Cagayan Economic Zone AuthorityInteractive GamingCode Of PracticeRegulatory ComplianceAll licensed operators, including their management and staff will abide by the laws andregulations governing online gaming in the Cagayan Special Economic Zone & Free Port(CSEZFP) in conjunction with relevant laws of the Republic of the Philippines.AccountabilityLicensed operators within the CSEZFP will voluntarily agree to have their systems,policies and procedures available for inspection and review by members of the regulatoryboard or their duly authorized representatives. Gaming systems and software applicationswill be required to undergo independent testing and audit by an authority recognised bythe regulator.Player ProtectionAll players are to be registered or hold an account. A Personal Identification Number(PIN) or password is to be established. Minors are not considered eligible to register orhold an account. Adequate controls will be implemented to prohibit minors fromaccessing gaming systems.Player PrivacyAll licensees will design and operate their services to afford complete privacy andconfidentiality. Controls and procedures regarding the keeping of player records andinformation will be clearly posted.Data SecurityAll Licensees will have in place controls, to detect and eliminate fraud and to protect thesystem and data from internal or external breach.Advertising & PromotionsAll advertising will be done in a responsible manner so as not to encourage irresponsiblebehavior from patrons. All promotional material will be truthful and accurate.Dispute Resolution & Audit TrailsDetailed records of all player activity will be recorded and archived. These records willbe accessible and auditable by the regulator or a duly authorized representative. Page 2 of 2Responsible GamblingAll reasonable efforts will be made to identify and prohibit compulsive gambling.Procedures should allow the ability for players to impose betting restrictions and accesstheir betting history. Information on counseling and help organizations should be madeavailable.Financial ProcessingAll banking and financial affairs will be conducted in accordance with generally acceptedstandards of recognised international banking institutions. Transaction reporting willcomply with guidelines defined by the regulator.Payment of WinningsAdequate funding will be maintained to pay all current obligations and maintain ongoingoperations. Winnings and account balances will be paid promptly on demand.
Cagayan Economic Zone & Free PortInteractive Gaming Rules and RegulationsVersion 2.0, August 2004Part 1 - Preliminary1. Interpretation2. Interactive gamePart 2 – Licenses for interactive gamingDivision 1 – Offence for unlicensed interactive gaming3. Licensees to conduct interactive gamingDivision 2 – Licensing procedure4. Application for license5. Application to be granted or refused6. Investigation in relation to application7. Existing operators Licensed in Approved JurisdictionsDivision 3 – Conditions and form of license8. Conditions of license9. License fee10. Form of licenseDivision 4 – Suspension, revocation and surrender11. Suspension and revocation of license12. Immediate suspension13. Effect of suspension and revocation14. Surrender of licenseDivision 5 – Other general provisions15. Renewal of license16. License not to be transferred17. Mortgage, charge or encumbrance over licensePart 3 – Compliance requirements18. No internet gambling by persons under 18 219. Approval of interactive games20. Approval of control systems21. Change of control system22. Approval of equipment23. Financial institution accounts24. Notification of changes25. Records26. Submission of reports27. Audit28. Special audit29. Investigation of licenseePart 4 – Interactive gaming levy30. Liability to the gaming levy31. Payment and returns for calculation of gaming levy32. Penalty for late payment and underpayment33. Recovery of amountsPart 5 – the Regulator34. Functions and powers of the Regulator35. Code of Practice36. Complaints37. Appointment of inspectors38. Reports39. Contracting out services and workPart 6 – Miscellaneous40. Appeal rights41. Confidentiality42. Forfeiture43. Orders44. Application of certain other Acts45. Commencement 3THECAGAYAN ECONOMIC ZONE & FREE PORTINTERACTIVE GAMING RULES AND REGULATIONSRules and Regulations to regulate interactive gaming, and for related purposes.BE IT ADOPTED by the Cagayan Economic Zone Authority as follows:Part 1PreliminaryInterpretation1. In this Rules, unless the contrary intention appears:“approved form” means a form approved by the Regulator for use herein;“authority” means the Cagayan Economic Zone Authority;“chairman” means the Chairman/Administrator of the Cagayan Economic ZoneAuthority;“CEZA” refers to the Cagayan Economic Zone Authority who is the governingbody of the CSEZFP; “close associate”, of an applicant for a license, means:a) a director or an executive officer of the applicant; orb) a shareholder of the applicant; orc) a person who the authority reasonably