Regulatory Framework for Remote Play - Slot Machines

PAGCOR

Internet Gaming -- Licensing and Regulation Group Offshore Gaming Licensing Department

REGULATORY FRAMEWORK

FOR REMOTE PLAYSLOT

MACHINES

Rev. No.: 1 Effectivity:

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AG Offshore Gaming Licensing Department REMOTE PLAY SLOT MACHINES Effectivity Rev. No. APR 25 ZULL 1

EXECUTIVE SUMMARY

With the advancement of technology, particularly the internet,various and numerous transactions have evolved accordingly, including that of gaming. At present, games in brick-and-mortar casinos, traditional bingos, electronic games, and even billiards are being offered on the internet through online gaming.

However, there are still players who have reservations in playing online. There are issues with the integrity of games which are run mainly by software or through the cloud. Likewise, the difference between seeing computer images as opposed to physical machines to which a player is more accustomed with is understandable

This gap is now being bridged by technology through Remote Play. This allows the use of the same type of machines used on the casino floor but are connected to the internet so that they can be played online. This is helpful in tapping the market of players transitioning to be online players.

By virtue of the foregoing, the following are laid down as the Regulatory Framework for the conduct of Remote Play-Slot Machines (Remote Play (SM)

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TABLE OF CONTENTS

S GENERALPROVISIONS

I LICENSING OF REMOTE PLAY FOR SLOT MACHINES

H COMMENCEMENT OF OPERATIONS 4o

REMOTE PLAY(SM)PLATFORM REQUIREMENTS AND STANDARDS--

V CONDUCT OF GAMING- 10

V. FINANCIAL OBLIGATIONS OF REMOTE PLAY LICENSEES -10

V GROUNDS FOR THE SUSPENSION AND CANCELLATION OF LICENSE -----12

Vi MISCELLANEOUS PROVISIONS 1A

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I.GENERALPROVISIONS

1. Remote Play (SM) refers to a game offering wherein slot machines situated in

PAGCOR-operated casinos,locations with junket operations under PAGCOR or Integrated Resorts, are accessed through remote gaming platforms, exclusively by foreign players located outside the Philippine territory

2. Remote Play (SM) Licensee is the entity duly licensed and authorized by

PAGCOR to conduct Remote Play(SM)

3. Authorized Player refers to players of the licensee who can access its games

through the latter's website with the following criteria: a. Any individual who is physically in a country other than the Philippines; this

excludes Filipino citizens, even if abroad,and individuals in territories where online gaming is prohibited; b.Age of at least twenty-one (21) years old; and c. Must be registered and must have established a player account.

4. Gaming Laboratory refers to entities responsible for the testing of gaming

systems, hardware and software, using industry's accepted and established

standards for gaming jurisdictions worldwide.

5. Gross Gaming Revenue refers to Gross Bets less the total amount of Payout

in online gaming.

6. Return to Player (RTP) is the percentage of the total money wagered on a

specific type of slot machine or game that will be paid back to players over time

7. Offshore Gaming Licensing Department (OGLD) is PAGCOR's licensing

department for Remote Play (SM) License

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8.PAGCOR Monitoring Team (PMT) refers to a group of PAGCOR Compliance

Monitoring and Enforcement Department- I-Gaming (CMED-IG personnel whose task is to monitor and enforce the Remote Play (SM Licensee's

compliance with PAGCOR's regulations.

II.LICENSING OF REMOTE PLAY FOR SLOTMACHINES

1. The OGLD shall process all applications for licensing as a Remote Play (SM)

Licensee;

2. The applicant for a Remote Play (SM License must be a duly constituted

business enterprise organized in the Philippines;

3. The applicant must pass PAGCOR's standard probity check for gaming

operator suitability and comply with all the documentary and system requirements;

4. The applicant must file a Letter of Intent (LOl) addressed to the Chairman and

Chief Executive Officer

5. Upon receipt of the application, OGLD shall issue a Deposit Notice and

Payment Form for the application fee

6. The applicant shall submit a duly filled out Remote Play (SM License

Application Form (ES Form No.1) together with the following requirements

a.Company Requirements

Copy of the Certificate of Registration from the Securities and Exchange Commission (SEC with required capitalization of at least

One Hundred Million Pesos (Php 100,000,000.00 authorized

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capital stock and Twenty-Five Million Pesos (Php 25,000,000.00 paid up capital; I Articles of Incorporation (AOl) and By-Laws duly filed and approved

by the SEC. The AOI must show that gaming is one of the primary purposes of business;if secondary,a copy of the Board's resolution

on the same should be submitted; I Latest General Information Sheet (GIS) duly filed with the SEC

