Dozens of scantily dressed Filipina croupiers stand in booths shuffling cards in front of a webcam, their faces softly illuminated by professional lighting.
Nearby, rows of Chinese nationals sit at desks chatting on cellphones with potential clients back in China.
This is what a typical POGO – or a Philippine Offshore Gaming Operator – looks like, according to descriptions provided to CNN by several gaming experts. Some are based in abandoned malls, while others are found in converted parking lots or cheap rented offices, they say.
In the past three years, the Philippines has emerged as a major hub for online gaming, according to Filipino officials, attracting more than 100,000 Chinese nationals who work in virtual casinos catering to players back in China where gambling is illegal.
They have been both a boon and a curse for the country.
The online casinos generate tax revenue and desperately needed jobs in Manila’s crowded downtown area. But at the same time, they’ve pushed up rents and created new challenges for the Philippine National Police.
In the past year, Beijing has ratcheted up pressure on Manila to shut down the industry, following its success in convincing Cambodia to move toward doing the same last year.
Manila stopped taking applications for new POGO licences in August 2019, citing concerns about national security, but President Rodrigo Duterte said the next month that he would not ban the industry.
“We decide to benefit the interest of my country,” he said. “I decide that we need it.”
In May, Duterte allowed the POGOs to reopen, after two months of closure due to the Covid-19 pandemic, effectively endorsing them as essential businesses.
Philippines’ casino boom
Online gaming platforms allow players to gamble remotely. They sign up, choose a game and it is played over a livestream in another jurisdiction.
“The games offered on these platforms are dictated by Asian tastes, where most of the demand comes from,” said Brendan Bussmann from Global Market Advisors, a Las Vegas-based consulting firm specializing in the gaming, sports, entertainment and hospitality industries.
“There is a lot of baccarat, as well as some sic bo (a Chinese dice game) and blackjack,” said Bussmann. The amounts wagered tend to be low, in the range of $5 to $100, he said.
Manila has become the number one hotspot worldwide for online gaming, in front of Malta, the Isle of Man and Curacao, according to David Lee, a lawyer at Taiwanese firm Lin & Partners who specializes in gaming laws.
“The Philippines pioneered online casinos in the early 2000s, when Cagayan, a province to the north of the country, started awarding licenses to a handful of operators,” explains Ben Lee, the founder of IGamiX, a Macao-based consultancy firm focused on the gaming industry in Asia. “But they really took off in 2016, when President Rodrigo Duterte came into office.”
Duterte handed the right to issue offshore gambling licenses to the Philippine Amusement and Gaming Corporation (PAGCOR), a government entity that operates casinos and regulates the industry. “It began to aggressively develop the industry by awarding dozens of licenses,” said lawyer David Lee.
Chinese businessmen were quick to seize the opportunity and the number of POGOs mushroomed.
There are now 60 licensed offshore gaming operators in the Philippines, according to PAGCOR.
They are assisted by several hundred service providers, who help them build and maintain the infrastructure behind their platforms, according to Ben Lee, of IGamiX consultancy. Many of these service providers also act as an interface between the POGOs and their customers, renting a video feed from the officially licensed operators and overlaying their logo and visual identity onto it, he added.
“Some 90% to 95% of POGO customers are located in China,” he said. This is illegal. Chinese laws ban any form of gambling by its citizens, including online and overseas.
Laws in the Philippines also ban online casinos from marketing their services to citizens of a country where gambling is illegal, according to lawyer David Lee. But this rule is ignored by most POGO operators and poorly enforced, according to several experts.
A spokeswoman for industry regulator PAGCOR said new regulations were introduced in August 2016 to curtail the proliferation of illegal online games and to ensure they are properly regulated.
She added that POGOs are supposed to only cater to foreign customers ages 21 and above situated outside the Philippines, in jurisdictions where online gaming is allowed.
Hidden payments
Managing the cross-border flow of money is a challenge. China limits the amount of money any individual can move out of the country to $50,000 per year. And since it doesn’t allow its citizens to gamble online, they are also not allowed to send money abroad for this purpose.
“It is usually wired electronically, using services like Alipay or WeChat Pay, and disguised as a simple retail purchase,” said consultant Ben Lee. “Chinese gamblers are also increasingly using crypto currencies like Bitcoin to avoid detection.”
Chinese conglomerate Tencent, which owns messaging service WeChat, has set up a risk management team to combat abusive behavior, such as illegal gambling, by monitoring payments made via the app, a spokeswoman told CNN.
CNN also reached out to tech company Alibaba, founder of Alipay, for comment but did not receive a reply.