believes will, if a licenseis granted to the applicant, be associated with the ownership ormanagement of the licensee’s operations;“close associate”, of a licensee, means: 4a) a director or an executive officer of the licensee; orb) a shareholder of the licensee; orc) a person who the authority reasonably believes is associated with the ownership or management of the licensee’s operations;“code” means the Code of Practice in force under section 35;“commencement” means the commencement of the effective period of this Act;“conduct” includes promote, organize and operate;“control system” means a system of internal controls, and administrative andaccounting procedures for the conduct of interactive games by a licensee;“CSEZFP” refers to the Cagayan Special Economic Zone and Freeport as a separatecustoms territory covering the entire area embraced by the Municipality of Sta. Anaand the islands of Fuga, Barit and Mabbag in the Municipality of Aparri, all in theprovince of Cagayan. “executive officer,” of a company, means a person who is concerned with, or takespart in, the company’s management, whether or not the person is a director or theperson’s position is given the name of executive officer;“gambling record” of a licensee, means a record (including a document) about theoperations conducted by the licensee under its License;“inspector” means a person who is an inspector for this Rules and Regulations;“interactive game” has the meaning given by section 2;“interactive gaming equipment” means a machine or other device (whether electronic,electrical or mechanical), computer software or any other thing used or suitable foruse in the conduct of an interactive game;“interactive gaming levy” means the fee imposed under section 30;“law enforcement agency” means:a) the Philippine National Police; orb) any other Police Force outside the Philippines; or 5c) the Security Force of CEZA; ord) any other body within or outside the Philippines with law enforcement functions;“License” means a License issued under this Rules and Regulations to conductinteractive games;“Licensee” means a company that is licensed under this Rules and Regulations toconduct interactive games;“master licensor” means a company that has been authorized by the CagayanEconomic Zone Authority to be the entity responsible for monitoring all activitiespertaining to the licensing and operation of interactive games;“player” means a person who participates in an interactive game;“regulations” means regulations made under this Act;“telecommunication device” means:a) a computer adapted for communicating by way of the internetor another communications network; orb) a television receiver adapted to allow the viewer to transmitinformation by way of a cable television network or othercommunications device; orc) a telephone; ord) any other electronic device or thing for communicating at adistance.INTERACTIVE GAME2. 1) A game is an interactive game if:a) a prize consisting of money or something else of value isoffered or can be won under the rules of the game; andb) a player:(i) enters the game or takes any step in the game by means 6of a telecommunications device; and(ii) gives, or undertakes to give, a monetary payment orother valuable consideration to enter the game; andc) the winner of a prize in the game is decided:(i) wholly or partly by chance; or(ii) by a competition or other activity in which the outcomeis wholly or partly dependant on the player’s skill.2) Subject to subsection (3), betting on a race event, sporting event or anyother event by means of a telecommunications device is taken to be aninteractive game.3) A game is not an interactive game if a regulation declares it not to bean interactive game.PART 2LICENSES FOR INTERACTIVE GAMINGDIVISION 1 – OFFENCE FOR UNLICENSED INTERACTIVEGAMINGLICENSEES TO CONDUCT INTERACTIVE GAMING3. 1) A person must not conduct an interactive game wholly or partly inCSEZFP unless the person is a licensee and the game has beenapproved by the Regulator under section 19.2) A person who contravenes subsection (1) is liable to pay a fine as follows:a) if the person is an individual - by a fine not exceeding UnitedStates Dollars: Two Hundred Thousand (US$200,000) or itsPhilippine Peso equivalent; or 7b) in any other case - by a fine not exceeding United States Dollars:One Million (US$1,000,000) or its Philippine Peso equivalent.DIVISION 2 - LICENSING PROCEDUREAPPLICATION FOR LICENSE4. 1) An application for a License to conduct interactive games in CSEZFPmust:a) be made in writing to the Chairman coursed through the MasterLicensor; andb) be in such form as is specified by the Regulator; andc) be accompanied by such application fee as is prescribed by theregulations.2) The Master Licensor may, by written notice given to an applicant for aLicense, require the applicant to give it further information or documentsthat are necessary and reasonable to help CEZA and the Master Licensorevaluate the application. The notice must specify a period of not less than14 days within which the applicant is to give the furtherinformation or documents.3) An applicant must not: a) make an application that is false or misleading in any material particular; or b) give in response to a notice under subsection (2) any information or document that is false or misleading in any material particular. 