Philippines: The Beginning Of The End & What Comes Next

Sorry Saga Seeks A Conclusion

Philippine President Ferdinand Marcos Jr.’s July promise to ban foreign-facing online gambling operators (POGOs) marked a major shift in the national, regional, and even global, gambling ecosystem.

Three months later, the presidential executive order formalising the ban has yet to be issued as the government looks into complications involving migrant and local POGO employees.

A notorious segment of the Philippine gambling industry with more than a decade of murky history and enormous turnover, POGOs will be a thing of the past by the end of the year — if the executive order holds true to Marcos’ congressional state of the nation speech.

Although Marcos and his officials have not identified the precise trigger(s) for his ban after years of industry provocations and Chinese government anger, the final straw was likely the bizarre fallout from two major raids this year on cyber-scam compounds.

Ahead of Marcos’ executive order, this Vixio GamblingCompliance Forensic Explainer places the impacts of these raids in the context of the wider, complex collapse of political and administrative support for POGOs, and identifies key events in this timeline, as well as major developments since the ban was announced.

Setting the messy scene

POGO operations and revenue took a massive hit from the coronavirus pandemic. This damage heightened increasing government irritation over tax avoidance, the industry’s corruption of government organs and the wider proliferation of community crime and other non-compliance. 

This came on top of pressure from Beijing over POGOs targeting Chinese customers and hiring its nationals for Philippine operations.

Chastened and forced to front up tax arrears, surviving POGO licensees by early 2023 may have thought the tide had turned in their favour as revenue began to rebound.

Political pressure had also swung away from individual POGO notoriety and toward reforming regulator PAGCOR’s internal operations and purging an immigration bureaucracy thoroughly corrupted by POGO worker and agent bribes, including every operational head at the Philippines’ premier international airport.

However, a raid in Clark Freeport in May 2023 made it clear that the Philippines had become a haven for operators of Southeast Asian-style cyber-scam operations that mix online gambling with cryptocurrency investment pitches and romance scams. 

This and precincts raided since have featured the same business model of prison-like compounds, human trafficking, coerced labour, torture and possibly murder.

That first raid freed at least 1,160 workers from around Asia, including 172 Filipinos. The Chinese-led operation was the largest online gambling-linked hub to be raided since 2016, when 1,300 Chinese nationals were detained at the nearby Fontana resort.

This time, however, human trafficking and illegal detention were involved, and the POGO licensee linked to the compound was leading gambling company Oriental Game, the same company whose Filipino boss Kim Wong processed millions of dollars gained from middle men in the Bangladesh Bank scandal of 2016.

PAGCOR admitted after the raid that there was a serious problem and cracked down on the licensee with a fine and a local blacklisting, promising a review of other licensees, while Clark Development Corporation suspended online gambling applications in its special economic zone.

But the raid was only the first of many on illegal POGO-linked or other scam compounds relying on slave labour. In late June 2023, police broke up the largest operation yet linked to a PAGCOR licensee.

That raid, in Las Piñas City in southern Metro Manila, freed more than 2,700 enslaved workers, more than half of them Filipino. 

The operator was a Chinese-run, PAGCOR-registered service provider for POGOs, and scams were being carried out by a trafficked or duped workforce that included victims from another 17 countries, including nations in the Middle East and Africa.

The number of detained victims was so large that the authorities struggled to supervise and house them until they were deported, depleting the police budget.

But the wider and more serious problem was that it was now all but certain that the cyber-scam compound phenomenon was endemic in the Philippines.

PAGCOR put on a brave face, announcing in September lower levies for domestic-facing online operations, and promising to publicise the gambling website URLs of POGOs after completing a full compliance check of its licensees.

But within days, a lengthy Senate committee report called for a complete shutdown of the POGO sector and for PAGCOR to divest itself of commercial casino operations.

Then, in late October, a third major raid was executed on a cyber-scam compound near Manila’s international airport in Pasay City, detaining more than 600 people. Allegations followed of coercion, physical abuse and prostitution at the site, reportedly controlled by one licensed POGO service provider and a second service provider whose licence had been cancelled three months earlier.

The following month, the justice department launched a probe into a range of government agencies over foreign POGO workers illegally obtaining passports, birth certificates and other authentic ID documentation for tax purposes, health care and disability benefits.

By the end of 2023, pressure on POGOs and PAGCOR seemed to peak, but there was no sign from President Marcos that he was overly concerned about the trajectory of the industry, let alone that it should be banned as the Senate committee requested.

All along, the ultimate guardian angel of the Philippine online gaming industry, PAGCOR boss Alejandro Tengco, was as resolute as ever in his support for POGOs and in his message of POGO revenue being vital to the regulator’s mandate for community welfare operations.

