Philippine Offshore Gaming Operator

Philippine Offshore Gaming Operators (POGOs) is the official designation for firms operating in the Philippines that offer online gambling services to markets outside the Philippines.

Background
Philippine Offshore Gaming Operators or POGOs are online gambling firms that operate in the Philippines but cater to customers outside the country. To operate legally, they must be licensed by the Philippine Amusement and Gaming Corporation (PAGCOR). They are obliged to restrict any individual in the Philippines, regardless of citizenship, Filipino citizens regardless of location, and potential patrons in countries and territories where offshore gambling is illegal from availing their services; failure to do so risks license revocation.

PAGCOR started the processing of license applications for POGOs in 2016 after it decided not to renew the license of local online gambling firm PhilWeb in an effort to boost its revenue.

There are three license categories. Category 1 involves services that have live streaming with women online gambling dealers. Category 2 and 3 are sub-sectors of business process outsourcing (BPO) which provide back office support.

However, the IT and Business Process Association of the Philippines (IBPAP), an umbrella industry group of BPOs, do not consider POGOs in general as BPOs. IBPAP's members are registered with either the Philippine Economic Zone Authority or the Board of Investments while POGOs get their license to operate from PAGCOR, a fact the group argues differentiate POGOs from BPOs.

Prevalence
POGO firms, mostly Chinese-backed and based in Metro Manila, suddenly increased following the start of the presidency of Rodrigo Duterte in 2016. According to PAGCOR, during its peak in 2019, there were almost 300 licensees; stricter regulations reduced the number of operating POGOs to about 75 by the end of 2023.

Since August 2019, PAGCOR has banned licenses for new firms.

KMC Savills Inc. projects that POGOs have utilized at least 800,000 sqm of office space. While a significant portion of the Philippine offshore gambling industry cater to the Chinese, some serve the Korean and Vietnamese markets.

By 2019, the industry rents more office space than business process outsourcing, purchasing 386,000 sqm within the first nine months, 34% of total demand; as well became the biggest market for new office space in Metro Manila with 12% of the stock. Annual rents cost for commercial,  for residential.

Property consultancy firm Leechiu Property Consultants (LPC) reported that POGOs vacated a total of 630,000 sqm of office space from 2020 to third quarter of 2022. LPC reported that POGOs still occupy 1,000,000 sqm of office space as of October 2022; its complete exit would result in estimated in lost annual office rentals.

Economy


Department of Finance (DoF) data shows that combined taxes collected from POGOs from 2017 to October 2022 reached : by PAGCOR, while  by the Bureau of Internal Revenue (BIR) (since 2018).

In 2019, total collected taxes reached. POGO generated in license fees, according to PAGCOR. National Economic and Development Authority also reported that, at the same year, POGOs contributed —0.67% of the country's gross domestic product.

However, all of these declined thereafter, especially due to COVID-19 pandemic. By 2023, with decrease of the number of operators, POGO still generated in license fees.

Since 2015, PAGCOR has been collecting fees from POGOs, which represent 2% of the country's gross gaming revenue. Revenues from POGOs composed less than 5–6% of the PAGCOR's total income.

In addition to license fees, BIR collects a 5% franchise tax on local providers since 2017, as well as income taxes on workers; some firms were closed due to alleged failure to pay such. Additional taxes on POGOs were imposed upon issuance of Republic Act No. 11590 (An Act Taxing POGOs) by President Rodrigo Duterte in September 2021.

Employment
It was reported as of October 2019 that 470,000 people were employed in the POGO industry, with total annual payroll at. These might included more than a hundred thousand Chinese workers. The government though had various reports on the Chinese working in the country; by early December, figures from the BIR, the Department of Labor and Employment (DOLE), and PAGCOR suggested that the number ranged from at least 44 to 93 thousand.

There are 138,000 foreigners employed by POGOs as of May 2019, with 83,760 of them holders of special work permits allowing them to stay in the country for at most six months. Only 17 percent of those employed in POGOs are Filipino nationals. Employment decreased significantly during the COVID-19 pandemic.