84) An applicant that contravenes subsection (3) shall be liable to pay a finenot exceeding United States Dollars: Six Hundred Thousand(US$600,000) or its Philippine Peso.5) An Application fee referred to in paragraph (1)(d) is not refundable.APPLICATION TO BE GRANTED OR REFUSED5. 1) The Chairman and the Master Licensor musta) consider an application for a License; andb) either grant or refuse to grant the application within 1 monthafter receiving it and any other information or documentsrequested by it the Chairman and/or the Master Licensor undersection 4.2) After consultation with the Master Licensor, the Chairman may grant anapplication for a License only if:a) the Chairman is satisfied that the applicant is a suitable person tohold a License; andb) the application and any information or documents given inresponse to a notice under section 4 are not false or misleadingin any material particular; andc) any person required to comply with subsection 6(3) has doneso.3) In deciding whether an applicant is a suitable person to hold a License,the Chairman and the Master Licensor must have regard to the following:a) the character, business reputation and financial background ofeach close associate of the applicant;b) the applicant’s current financial position and whether theapplicant has the financial, technical and other resources toconduct interactive games under a License;c) whether the financial resources of the applicant are availablefrom a source that is not tainted with illegality; 9d) whether the applicant has in place a satisfactory corporate,ownership or trust structure;e) the experience and business ability of the persons who will beinvolved in the management or operation of the applicant’soperations;f) anything else prescribed under the regulations.3) If the Chairman and the Master Licensor decides to grant an applicationfor a License, they must within 7 days issue a License to the applicant.4) If the Chairman and the Master Licensor decides to refuse to grant anapplication for a License, the Chairman through the Master Licensor mustwithin 7 days give the applicant written notice of the decision.INVESTIGATION IN RELATION TO APPLICATION6. 1) The Chairman and/or the Master Licensor must conduct the investigationsand make the inquiries the Chairman and/or the Master Licensor considersto be necessary to enable him or her to determine an application for aLicense.2) The Chairman and/or the Master Licensor may obtain from a lawenforcement agency a report on any individual who:a) is a close associate of the applicant; orb) is or will be involved in the management or operation of theapplicant’s operations.3) For the purposes this section, the Chairman and/or the Master Licensormay require an individual mentioned in subsection (2) to have his or herphotograph, finger prints and palm prints taken.4) A person who fails to comply with a requirement under subsection (3)shall be liable to pay a fine not exceeding United States Dollars: FortyThousand (US$40,000) or its Philippine Peso.EXISTING OPERATORS LICENSED IN APPROVED JURISDICTIONS 107) 1) Any person conducting an interactive game wholly or partially within alicensed jurisdiction recognized and approved by the Chairman, may begranted a provisional license immediately upon submission of applicationand payment of the required fees.2) The Chairman and the Master Licensor may grant a License to such anexisting operator if it can be shown the operator is licensed within ajurisdiction with controls and regulations deemed appropriate by theRegulator.3) If, upon commencement of the licensees operation, the licensee is incontravention of any provision of this Rules and Regulations, the operatormust:a) give written details of the contravention to the Regulator within 1month after commencement of operationsb) rectify the contravention within 1 month, or such other period asthe Regulator approves in writing, after commencement ofoperations4) Compensation is not payable by CEZA and the Master Licensor to anexisting operator in respect of any loss or damage suffered by the operatorthat:a) arises from the operator rectifying a contravention of this Rulesand Regulations in accordance with subsection (3); orb) arises as a result of the operator having its license suspended orrevoked after failing to rectify a contravention of this Rules andRegulations in accordance with subsection (3); orc) arises as a result of the operator having its license suspended orrevoked in accordance with section (11)(1).DIVISION 3 - CONDITIONS AND FORM OF LICENSECONDITIONS OF LICENSE8. 1) The Chairman must, after consultation with the Regulator, determine theconditions of a License. 