China Tires of Gambling Ops in Nearby Countries

Massive crackdown nets thousands of suspects, billions of dollars

Apparently tiring of the massive amounts of illegal funds flowing into gambling outside the country, China’s Ministry of Public Security has completed a harsh crackdown, arresting more than 11,500 suspects, destroying 368 gambling platforms and 148 technical programs and seizing more than US$32 billion, according to a government press release.

It’s uncertain what effect that is going to have on the burgeoning offshore gaming industries in the neighboring countries – or which ones, for that matter – that cater to Chinese gamblers placing their bets from the undetected safety of their domestic living rooms. The ministry’s statement mentioned Vietnam, Myanmar and Southeast Asia as areas where illegal gaming is taking place.

“China has been arresting people for this kind of thing for some time,” said an executive with a Manila-based risk management firm. “If the scale is really different this time, then the [Philippine Offshore Gaming Operators} would be affected. Counter to this is that many of the people that run these operations are Indonesian, Malaysian, whatever. I think this kind of thing won’t kill gambling in the Philippines, but we would expect it to hurt.”

In August 2019, the Chinese Embassy complained to the Philippines over operations that permit online streaming from video studios of casino-style table games aimed at overseas consumers, issuing a stern warning that the burgeoning online gaming industry POGOS, as they are called, were draining hundreds of millions of renminbi through underground banks and cross-border money laundries and “posing a threat to China’s financial security and supervision.” The embassy warned that the government planned to step up action to stamp out illegal gambling and told its citizens at home that if they were gambling overseas, they could be committing criminal acts.

Duterte so far has refused to shut down what has become a lucrative foreign exchange earner. Bt nor is the Philippines alone although its online gaming operations now dominate the industry. Last year, apparently after a stiff warning from the Chinese authorities, Cambodian police with Chinese help arrested 127 Chinese nationals accused of running an illegal online gambling and extortion ring. The Cambodian leader Hun Sen ordered Cambodia’s flourishing gaming industry closed, causing a real estate crisis in Sihanoukville. Today, however, gaming sources say, the industry has popped up again in Cambodia in defiance of Chinese orders. It’s uncertain if the Chinese raids have now closed down the operations.

On the Chinese mainland, casino gambling is only permitted in the former Portuguese enclave of Macau. Marketing within the mainland of gambling operations outside the country is also prohibited, but it’s clear that word has spread enormously among the Chinese population.

According to the public security ministry, officials began the crackdown at the end of February, deploying agents across the country to carry out in-depth efforts to combat cross-border gambling and related blackmail, fraud, money laundering, abduction, trafficking, smuggling, finance, and other illegal and criminal activities that have grown around the illegal gaming industry.

The alleged criminal activity is sophisticated, with syndicates developing high-tech software apps to move money while hiding activity from the authorities. The crackdown closed 187 payment platforms and underground banks, seized more than 220,000 bank cards, froze more than 28,100 accounts, and identified more than RMB229 billion US$32.3 billion) in funds. Within the country, officials broke up telecommunications network fraud criminal bank accounts and smashed more than 1,200 dens, seized more than 27,000 sets of accounts involved.

Although the Communists officially outlawed gambling when they took power in 1949, they have had big problems trying to quell it. Chinese bureaucrats have been notorious for thieving billions from state agencies and state-owned enterprises to slip across the border to gamble. Chinese police have engaged in a cat-and-mouse game in Macau for decades, arresting government officials and dragging them back to China for trial.

Thus the urge to gamble has created a new economic pillar for the Philippines, which has remained largely outside the sights of the Chinese government. The POGOs, as the offshore operations are known, have exploded in size. Small-time bettors using their phones can live-stream wagers of as little as 10 RMB (US69¢) through Putonghua-speaking computers. More affluent gamblers can use attractive fashionably-dressed proxies wearing headsets to play baccarat and other games. Thus the Chinese at home are finding it easy to spend vast amounts of money and time online, a growing percentage of that passing through Manila. With computers and smartphones, they can hide their gambling from authorities.

President Rodrigo Duterte has said there could be as many as half a million mainland Chinese who have flooded into the country, legally, or illegally although the government officially put the number at 149,000 at the end of 2019.  The industry has become the biggest demand driver of office space in Metro Manila, outpointing business office process outsourcing, another industry in which the Philippines leads the world.

Unfortunately, it has also generated considerable crime, much of it committed by Chinese loan sharks committed against gamblers who get in over their heads in the proliferating casinos. The Chinese embassy charged that dozens of kidnappings and torture cases have taken place against Chinese citizens who gamble or work illegally in gambling entities in the Philippines.

There is no indication in the public security ministry’s statement that the graft campaign targeted the Philippines. In typical cases, the statement said, “overseas casinos attracted customers to gamble in our territory,” organizing agents to solicit from overseas dens and within the territory. Suspects used software development as a guise to provide technical support for overseas casinos and online gambling groups in Southeast Asia, transferring and withdrawing funds in the country and hiring people to send cash to overseas casinos. Some organized outbound gambling.

In January, the public security agents discovered that overseas casinos were recruiting domestic personnel to participate in gambling on a massive scale. In Gansu, for instance,  public security agents launched a network arrest operation that netted 32 suspects, hunted down another 22 suspects online, froze 1,200 bank cards as well as 269 various accounts and seized cars, computers, mobile phones, and other equipment.