Tengco stood firm as the House of Representatives approved a debate on a POGO ban, stating in February 2024 that PAGCOR had “weeded out all the criminal activities that happened” prior to its licence review and culling process that cut the number of POGOs and service providers by 70 percent.

Beginning of the end: The Tarlac raid

It quickly became clear that criminal activities had not been weeded out during this reform period. Some interests simply went underground after losing their licences, but others expanded and flourished on the margins of PAGCOR regulation, likely with the active investment of local officials and law enforcement.

The cyber-scam operation that arguably tipped the political scales against the POGO industry was raided on March 13, 2024, just weeks after Tengco’s “weeded out” comment.

The large property in the municipality of Bamban, Tarlac Province, just north of Clark Freeport, had similar features to those raided in 2023: a POGO licence for the wider precinct, tip-offs by a foreign embassy and an escapee, physical proximity to local government and law enforcement, a large number of freed captive workers (at least 875, half of them Chinese, some from Africa), a focus on cryptocurrency investment and romance scamming, allegations of torture and a small cache of weapons and ammunition.

But the Tarlac operation also had unique, profoundly scandalous elements, linking its owners to identity fraud, foreign infiltration of Philippine politics, possible espionage and a colossal money-laundering investigation in Singapore, the largest in the latter’s history.

Political fallout from the Tarlac raid smouldered before detonating like a cluster bomb, pushing the media and gambling-hostile lawmakers to ramp new pressure on the government to junk POGOs in their entirety and deal with the scourge of human trafficking and online predation once and for all.

At the core of the operation’s notoriety was Alice Guo, a self-styled Filipina of Chinese ethnicity and mayor of Bamban. Guo was a previous co-owner of the land that had been leased to POGO licensee Zun Yuan Technology, a company raided at the same site in February 2023 under a previous name.

By the end of May, Guo had appeared as a Senate witness, accused of links to illegal online gambling and cyber-scamming at the property, and was suspended as mayor along with her municipal officials and 49 local police, some of whom are accused of protecting the operation and intimidating victims.

Anti-gambling senator Risa Hontiveros also named Guo’s foreign co-owners of the land as Zhang Ruijin, a Chinese national, and Lin Baoying, an ethnic Chinese of Dominican nationality. Both Zhang and Lin have been convicted in Singapore amid the city-state’s probe into more than $2bn in laundered assets.

Official and media probes later linked Guo, Zhang and Lin to wanted alleged financial scammer Huang Zhiying, a co-incorporator of the raided Tarlac operation and an incorporating shareholder of the Clark Freeport property raided the previous year.

At that time, investigators and lawmakers were concerned about the effect of potentially vast amounts of laundered money sloshing through the local economy and local politics, but much worse was to come.

Suspicion over Guo’s murky background led to more official investigations and the revelation that Guo had lied to the Senate about her upbringing and education in the Philippines.

She was in fact a Chinese citizen who had arrived as an adult and improperly obtained Philippine citizenship and other documents from government departments before running for mayor and investing significant capital in land.

While the media reeled over new forms of institutional corruption, the Senate issued a warrant for Guo’s arrest. But she had disappeared, along with a number of her siblings.

There and back again

Guo, whose name on her verified Chinese passport is Guo Huaping, resurfaced after allegedly flying to Kuala Lumpur on July 18, then to Singapore, then to Indonesia.

The Indonesian authorities quickly detained and extradited Guo, her sister, and Cassandra Ong, a 24-year-old Filipina and alleged operator of an associated cyber-scamming compound in Porac, Pampanga Province, the raid on which is discussed below.

Back in the Philippines, Guo and her fellow suspects are still being questioned by authorities, who believe that larger forces are at play in Guo’s network, but Guo and her associates have remained uncooperative in new testimony before the Senate.

Early in the investigation into Guo in May, Risa Hontiveros alleged in the Senate that the Tarlac operation was not only scamming victims online, but also engaging in espionage and sabotage against the Philippine government.

Citing unnamed sources in the Philippine intelligence community, Hontiveros said “persuasive information” indicated the compound “has been used for surveillance activities” and hacking government websites, the first time such a charge had been levelled against the industry.

Potential POGO threats to national security entered public debate from this point, although little of substance followed until an Al Jazeera report in late September aired allegations by She Zhijiang, an Southeast Asian entrepreneur and online gambling kingpin sanctioned by the United States, wanted in China and now in detention in Thailand.

She alleged that he had been recruited by a Chinese operative while in the Philippines in exchange for “getting rid of the case” that Beijing had prepared against him over his gambling operations in Myanmar, according to the interview.