11 2) The period of a License cannot exceed 7 years.3) The Chairman in consultation with the Master Licensor may include in aLicense any other conditions that are necessary or desirable in the publicinterest, or for the proper conduct of interactive gaming.4) The Chairman may:a) vary the conditions of a License; orb) impose further conditions of a License.5) Before changing the conditions of a License under subsection (4), theMaster Licensor must notify the licensee in writing of the proposedchange and give the licensee at least 14 days in which to makesubmissions in writing to the Chairman coursed through the MasterLicensor.6) The Chairman must:a) take into account any submissions made by the licensee inmaking his decision; andb) give the licensee written notice of any change to the conditionsof its License.LICENSE FEE9. 1) A licensee must pay to the Regulator a fee prescribed by theregulations for the grant of a License (including a License granted undersubsection 7) and on each anniversary of the date the License was granted.2) A licensee that fails to pay the fee by the due date is liable to a surchargeequal to 100 percent of the prescribed fee. The fee and the surcharge aredebts due to CEZA and the Master Licensor by the licensee and CEZAand the Master Licensor may recover the debts by action in a court ofcompetent jurisdiction.FORM OF LICENSE10. 1) A License must be in the form approved by the Chairman. 122) The approved form must provide for the inclusion of the followingparticulars:a) the licensee’s name;b) the date of issue of the License;c) the period for which the License is granted;d) the conditions of the License;e) such other particulars as are prescribed.DIVISION 4 – SUSPENSION, REVOCATION AND SURRENDERSUSPENSION AND REVOCATION OF LICENSE11. 1) The Chairman may, after consultation with the Regulator, suspendor revoke a License if:a) the Chairman is satisfied on reasonable grounds that:i. the licensee is no longer a suitable person to hold aLicense; orii. the License was issued on the basis of materially false ormisleading information or documents; oriii. following an investigation by an inspector under section37 or an audit under section 27 or 28, the licensee hasinsufficient financial resources to conduct interactivegames in accordance with its License and it is in thepublic interest to suspend or revoke the License; orthe licensee is in violation of any provision containedherein; orb) the licensee is subject to voluntary or involuntary winding upproceedings or has a receiver appointed.2) In exercising his power under subparagraph (1)(a)(i), the Chairman mayhave regard to the matters mentioned in subsection 5(3). The Chairman 13may exercise the power whether or not a notice has been given by thelicensee under section 24.3) If the Chairman intends to suspend or revoke a License, the Chairmanthrough the Master Licensor must notify the licensee in writing of theproposed suspension or revocation and give the licensee at least 14 days inwhich to make submissions in writing to the Chairman.4) The Chairman must take into account any submissions made by thelicensee in deciding whether to suspend or revoke the License.5) The Master Licensor must give the licensee written notice of anysuspension or revocation of its License.IMMEDIATE SUSPENSION12. 1) The Chairman may, after consultation with the Regulator,suspend a License immediately for a period not exceeding 90 days if theMaster Licensor believes that:a) a ground exists under section 11 to suspend or revoke theLicense; andb) the circumstances are so extraordinary that it is imperative tosuspend the License immediately to ensure the public interest isnot affected in an adverse and material way.2) The suspension:a) must be effected by a written notice given to the licensee; andb) operates immediately the notice is given; andc) continues to operate until the Chairman cancels the suspension or itexpires, whichever happens first.EFFECT OF SUSPENSION AND REVOCATION13. 1) A company whose License is suspended or revoked under section 11 or 12must cease to conduct all interactive games while the suspension orrevocation is in force.2) The Chairman may rescind the suspension of a License on his or her ownmotion or on application in writing by the company concerned. 143) The licensee can resume conducting interactive games when thesuspension is rescinded or expires.SURRENDER OF LICENSE14. 1) The Chairman may, after consultation with the Regulator, approve thesurrender of a License on application in writing by the licensee. 2) The Chairman may impose conditions relating to the surrender of aLicense, including conditions that apply after the surrender and the formerlicensee must comply with those conditions.3) A former licensee that fails to comply with any conditions imposed undersubsection (2) shall be liable to pay a fine not exceeding United StatesDollars: Forty Thousand (US$40,000) or its Philippine Peso.DIVISION 5 – OTHER GENERAL PROVISIONSRENEWAL OF LICENSE15. 