Detailed company profile; V Organizational Chart indicating persons occupying the positions V. Duly accomplished and notarized Personal Disclosure Sheet (PDS

of key officers of the corporation with the following attachments:

For Filipino Citizens-copy of government issued ID For Foreign Nationals -copy of valid passport Vi Copy of the following documents:

Mayor's Permit/ Business Permit Certificate of Registration with the Bureau of Internal Revenue

Vii. Letter of No Objection from the Local Govermment Unit where the

gaming operations shall be conducted; and Ix. Proof of Payment of Application Fee.

b.Location/Business Requirements

i.Remote Play (SM) Manual of the corporation;

ii. Operating site may be within a PAGCOR-operated casino or licensed

casino with a junket agreement or integrated resorts; provided, that the host casino or integrated resort must give its consent to the proposed

Remote Play (SM) operations.

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C Payment of the following non-refundable Application Fees:

Type of Application Application Fee

First Issuance -valid for 3 years $100,000.00

Renewal per year $30,000.00

7. The application shall only be recommended to the Board of Directors for

approval upon compliance with all the following:

a.Submission of complete documentary requirements; b. Payment of the non-refundable application fee c. Satisfactory results of ocular inspection to verify the legitimacy of the

corporation and proposed operations by the PAGCOR Inspection Team

composed of representatives from the OGLD,CMED-IG, Slot Machine Department (SMD), Information and Technology Department (ITD), Internal Audit Department (IAD),and the host branch as may be applicable;and d. Compliance with the prescribed probity requirements.

II.COMMENCEMENTOF OPERATIONS

1. Once the application is approved, the applicant must comply with the pre-

operational requirements:

a. Posting of the Performance Bond in the amount equivalent to six (6

months MGF or equivalent to six (6) months fees for the existing machines, whichever is higher;

b. Submission of the website/s where Remote Play(SM) will be conducted; c. Certification from a PAGCOR accredited Gaming Laboratory of the

following standards and requirements:

GLI 11-Gaming Devices in Casinos

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ii. PAGCOR Technical Standards for Electronic Gaming

Machines ver 1.0;and iii. Certification attesting to the Internet Protocol (IP)

blocking of all Philippine IP addresses

d. The PAGCOR Inspection Team composed of representatives from the

OGLD,CMED-IG,SMD,ITD,IAD,and host branch shall then conduct a final inspection of the Licensee's office and all its related facilities, whether owned or outsourced, and system walkthrough of the Remote

Play (SM Platform, from player registration to income reporting, to determine the full compliance of its system with the regulations and its

capability and readiness to fulfill the prescribed scope of service;and

e. Full simulation of the Remote Play (SM) must be conducted and

approved by PAGCOR

2. Upon satisfactory completion of the pre-operational requirements, the Licensee

shall be issued a Notice to Commence Operations.

3. The Licensee is given until three (3) months from board approval of their

application for Remote Play (SM) License to commence their operations. Failure to operate within the prescribed three-month period shall warrant the imposition of the Minimum Guarantee Fee(MGF),corresponding demerits,and possible administrative penalties.

IV.REMOTE PLAY (SM) PLATFORM REQUIREMENTS AND

STANDARDS

1. The Applicant's gaming protocols must comply with the minimum requirements

and standards set forth hereunder.

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2. The Remote Play (SM) Platform shall not accept bets coming from within

Philippine territory and shall not be accessible in any way whatsoever inside the Philippines or by Filipinos abroad

3. The proposed Remote Play (SM Platform must comply with the following

standards:

A. Player Registration

New players may either personally register in the office/registration area of the Licensee which must be within the operations site and witnessed by CMED-IG personnel or through Remote Registration

The Remote Play (SM) platform's player registration or Know-Your-Customer (KYC) process is required for all players and must contain the following:

I Requires the prospective Player to enter his/her:

a. Full Name b.Date of Birth c.Contact Number d. Current Address e. Nationality f.Occupation,and g. Source of Income.

I Only persons twenty-one (21) years of age and above shall be allowed

to register.

I Requires the prospective Player to submit a copy of the bio page of

his/her valid passport.

I. Requires the prospective Player to declare the following information:

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a.That helshe is at least twenty-one(21) years of age;and b. That he/she is not among any of those persons disqualified under the

Iaw to engage in gambling

N A screenshot of a mandatory real-time photo ID to verify player eligibility

and identity.

