENT: Money laundered through Pagcor casinos nationwide

April 30, 2008

The Philippine government has received yet another blackeye through a US State Department country report which pointed to the Philippines as being a haven for money laundering, among other crimes, pointing to “cash smuggling” and money laundering as a “major concern,” stating that many casinos of the Philippine Amusement and Gaming Corp. (Pagcor) “located near small provincial international airports that may have “lax enforcement of cash smuggling” are vulnerable to cash smuggling.

The report also scored the 15 big Pagcor casinos nationwide which it said offered “abundant opportunities for money laundering.”

Pagcor has announced the creation of a gambling city in Metro Manila, which site that will house a giant Las Vegas-style gambling city, was blessed by three Catholic bishops.

Virtually every hotel in Metro Manila has been turned into a mini-Pagcor casino with other on-line outlets yet.

The State Department report pointed out that Pagcor, even when required, failed to comply with the request of the country’s Anti-Money Laundering Council for the gambling firm in 2006 to submit suspicious transaction reports.

The same report also stressed that the billions remitted by overseas Filipino workers (OFWs) have created more worries in curbing cash smuggling.

“Most of these funds are brought in person by

OFWs or by designated individuals on their return home and not through any alternative remittance system,” the report said, adding that some OFWs also use the underground remittance system, which is a person-to-person transfer of money though a network of handlers.

This has also become a concern for international intelligence agencies as this type of remittance system is suspected by international monitors as being used by terrorists to facilitate their money-laundering activities and can go undetected.

A major money laundering country is defined by statute as one “whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking” The report stated.

The Philippines was listed as a major money laundering country in 2008, along with Afghanistan, Burma, Cambodia, Canada, Cayman Islands, China and Pakistan.

Drug dealing was also a major concern, as the report stated that “although the Philippines is not a regional financial center, the illegal drug trade in the Philippines has evolved into a billion dollar industry. The Philippines continues to experience an increase in foreign organized criminal activity from China, Hong Kong, and Taiwan. Insurgency groups operating in the Philippines partially fund their activities through local crime, the trafficking of narcotics and arms, and engage in money laundering through ties to organized crime.”

It also said that the “proceeds of corrupt activities by government officials are also a source of laundered funds. Smuggling continues to be a major problem, it added.

The Federation of Philippine Industries estimates that lost government revenue from uncollected taxes on smuggled items could be over $2 billion annually, including substantial losses from illegal imported fuel and automobiles. Remittances and bulk cash smuggling are also channels of money laundering.

It stated that in 2006, the AMLC requested the chain of casinos operated by the state-owned Pagcor to submit covered and suspicious transaction reports, but that it has not yet done so. “There is increasing recognition that the 15 casinos nationwide offer abundant opportunity for money laundering, especially with many of these casinos catering to international clientele arriving on charter flights from around Asia. Several of these gambling facilities are located near small provincial international airports that may have less rigid enforcement procedures and standards for cash smuggling. Pagcor is the sole franchisee in the country for all games of chance, including lotteries conducted through cell.”

The report also pointed out that the country has over 5,000 nongovernmental organizations (NGOs) that do not fall under the requirements of the Anti MOney Laundering Act. “Because of their NGO) ability to circumvent the usual documentation and reporting requirements imposed on banks for financial transfers, NGOs could be used as conduits for terrorist financing without detection.” the report said.

“The problem of cash smuggling is exacerbated by the large volume of foreign currency remitted to the Philippines by Overseas Filipino Workers (OFWs). The amount of remitted funds grew by 18 percent during the first 10 months of 2007, and should exceed $14 billion for the year, equal to 11 percent of GDP. The Central Bank estimates that an additional $2-3 billion is remitted outside the formal banking system. Most of these funds are brought in person by OFWs or by designated individuals on their return home and not through any alternative remittance system. Since most of these funds enter the country in smaller quantities than $10,000, there is no declaration requirement and the amounts are difficult to calculate.” it said.

The Philippines has been included in a list of 56 nations identified as money laundering heavens for foreign drug cartels and terrorist organizations due to weak money laundering laws, a US State Department report stated, stressing that the Philippines was included in the list due to “significant amounts of proceeds from serious crime.”

By Michaela P. del Callar

source: http://tribune.net.ph/headlines/20080501hed1.html

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