BIR reported in October 2022 that there were 16,736 Filipino workers employed by licensed POGOs, accounting for 48.87% of the total employment in the industry; showing that there had been a gradual increase of Filipinos, from 14.19% in 2019, as against 17,509 foreign nationals.

In another report by PAGCOR at the same time, there were some 41,855 accredited POGO workers: 19,671 (47%) were Filipinos; 7,534 (18%) were Chinese. The Association of Service Providers and POGO, on the other hand, said there were 11,776 Filipino direct hires and 11,342, indirect, in POGOs.

Meanwhile, DOLE reported that the number of Filipino POGO workers increased, from 22,000 as revealed during a Senate hearing in October 2022, to 25,000 by January 2023.

Tourism
According to the Department of Tourism, in 2019, China ranked second, behind South Korea, in the number of tourist arrivals at 1.74 million. Due to travel ban imposed by China during the COVID-19 pandemic, Chinese visitors in the Philippines decreased significantly, falling to 6,615 in 2021. At that time, China was enforcing a crackdown on gambling operations on its citizens and launched appeals to the Philippine government to stop POGOs.

Issues and controversies
The POGO industry had been criticized for being a symbol of state-backed Chinese investments in the country. It was perceived that POGOs were promoted by the government at the expense of other industries.

Ownership and registration
A 2019 Nikkei Asian Review report states that POGO owners are mostly anonymous. At that time, PAGCOR recorded 60 POGOs set up in the country since 2016; ten are registered in the Philippines itself, while 43 in the British Virgin Islands, and the rest in six other countries, mostly where the identities of owners are kept secret.

Only 15 are registered with the BIR, 6 of them pay taxes; while 16 are registered with the Securities and Exchange Commission.

In late 2019, the Philippine Daily Inquirer reported that the government shut down nearly 200 illegally-operated POGOs that year, as district representative Joey Salceda later claimed there were still at least 100.

At the time an estimated 70,000 Chinese workers in Metro Manila-based POGOs were reported in 2020, there were estimated to be at least 200 POGOs having no permit. Corruption in the processing of work permits was also raised.

Meanwhile, illegal hubs in Central Luzon were reportedly dismantled; as about 2,000 foreigners were later deported.

Effect in Philippines–China relations
POGO caused a diplomatic clash between the Philippines and China. The latter expressed its displeasure over its citizens' involvement, which comprise majority of workers and players, as all forms of gambling remain illegal in China while online casinos can only be played by those outside the Philippines. China, among others, warned that POGOs can worsen criminality, specifically money laundering. The Chinese government officially rejected POGOs which was branded the "most dangerous tumor in modern society" disliked by all people worldwide.

Following the Philippine government's move to suspend new POGO applications while addressing all concerns, on August 21, 2019, the Chinese government urged the former to halt online gambling, requesting as well through its statement to punish POGOs illegally employing and mistreating their citizens and to protect the victims. Chinese President Xi Jinping personally repeated the plea, addressing Philippine President Rodrigo Duterte, during their bilateral meeting in Beijing on August 29.

On September 4, 2019, at a press briefing at Malacañang, Duterte declined the request, saying that POGO is beneficial for the country's economy and many people would lose jobs if POGOs will be banned.

Employment and residency of foreigners
Some locals criticized as well the influx of Chinese, among other foreigners which were believed taking jobs, and limited hiring of Filipinos, as it is evident with raids by immigration authorities on POGO offices. PAGCOR argued the need for large numbers of native Mandarin speakers to serve mostly Chinese players. The government denied that it is giving preferential treatment to the Chinese for the industry.

There were also reports that residents in Manila were forced to leave their residences in apartments in favor of Chinese tenants; as well as medical facilities catering exclusively to POGO workers during the pandemic.

Security issues
There were security issues reportedly linked to POGOs, including related criminal activities. Authorities in the Philippines face issues on dealing with these: POGOs illegally operating overnight; rise in undocumented workers from China; and weak response from government agencies. This was contributed further by the "visa upon arrival" program by the tourism department, which makes it easier for the Chinese nationals to enter the Philippines, ending up working for POGOs.