. Prior to account confirmation, each player must read and accept the

Terms of Use of the Remote Play Platform (SM.The Licensee shall submit its Remote Play (SM) Terms of Use and must be approved by the OGLD prior to implementation in the Remote Play (SM) Piatform.A player's violation of any provisions of the Terms of Use shall be a ground for the suspension or cancellation of his/her account.

Vii. Failure to provide all requirements during registration shall result in an

incomplete registration and should prevent a prospective player from placing bets

Vi. The Licensee must institute its own privacy policy

B. Membership Verification and Monitoring

The Remote Play(SM) Platform shall have the capability to ensure that only the registered player is using his/her account to bet. Hence, either of the following functionalities for membership verification shall be mandatorily implemented in the platform:

I Biometrics verification

a.Facial verification; b. Fingerprint scanning; and c. Iris scanning.

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or

I OTP Verification where the system sends a randomly generated one-

time-PIN (OTP) to the registered number of the player which must be

inputted by the player to allow access to the platform.

C. Responsible Gaming

The Remote Play (SM) Platform must show an infographics or short video clip to the player upon log-in showing PAGCOR's responsible gaming reminders.

D. Customer Care Center The Remote Play (SM) platform must incorporate a Customer Service system

where all concerns of the players may be lodged and promptly addressed

V.CONDUCTOF GAMING

The conduct of Remote Play (SM) shall be subject to the Licensee's own Operations Manual and Implementing Rules and Guidelines which are to be submitted to the OGLD for approval. This shall include the following but not limited to submission of gaming lay-out, surveillance plan, return to player percentage, and game mechanics.

VI.FINANCIAL OBLIGATIONS OF REMOTE PLAY LICENSEES

A.Regulatory Fee

1. The Licensee shall be imposed of a monthly regulatory fee computed based on

whichever is highest of the following:

a.$ 15,000.00 for the first 50 machines, and $ 350.00 per machine in excess

of the 50 machines;

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b.20% of the Gross Gaming Revenue; and

C Minimum Guaranteed Fee (MGF) amounting to $ 15,000,00

2. The Licensee shall be billed the monthly regulatory fee every 10th day of the

succeeding month and the same should be settled on the 15th day of the month

3. Failure to submit proof of payment on the 15th day of the month shall result in the

imposition of interests on the outstanding balance; and

4. Non-payment of the regulatory fee for two (2) consecutive months shall result in

the forfeiture of the amount from the Licensee's Performance Bond

B. Performance Bond

1. Posting and Forfeiture of Performance Bond

a. The Licensee must post a Performance Bond as indicated in III (1)(a) of these

regulations.

b.The Performance Bond is non-transferrable one-time payment

c. The Performance Bond shall be used to cover any unpaid financial liabilities of

the Licensee.

d. If the Performance Bond is less than the Licensee's accounts payable to

PAGCOR, the amount in excess of that is still due and demandable to the Licensee.

e. The Licensee shall replenish its Performance Bond within thirty(30) days from

the date of forfeiture,otherwise, the Licensee shall be imposed penalties as may be deemed necessary by the OGLD

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2.Processing of Refund

a. The Licensee shall submit to the OGLD a letter-request for the refund of the

Performance Bond;

b. Oniy Licensees who are clear of all financial obligations with PAGCOR are

entitled to a refund;

c. Board-approved requests for refund shall be forwarded to the Accounting

Department for their appropriate action; and

d. All original copies of the Remote Play(SM License must be surrendered to the

OGLD prior to the release of refund of the Performance Bond

C. Additional Sitel Transfer of Site Fee

Application for additional site or transfer of operating site to a building other than that of the existing operating site shall be $20,000 inclusive of inspection fee and printing of one certificate

VII.GROUNDS FOR THE SUSPENSION AND CANCELLATION OF

LICENSE

A.The following shall be grounds for the suspension of a Remote Play (SM) License

1.The Licensee or its owners,operators,or key officer is charged of an offense

in violation of anti-gambling laws of the Philippines;

2. The Licensee or its owners, operators, or key officer is charged of any serious

offense under any other law;

3.The Licensee does not cooperate with the PAGCOR Inspection Team for the

inspection of their premises, machine, and equipment;

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4. The Licensee fails to discharge its financial commitments:

5. The Licensee obtained the license by a materially false or misleading

representation in some other improper way;

6. The Licensee fails to prevent Filipino citizens,minors,and those prohibited by

Iaw,to participate in its Remote Play(SM);and

7. The Licensee is required to be suspended to ensure that the public interest is

not affected in an adverse and material way, or the integrity of the conduct of gaming is not jeopardized in any way.