1) A licensee must apply in writing to the Chairman coursed through theMaster Licensor to renew its License not less than 28 days before the dayon which the License expires.2) The Chairman may, after consultation with the Regulator, refuse to renewa License on any ground referred to in subsection 11(1) on which theMaster Licensor may suspend or revoke the License, but not on any otherground.3) If the Chairman intends not to renew a License, the Chairman through theMaster Licensor must notify the licensee in writing of the proposed refusalto renew and give the licensee at least 14 days in which to makesubmissions in writing to the Chairman coursed through the MasterLicensor.4) The Chairman must take into account any submissions made by thelicensee in deciding whether to renew the License. 5) The Master Licensor must give the licensee written notice of any refusal torenew the License.LICENSE NOT TO BE TRANSFERRED 1516. A License cannot be transferred except by way of enforcement of amortgage, charge or encumbrance in accordance with subsection 17(2).MORTGAGE, CHARGE OR ENCUMBRANCE OVER LICENSE17. 1) A licensee must not mortgage, charge or otherwise encumber its Licenseexcept with the written approval of the Chairman after consultation withthe Master Licensor.2) If a person has a right to sell and transfer a License under or because of amortgage, charge or encumbrance, the License may only be sold andtransferred to a person approved by the Chairman after consultation withthe Regulator.3) The Chairman must not approve the transfer of a License, unless theChairman is satisfied after consultation with the Master Licensor that theproposed transferee is a suitable person to hold the License.4) In deciding whether to approve the transfer, the Chairman may take intoaccount the matters set out in subsection 5(3) and exercise any of thepowers in section 6 in relation to the proposed transferee.5) If a person has under, or because of, a mortgage, charge or encumbrance apower to appoint a receiver or manager of the business conducted underthe License, the power may only be exercised if the Chairman firstapproves the proposed receiver or manager in writing.PART 3COMPLIANCE REQUIREMENTSNO INTERNET GAMBLING BY PERSONS UNDER 1818. 1) A licensee must not allow an individual who is under 18 years of age toplay an interactive game conducted by the licensee.NO BETS FROM THE PHILIPPINES 2) It shall be understood that no bets or wagers from within the territorialjurisdiction of the Republic of the Philippines shall be accepted inconnection with the operation of the licensee and neither shall the results 16of sporting events held within the Philippines be subject of sports bettingoperation of the said licensees.3) A licensee that contravenes subsection (1) shall be liable to pay a fine notexceeding United States Dollars: One Hundred Thousand (US$100,000)or its Philippine Peso equivalent.APPROVAL OF INTERACTIVE GAMES19. 1) A licensee must not conduct an interactive game under its License unlessthe Regulator has given written approval for:a) the interactive game; andb) any software under which the game operates and, if possible,the source code for that game; andc) the rules of the game; andd) any material accompanying the game; ande) the way in which the game, and any accompanying material,presents to and interacts with the player.2) In deciding whether to give an approval, the Regulator may have regard towhether:a) each player of the game will have easy access to the rules of thegame and information about the rate of return that the gameprovides; andb) the game operates strictly in accordance with any rules andinformation provided to players; andc) any aspect of the game is false or misleading; andd) the graphics, sounds, text and other presentational aspects ofthe game are socially responsible and in accordance withprescribed standards.3) A licensee that contravenes subsection (1) shall be liable to pay a fine notexceeding United States Dollars: Five Hundred Thousand (US$500,000)or its Philippine Peso equivalent. 17APPROVAL OF CONTROL SYSTEMS20. 1) A licensee must not conduct interactive games under its License unless theRegulator has given written approval for the licensee’s control system.2) In deciding whether to approve a licensee’s control system, the Regulatormay have regard to the following:a) the licensee’s general procedures to be followed for the conductof interactive games;b) the licensee’s procedures and standards for the maintenance,security, storage and transportation of equipment to be used forthe conduct of interactive games;c) the licensee’s procedures for recording and paying prizes wonin interactive games;d) the licensee’s procedures for using and maintaining surveillanceand security facilities;e) the licensee’s systems for transferring and accounting ofmoney;f) the licensee’s procedures for:i. dealing with players’ complaints about games; andii. conforming with the policies of financial bodies (forexample, Mastercard and Visa); andiii. excluding players from playing interactive games; andiv. identifying and managing the problem gamblingbehaviour of players; andv. registering players;g) the licensee’s general administrative systems and procedures;h) such other matters as the Regulator thinks relevant. 