In 2019, watchdog Movement for the Restoration of Peace and Order said that the Philippines is becoming a haven for POGO-related crimes. The watchdog also said that illegal workers were packed into condominiums, each unit having up to 40 people in two or three shifts. Authorities had arrested several illegal Chinese workers from raided POGOs, which were eventually deported.

Data from Philippine National Police recorded a total of 4,355 victims to crimes (4,039 in the first half of 2023), and 903 perpetrators, from January 2017 to June 2023; majority of all individuals involved were Chinese nationals. The National Bureau of Investigation also revealed that from November 2019 to March 2023, there were 113 cases, 65 of these involved human trafficking.

Incidents reported to the police were kidnap-for-ransom, kidnapping and illegal detention. From 2017 until late 2019, the PNP Anti-kidnapping Group (AKG) reported 67 kidnappings. It was reported that some employees leaving companies were the victims, and policemen were helping the perpetrators; thus, causing rescued victims to refuse cooperation with authorities.

Those POGO facilities had been involved in online scams and human trafficking. In 2023, raids in three separate hubs alone, in Pampanga, Las Piñas and Pasay, resulted to the rescue of almost five thousand victims. That in Pasay, wherein a torture den was discovered, now serves as the temporary detention facility for future rescued foreigners; while at another facility in the city allegedly involved in scams, the police confiscated 28,000 registered SIM cards.

There had been Chinese nationals also arrested for illegal possession of firearms, even on petty crimes; they were reportedly involved also in bribery. Prostitution dens were also discovered. It was also revealed that some gambling syndicates employ Filipino policemen as protectors, as well as corruption of the immigration and police.

These prompted PAGCOR to enforce strict regulation; during the last quarter of 2023, these firms were renamed as Internet Gaming Licensees with new rules and regulations for the industry being implemented, as PAGCOR stated that POGO "become too negative."

Amid reports of involvement of their citizens in fraudulent activities, in October 2023, China, through a statement from the Chinese Embassy in Manila, called on the Philippines to take strong measures in preventing POGO-related crimes.

Finance
Issues on POGOs including reports of tax evasion and minimal contribution to the national economy were also raised.

Data from the Anti-Money Laundering Council showed (26%) of the  worth of transactions from 2017 to 2019 were deemed suspicious. DoF, saying that POGO-related crimes may pose a risk to business and institutions, estimated that the Philippines may risk losing – in foreign direct investments.

PAGCOR reportedly failed to collect in unpaid dues from shuttered POGO firms. To avoid further losses to be incurred by the government, in 2023, PAGCOR announced its plan to privatize 45 casinos by the third quarter of 2025, with a revenue target at between and.

Other issues
Also raised was the security threat posed by the POGOs.

Environmentalists condemned the conversion of mangrove area into a "POGO island" cluster in Cavite.

Even during lockdown due to pandemic, PAGCOR actively pushed for the resumption of POGO operations in Metro Manila. IT and Business Process Association of the Philippines later rejected the claim that POGOs, performing an "essential service," are part of their sector.

2023–2024 Bamban raids
On February 1, 2023, authorities raided a POGO firm Hongsheng Gaming Technology, Inc., allegedly engaged in a cryptocurrency investment scam, in Bamban, Tarlac, through a warrant issued by the Tarlac City Regional Trial Court (RTC). Up to 851 workers—351 foreigners and 500 Filipinos—were held; three other officers of the company were at large.

On March 13, 2024, authorities raided the same compound, serving two search warrants issued by the Malolos, Bulacan RTC against Zun Yuan Technology Inc., and rescuing more than 600 workers. Various firearms and alleged scamming paraphernalia were seized.

Nine of the rescued Filipinos were considered as witnesses, as there were allegations of physical abuse and torture, as well as illegal activities in the POGO hub, including scams. The foreigners were reportedly staying illegally in the country; eight of them were charged with human trafficking and serious illegal detention at the Capas RTC.

