Illegal lotteries prove tough to stamp out

Published in: Latest Intelligence Illegal lotteries, popularly known as “jueteng”, have proved difficult to stamp out in the Philippines despite concerns that they are fuelling corruption.

The illegal numbers games are usually based on the popular three-digit lotto offered by the government-regulated Philippine Charity Sweepstakes Office (PCSO).

In the legal PCSO version, players buy tickets at official lotto outlets and choose any three number combinations for P10 each. A player can win up to P4,500 (approx. US$100). In the illegal version, winning combinations are based on the official PCSO draws but a P10 bet on the three numbers could win P5,000, higher than the prize money offered by the PCSO.

The game appeals to ordinary people because the gambling stake can be low, it is simple to play, and the results are known quickly. The odds make it particularly appealing; payouts are 400 times the amount of the initial bet. The game can be found mostly in the poorer provinces of the Philippines including Luzon, Batangas, Pampanga and Pangasinan.

However, as an unregulated, illegal operation, there are big opportunities for corruption. Operators can rig the results and control how much is taken in and paid out. The illegal operator can, for example, arrange a manipulated result that will allow him to pay out only 30% of the total amount bet on the winning numbers. That means 70% stays with the operator. According to Senator Panfilo Lacson, who also served as the Director General of the Philippine National Police, the daily collection of jueteng operators can reach P50 million pesos.

Although illegal, the game is hardly secret. Bets are taken openly and the jueteng operators are well known in their areas by citizens, local officials and the police. Senator Lacson said that a regional police director, who protects operators of illegal gambling rackets, could receive between P2 million and P3 million a month and that a provincial police director could get between P500,000 and P1.5 million a month.

One of the most famous examples of an official receiving payoffs is current Manila Mayor and former president of the Philippines, Joseph Estrada, who was previously placed under house arrest for various charges of corruption including the receipt of jueteng payoffs amounting to P500 million ($11.5 million) during his presidency. The next president, Gloria Macapagal Arroyo came into power promising to eradicate the game. However despite her efforts, it continued to flourish.

In an attempt to squeeze out the illegal operators, the PCSO introduced a Small Town Lottery (STL) system, a regulated version of the game. However, because of the similar betting mechanics on two-number combinations, it ultimately spawned a new form of illegal gambling.

Using government approved games as a cover has made it very difficult to clamp down on illegal lotteries, said Chief Supt. Ford Tuazon, deputy director of the Philippine National Police Criminal Investigation and Detection Group.

“We have a hard time implementing it. We have so many raids on this illegal gambling (and) we have a hard time when it comes to STL because apparently jueteng is [being conducted] under the cover of STL,” Tuazon said testifying before the House Committee on Games and Amusement in April 2011.

PCSO Chairman Margarita Juico has said these illegal operations are hurting the earnings of the official lottery operator.

Illegal gaming operators in the Philippines cannot deposit large sums of money in the bank without instantly arousing suspicion so instead they convert their cash by buying expensive items that are then sold at auctions in Singapore or Hong Kong. One effort to stem this trade was made by the Anti Money Laundering Council within the Philippine central bank, which investigated transactions involving expensive works of art, jewelry, and other luxury items.
In the government’s latest attempt to stamp out the proliferation of illegal operators, Small Town Lottery operations were disbanded across 14 provinces by end of June to be replaced with a new game - Loterya ng Bayan (LTB). Unlike the Small Town Lottery, LTB operators will have a remittance quota. They will also be subjected to stringent auditing by the PCSO. The new numbers game will also have online operations with a minimum bet of P1.