After agreeing, She said Alice Guo, whom he called a fellow operative for China’s Ministry of State Security, had asked him for funding for a political campaign in the Philippines. He says he declined to do so to avoid offending the Philippine government.

Jason Tower, the United States Institute of Peace’s Myanmar country director, told Al Jazeera that She’s claims cannot necessarily be believed given the reputation of his and other networks in the region. “These are groups that specialise in fraud,” he said.

But the Al Jazeera report shows an associate of She accessing a dossier on his computer relating to Alice Guo, including her passport, whose family details Al Jazeera verified and whose listed Fujian Province home address is the local office of the Chinese Communist Party.

“Guo Huaping,” She then says in the interview, addressing Alice Guo, “China cannot be trusted. The two of us once dedicated our lives to China’s Ministry of State Security.

“Look at what happened to me. If you don’t want to be eliminated, you should tell the world the truth.”

Amid sustained tension between Manila and Beijing over control of reefs and territorial waters in the South China Sea, Philippine Senate president Francis Escudero said in late September that the Al Jazeera report should be examined, as it “could fall within the provisions of espionage, which is spying for a country even without war”.

A second development in recent weeks is the October 10 arrest in the Philippines of Chinese national Lin Xunhan, also known locally as “Luy Dong”, “Haohao” (“the big boss”), “Boga” and by other aliases, on suspicion of leadership of a sprawling cyber-scamming and human trafficking network, including many of the operations discussed here.

The joint raid by the Presidential Anti-Organized Crime Commission (PAOCC) and military intelligence officers in Laguna province, southeast of Manila, followed eight months of surveillance and netted 12 other Chinese citizens, their Filipino bodyguards, weapons and documents, the commission said.

PAOCC spokesperson Winston Casio said that Lin, thought to be one of the “pioneers” of online gambling networks in the Philippines, controlled scam operations in several regions of the Philippines, including the Pampanga Province compound that was the subject of 2024’s other major raid in June.

Homicide and a warrant debacle: The raid in Pampanga

The Tarlac raid in March was textbook law enforcement, at least on the part of central government authorities.

But the June 5 raid on some 30 buildings next to the Royal Garden Golf & Country Club in the town of Porac, Pampanga Province, just south of Clark Freeport, was anything but.

When PAOCC officers and national police arrived they found a near-empty property, and had to detain workers as they fled in vehicles and on foot, pointing to what the PAOCC suspected was a local police tip-off to the operators.

The authorities were then hamstrung when a court temporarily withdrew a warrant for locked-down buildings in the compound, preventing officers from locating workers in possible need of rescue.

Instead, the authorities rounded up some 160 foreign nationals, mostly Chinese, and 36 Filipinos from the surrounding area. One Chinese kidnapping and torture victim was still tied to a metal bedframe outside the compound when he was discovered.

The body of a second victim, who was apparently killed while being tortured on film, was not recovered and believed to have been illegally cremated.

The infamy surrounding this second, botched operation only added to the disrepute welling around the POGO sector and its regulation, and prompted new calls for immediate closure of online gambling operations and new ban bills in Congress.

In the following weeks, investigators probed possible operational links between the Porac and Tarlac properties, and those suspicions have since been vindicated, given the links between Cassandra Ong and Alice Guo, and the arrest of Lin Xunhan.

The end of the beginning: ‘All POGOs are banned’

Despite years of associated violence and other criminal conduct, corruptive POGO influence on government and commerce, heavy pressure and undiplomatic approaches by Beijing, naysaying Cabinet ministers astounded by POGO impunity and non-compliance, and a raft of Senate and House committee hearings, speeches, reports and bills to ban the industry, President Marcos’ announcement of a ban on July 22 still came as a surprise.

Up to that point, it was clear that the PAGCOR boss, who reports directly to Marcos, still had confidence that the sector could be turned around and told anyone who would listen that regulation would generate a better financial and compliance outcome than proscription.

Yet when Marcos told Congress that POGOs’ “grave abuse and disrespect to our system of laws must stop”, the camera switched immediately to Tengco who, amid a standing ovation, looked almost surprised while laughing and applauding.

Since then, Tengco has continued to seek ways for some part of the POGO ecosystem to survive, whether it simply be service providers working for foreign operators, or other means.

For this reason, if no other, the expansiveness of Marcos’ pending executive order remains to be seen, with the potential for loopholes starting but by no means ending with foreign-facing online operations based in Cagayan Special Economic Zone, which fall under the President’s authority, but not under PAGCOR’s.

In any case, a strong argument can be made that the final straw for Marcos was the uncontainable political and law-and-order risk that came with the revelation that POGO operations were now overlapping with underground actors, and fraudulent individuals elected to office, who are potentially hostile to Philippine sovereignty.