Aside from offices and dormitories in the POGO compound, further search in the complex, which is owned by Baofu Land Development Inc. and located beside the municipal hall, revealed 36 structures  including the nine villas and a swimming pool, underground tunnels connecting the three villas, and 38 to 51 vehicles, as well as nine carts and heavy equipment. Almost in cash, cryptocurrency-related materials and documents, among other items, were found in 27 vaults. In April, the Palace directed the Anti-Money Laundering Council to freeze and preserve the Zun Yuan compound and its other assets.

Senator Win Gatchalian revealed municipal mayor Alice Guo's alleged links with the firm. Guo, who was elected in 2022, had applied for the license of Hongsheng; and in late 2020, the municipal council approved its establishment and operation. Hongsheng had its license to operate canceled by the PAGCOR by 2022. Following the 2023 raid, the POGO hub was renamed Zun Yuan.

In May, during a Senate inquiry, senators said that the POGO compound housed "mercenaries" allegedly involved in cybercrimes and surveillance activities, citing intelligence reports. Meanwhile, Guo contradicted allegations against her, stating that she was the former landowner of the property, and her vehicle, found within the compound, was sold in 2020. Guo admitted that being one of the incorporators of Baofu, she later sold her shares upon entering politics.

2024 Porac raid
On June 4, 2024, the joint operatives of the Criminal Investigation and Detection Group and the Presidential Anti-Organized Crime Commission (PAOCC) raided a POGO firm Lucky South 99 Outsourcing Inc.'s 5.8-hectare complex, with 46 buildings, and other corporations at Grand Palazzo Royale complex at Porac near the Angeles City border along the Pan-Philippine Highway. On June 4, Malolos Regional Trial Court Branch 14 issued a search warrant for violation of the Anti-Trafficking in Persons Act of 2003. The judge, however, issued a 3-page Order denying the Application, grounded on Rule No. 126 of the Revised Rules of Court, on June 5. On June 7, RTC, San Fernando, Pampanga issued another Warrant. The Supreme Court is investigating the allegations regarding the withdrawal of the first warrant. Initially, 190 individuals were arrested. 158 Chinese, Vietnamese and Malaysian citizens including 29 Filipinos were rescued during the service of the warrant. “There seemed to be a leak prior to the operation. Chinese [nationals] supposedly escaped before PAOCC arrived,” Risa Hontiveros said. A criminal investigation on the alleged leak resulting into the "compromised" raid is currently ongoing, PAOCC spokesperson Winston John Casio said. "157 foreigners suspected to be POGO workers were caught leaving" before the operatives' "wellness check", Casio added. Only 140 suspects from 1,000 foreign nationals in the POGO buildings were found before the PAOCC team reached the site. Sherwin Gatchalian said Chinese syndicates had intelligence gathering reaching the judicial department. Lucky South 99 hired convicted pork barrel, Dennis Cunanan, in its operations. Porac Mayor Jaime "Jing" V. Capil denied allegations of his participation. "No mayor's permit was issued to Lucky South for 2024," he added. On September 17, 2022, the POGO firm was also raided and closed due to unlawful activities but it continued operations thereafter without permit.

<!- On June 4–5, the Presidential Anti-Organized Crime Commission (PAOCC) and joint police operatives conducted a raid in another, unlicensed POGO hub, Lucky South 99, at the Royal Garden Estate in Porac, Pampanga, through a search warrant issued on June 4 by the Malolos RTC Branch 14 against officers and employees of the company for violations of Anti-Trafficking Act, following reports on human trafficking and torture.

When authorities arrived at the facilities, nobody were found; as a total of 157 foreigners, 127 of them Chinese, along with 50 Filipinos, were caught leaving the premises along Friendship Highway in Angeles City, one of the site's main entry points. After another operation on June 5, over 190 individuals were rescued.

Among those items seized inside the facility, through another warrant from the San Fernando RTC, were a document with name of former Presidential spokesperson Harry Roque, six sets of People's Liberation Army uniforms, a "medal" for a Chinese military sergeant, and military gears, as well as identification cards of a foreigner bearing different names. Roque, according to PAOCC, was the lawyer of Whirlwind Corporation, which leased the land to Lucky South 99.

