The Philippines weeds out rogue online gambling operators as law enforcement headaches mount

Authorities in the Philippines suspect large parts of the country’s online gambling industry to be a smokescreen for other crimes.

Starting this October, the Philippines will stop operations of 175 Philippine offshore gaming operators (POGOs) and deport about 40,000 Chinese workers, a justice ministry official said yesterday (Sept. 26).

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“The crackdown was triggered by reports of murder, kidnapping, and other crimes committed by Chinese nationals against fellow Chinese nationals,” justice ministry spokesperson Jose Dominic Clavano said.

Already back in 2020, the Philippines’ anti-money laundering council found the POGO industry “highly vulnerable” to financial crime. In January, a report by Filipino lawmakers found a “clear link” (pdf) between these businesses and nefarious activities including human trafficking, and recommended the prosecution of immigration officials who were involved in the criminal scheme.

The POGOs being shuttered have seen their Philippine Amusement and Gaming Corporation (PAGCOR) licenses expire or revoked for violations like non-payment of government fees, Clavano added.

Quotable

“It’s like POGO as a mother vice gives birth to a whole slew of other vices and crimes.” —Senator Grace Poe

A brief history of POGOs

POGOs are online gaming companies licensed to operate in the Philippines. They offer a variety of gaming services including online casino games and sports betting to foreign gamblers.

In 2016, the south Asian nation formalized online gaming, drawing several operators to set up in the country. But the sun soon started setting on the sunrise industry.

In 2020, many of those businesses fled to neighboring countries like Cambodia, Vietnam, and Laos, as covid-19 ravaged the Philippines.

As POGOs leave due to #COVID19, Manila posts highest office vacancy since the global financial crisis, says Colliers. @rapplerdotcom pic.twitter.com/slSZ2aA2ox

— Ralf Rivas (@RalfRivas) October 29, 2020

The following year, tighter regulations added to POGOs’ woes. Manila imposed a 5% tax on gross gaming revenue and charged foreigners employed in online casinos and their service providers 25% income tax. The government hoped to raise tax revenue, but in reality, it drove many POGOs out of the country.

Despite the headwinds, the industry clearly remains a money spinner. Consider the shirt sponsorships and commercial partnerships these operators have forged with English football teams. Leyu, which has a PAGCOR license, is an official sponsor for Chelsea. Another betting brand, SBOTOP, has a multi-year deal to be Leeds United’s primary sponsor. Yet another, W88, not only struck deals with Aston Villa, Crystal Palace, and Fulham, but also Argentina’s Football Association.

By the digits

34: The number of licensed POGO companies in the Philippines as of Sept. 20 (There were 63 before the pandemic)

46%: drop in revenue collection from the POGO industry between 2020 and 2021

32 billion Philippine peso ($542 million): Projected income for POGOs for this year—a generous estimate, as only 3 billion Philippine peso ($51 million) has been collected as of Sept. 14

952 million Philippine pesos ($16 million): How much the government stands to lose daily if the entire POGO industry shuts down

259 acres: the amount of office space that would lie vacant if the POGO industry shut down—comparable to a third of the size of New York’s Central Park

17: The number of POGO-related kidnappings so far this year, according to The Philippine National Police (PNP). In all of 2021, there were 12 such cases

300,000: The number of Chinese nationals the POGO industry employed at its peak

Should POGOs be banned?

Senate Majority Leader Joel Villanueva recently introduced the Anti-Online Gambling Act to outlaw POGOs and penalize participants with up to six months in jail and fines of up to $8,710.

Critics think it’s too extreme to give up tax and real estate revenues from an entire industry because of some bad actors.

“Deporting all employees of POGOs because of the involvement of a few of them in the abductions and murders of their compatriots is like using a mallet to kill a pesky fly,” writes Ramon T. Tulfo, Filipino TV host, radio broadcaster, and columnist.

China’s gambling don’ts and do’s

China has had a no-gambling policy for citizens since the Communist Party came into power in 1949. In August 2019, China’s Xi Jinping urged then-president Rodrigo Duterte to ban POGOs outright. But the Filipino leader rejected the idea, citing possible job losses.

China’s draconian stance does not apply to its special administrative region, Macau. In a good year, Macau’s annual gambling revenue is six times that of the Las Vegas strip.

Macau’s back

An autonomous region on the south coast of China, Macau was the world’s gambling hub until corruption and covid brought it to a halt. But on the same day as the Philippines announced its crackdown, China finally decided to start allowing tour groups into Macau after a three-year hiatus.

Shares in Macau casino operators jumped up 13% on the news. Las Vegas Sands, which operates the largest casino complex in Macau via subsidiary Sands China, rose 12%, reversing the stock’s losses for the year.

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