The Philippine gaming sector is facing a challenging road ahead as both the government and industry leaders are working together to remove the Philippines from the global money laundering grey list. In recent months, Philippine authorities have addressed money laundering issues and online gaming operators are now using Know Your Customer (KYC) and artificial intelligence (AI) technology to prevent fraudsters from laundering money. Through rigorous screening mechanisms, operators can not only prevent fraudulent arbitrage but also provide a safer gaming experience for regular players.
Emphasis on anti-money laundering issues
Due to the Financial Action Task Force (FATF) listing the Philippines on its grey list, banks, casinos, and online businesses in Southeast Asia have been under strict scrutiny. This means that international banking organisations will have stricter scrutiny standards for listed countries. This has made it difficult for many foreign workers in the Philippines to remit their earnings back to their home countries.
Philippine President Ferdinand “Bongbong” Marcos Jr., has instructed the Anti-Money Laundering Council (AMLC) and relevant agencies to take action, aiming to have the country removed from the grey list by October this year, in response to potential future gambling market policies.
Stringent regulation on social media
Earlier this year, many Southeast Asian countries were successively greylisted by the FATF, including the Philippines, Vietnam, and others. Apart from the banking industry, online gaming and gambling industries have also been significantly affected. According to data from the Facebook Ad Library, there is strict regulation of gambling and online gaming advertisements in the Philippines starting in mid-March this year, leading many operators to either submit relevant gambling licences issued by the Philippine government, such as those from the Philippine Amusement and Gaming Corporation (PAGCOR), or change their promotional methods if they held licences not recognized by the government.
Challenges faced by gaming operators
One of the reasons why gambling operators have been easily subjected to government oversight in the past is the opaque regulatory mechanism, which has led to higher money laundering risks compared to other industries. However, money laundering risk is also one of the urgent issues that the gambling industry is facing. Because traditional online gambling websites recruit players through bonuses, fraudsters can exploit the “bonus abuse” by creating accounts to cash out. Many suspicious fraudsters create multiple accounts and launder money by gambling against each other at gaming tables.
Combating money laundering: KYC as the first line of defence
In recent years, many online gaming operators have faced a large amount of fraudster money laundering, resulting in losses for operators due to bonus abuse and member fraud, exceeding fines from regulatory bodies. Therefore, many operators have started using KYC methods to prevent related arbitrage activities. However, due to the diversity of KYC, many fraudsters still find loopholes.
As a result, most operators also employ AI methods to monitor player data to curb fraudulent arbitrage. The rigorous screening mechanism may deter many arbitrageurs and provide a safer gaming experience for regular players, while also assisting the government in having more leverage to remove from the grey list.
Overall, the Philippine authorities seem to be moving in the right direction. Although the gaming industry faces challenges including money laundering and fraud, many operators have started using KYC methods to prevent related arbitrage activities and have adopted AI to monitor player data, aligning with the latest policy requirements as much as possible. Although this rigorous screening mechanism may deter many arbitrageurs, it also provides a safer gaming experience for regular players and assists the government in having more leverage to remove from the grey list.