The 10-hectare complex, the biggest facility in Pampanga, was already raided in 2022 for alleged kidnapping of at least 43 Chinese nationals. It has 46 buildings, including villas, and a golf course.

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On June 4–5, PAOCC and various police units conducted operations in a POGO hub by Lucky South 99 Outsourcing Inc., inside the 5.8-hectare Royal Garden Estate, in Porac, Pampanga, along Friendship Highway near the Angeles City border. The operations originated from a search warrant issued on June 4 by Malolos RTC Branch 14, against officers and employees of Lucky South 99, following a report on sex trafficking and torture.

As authorities were about to conduct a "welfare check," 158 foreign (Chinese, Malaysian, Vietnamese) and 36 Filipino workers were rescued while leaving the compound. The arrests in the raid was far fewer than the expected thousand workers, because it was believed that several workers and company officials were escaped before the authorities arrived in the compound on the same day, where nobody was found. This, as well as jurisdiction concerns, resulted to the later retraction of the warrant; leading to allegations of infiltration of POGOs in law enforcement and the judiciary. For the same reason, PAOCC suggested that the operation might have been compromised by an internal leak, which is being investigated; the Supreme Court is investigating alleged infiltration of the court system by the Chinese syndicates.

PAOCC discovered in the POGO hub six People's Liberation Army uniforms, two military boots, and a medal for a Chinese military sergeant.

The compound was leased in 2019 by realty development firm Whirlwind Corporation, upon moving there, to two companies, one was the Lucky South 99. An application requirement—a four-year license—was granted in November 2019, and was not renewed thereafter as later confirmed by the municipal government. According to PAOCC, Lucky South 99 was already shut down by the DILG in September 2022, but resumed operation without a license from the PAGCOR since late 2023. In May 2024, PAGCOR denied its application citing "concerns" related to the Bamban case.

The huge compound, which had a resort and a country club, also houses a golf course. It was turned to an estate, with Lucky South 99 starting to set up buildings in 2019, eventually establishing 46, including villas. The facility is reportedly the biggest in Pampanga.

In the Senate hearing, Lucky South was said among those companies involved in operations in Zun Yuan premises in Bamban. A report by Rappler revealed that the company engaged the services of Dennis Cunanan, a pork barrel scam convicted of graft, for "government relations".

Porac mayor Jaime Capil later denied his alleged connection to the POGO company. ->

Legality
Three petitions were filed by the Union for National Development and Good Governance Philippines, Anti-Trapo Movement of the Philippines, Inc., and lawyer Jovencio Evangelista, challenging the legality of the rules for POGOs, which had been approved by the PAGCOR in 2016.

The Supreme Court (en banc) unanimously dismissed the consolidated petitions, citing failure to observe the hierarchy of courts and to meet the requirements for judicial review. The ruling, promulgated on April 25, 2023, was made public in March 2024.

Bans
In 2023, President Bongbong Marcos said that to outlaw all operations of POGOs, whose surrounding issues are caused by illegal operators, he needed a "good reason". That year, the Senate committee on ways and means filed a report which proposed the permanent ban of POGOs nationwide to prevent crimes from these companies. Committee chairperson Senator Gatchalian is among the ten signatories.

Gatchalian filed a Senate bill aiming to repeal the taxability of POGOs, established under Republic Act No. 11590.

At least three House bills seeking for such ban were filed in 2024 in response to the POGO-related crimes and the government's apparent failure to address it. In February, the games and amusements committee approved two measures authored by district representatives Bienvenido Abante and Rufus Rodriguez. Another was filed by Makabayan bloc, led by representative France Castro, in June; paralleling the one in the Senate filed by Gatchalian.

Meanwhile, at the local level, at least two cities in Metro Manila currently enforcing a ban on POGOs. In December 2022, Pasig banned POGOs and other forms of online gambling. In February 2024, the local government ordered the shutdown of establishments which still violating the ordinance.

In mid-2023, Valenzuela temporarily banned POGOs, online gambling and Small Town Lottery, for five years within its jurisdiction.

Other local government units which have also prohibited POGO operation since mid-2024 are Bulacan, Iloilo City, and Batangas City.