B.The following shall be grounds for the cancellation of the Remote Play (SM)

License:

1. The Licensee is not, or is no longer, in the opinion of the Board,suitable to hold

the license:

2. The Licensee or its owners, operators,or key officer is convicted of an offense

in violation of anti-gambling laws of the Philippines;

3.The Licensee or its owners,operators,or key officer is convicted of any serious

offense under any other law;

4. The Licensee repeatedly refuses to cooperate with the PAGCOR Inspection

Team for the inspection of their premises,machine, and equipment;

5. The Licensee ceases operation without due notice to PAGCOR,and cannot

explain the causes thereof; or attempts in any way to abscond from his obligations to his players or PAGCOR;

6.The Licensee repeatedly fails to discharge financial commitments;

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7.The Licensee fails to remit financial obligations due PAGCOR for at least two

2consecutive months

8. The Licensee fails to replenish its Performance Bond despite reminders from

PAGCOR;

9.The Licensee is declared bankrupt or under rehabilitation;

10.The Licensee obtained the license by a materially false or misleading

representation in some other improper way;

11.The Licensee failed to prevent Filipino citizens,minors,and those prohibited by

law,to participate in its Remote PlaySM);and

12.The Licensee failed to operate within the period of three (3) months from the

issuance of its license,unless otherwise approved by the PAGCOR Board of Directors;

VIII.MISCELLANEOUS PROVISIONS

1. Remote Play (SM) shall be monitored by the Compliance Monitoring and

Enforcement Department-I-Gaming (CMED-IG).For this purpose,CMED-IG shall create its own implementing rules and guidelines for the proper monitoring of Remote Play(SM)

2. The Remote Play (SM) License is a mere privilege and is not a contract

between PAGCOR and the Licensee.It is not a property of the Licensee,nor does it create any vested right or interest. Such license may be suspended or cancelled at any time upon the discretion of the PAGCOR Board of Directors for grounds provided for under these regulations.

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3. The License may not be transferred by way of sale, inheritance, succession,

gift or otherwise to any person or entity, without prior consent of the Board of Directors of PAGCOR;

4. The Licensee shall be solely responsible for ensuring that no wagers would be

accepted from Filipinos, person below twenty-one (21) years of age,and from player in jurisdictions where such forms of gaming are prohibited;

5.The Licensee shall not install, modify, decommission,remove,or destroy any

equipment without the written authority from the OGLD; 6. For monitoring purposes, the Licensee shall allow the inspections of the

premises,machines,and equipment being used in its operations at any time by the PAGCOR Monitoring Team or OGLD personnel duly assigned for the

purpose;

7. The Licensee shall comply with the provisions set forth in the Anti-Money

Laundering Act (AMLA), as amended, the Terrorism Financing Prevention and Suppression Act(TFPSA), their Implementing Rules and RegulationsIRRs) the 2021 AML/CTF Guidelines for Designated Non-Financial Business and Persons, and other regulatory issuances of the Anti-Money Laundering Council (AMLC)

Accordingly, they shall comply with documentary requirements, compliance checking requirements, and other submissions as may be required by the Anti Money Laundering Council, and its equivalent regulating unit in PAGCOR

covering the overall money laundering and terrorism financing (ML/TF risk management and control framework. OGLD must be copy furnished in all submissions

8. The Licensee must not stop or interrupt the running of its operations during the

validity of its license,without due notice and approval from OGLD. This is to

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ensure that proper notice is given to the game players and such stoppage is reasonable;

9. The Licensee must ensure that bets from the Philippine territory shall not be

allowed and that streaming feeds shall not be utilized for any other purpose than for Remote Play (SM) outside the Philippine territory;

10.All costs incurred for the conduct of Remote Play(SM)whether essential and/or

incidental shall be shouldered by the Licensee;

11.All claims by any contractee of the Licensee or by any third-party shall be

shouldered by the Licensee,and the latter shall hold PAGCOR free from all claims and obligations; and

12.In the event that Remote Play (SM) is declared suspended or closed by the

Office of the President or by any competent authority, the same shall have the same effect upon the licenses and certificates issued herein. The Licensees shall then hold PAGCOR free from all claims,obligations, and accountabilities arising from the above declaration.

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