183) A licensee that contravenes subsection (1) shall be liable to pay a fine notexceeding United States Dollars: Five Hundred Thousand (US$500,000)or its Philippine Peso equivalent.CHANGE OF CONTROL SYSTEM21. 1) A licensee may apply to the Regulator to change its approved controlsystem.2) The application must:a) be made in writing at least 60 days before the licensee proposesto start conducting interactive games under the approved controlsystem as proposed to be changed; andb) contain particulars of the proposed changes to the licensee’sapproved control system.3) In deciding whether to approve the application, the Regulator must haveregard to the matters referred to in subsection 20(2).4) The Regulator may, by written notice given to a licensee, direct thelicensee to change the licensee’s approved control system within the time,and in the way, stated in the notice.5) If the licensee does not comply with the direction, the approval for thelicensee’s control system is cancelled.APPROVAL OF EQUIPMENT22. 1) A licensee must obtain the Regulator’s written approval for each item ofinteractive gaming equipment used by the licensee to conduct interactivegames under its License.2) A licensee must not install, modify, decommission, remove or destroy anysuch equipment without the written approval of the Regulator.3) Computer software does not have to be approved under this section if ithas been approved under section 19.4) A licensee that contravenes subsection (1) or (2) shall be liable to pay afine not exceeding United States Dollars: Five Hundred Thousand(US$500,000) or its Philippine Peso equivalent. 19FINANCIAL INSTITUTION ACCOUNTS23. 1) A licensee must keep an account or accounts with a financial institution inthe Philippines that is licensed under the General Banking Act for use for:a) all banking or similar transactions for the operations conductedunder its License; orb) such other purposes as are approved in writing by theRegulator2) A licensee must use a financial institution account only for a purposereferred to in paragraph (1)(a) or for which the account is approved underparagraph (1)(b).3) A licensee that contravenes subsection (1) or (2) shall be liable to pay afine not exceeding United States Dollars: Five Hundred Thousand(US$500,000) or its Philippine Peso equivalent.NOTIFICATION OF CHANGES24. 1) A licensee must give the Regulator written notice of:a) a change in or addition to the licensee’s close associates; orb) a reduction in the licensee’s financial resources; orc) any change or addition to the persons who manage or operatethe licensee’s operations;within 7 days after the change, addition or reduction occurs.2) A licensee that contravenes subsection (1) shall be liable to pay a fine notexceeding United States Dollars: One Hundred Thousand (US$100,000)or its Philippine Peso equivalent.RECORDS 2025. 1) A licensee must keep licensee’s gambling records at a place approved bythe Regulator.2) Subsection (1) does not apply to an exempt gambling record prescribed bythe regulations.3) A licensee must keep a gambling record for 5 years after the end of thetransaction to which the record relates.4) A licensee that contravenes subsection (1) or (3) shall be liable to pay afine not exceeding United States Dollars: One Hundred Thousand(US$100,000) or its Philippine Peso equivalent.SUBMISSION OF REPORTS26. 1) A licensee must give reports to the Regulator about the licensee’soperations under its License.2) The Regulator is to specify, by notice in writing to the licensee, theinformation to be included in the reports.3) The reports must be in an approved form and be given at the times statedin the notice.4) A licensee must not include any information that is false or misleading ina material particular in a report.5) The Regulator may make information obtained under this section availableto a law enforcement agency within or outside if the Regulator is satisfiedon reasonable grounds that the information relates to an activity that isillegal within or outside the Philippines.6) A licensee that contravenes subsection (3) or (4) shall be liable to pay afine not exceeding United States Dollars: Two Hundred Thousand(US$200,000) or its Philippine Peso equivalent.AUDIT27. 1) As soon as practicable after the end of a financial year, a licensee mustcause the books, accounts and financial statements for the operationsconducted under its License for the financial year to be audited by anauditor qualified for appointment and approved by the Regulator. 212) The auditor must:a) complete the audit within 3 months after the end of thefinancial year; andb) immediately after completion of the audit, give a copy of theaudit report to the Regulator.3) Paragraph (2)(a) does not apply to the auditor if the Regulator is satisfiedthat in the circumstances it would be unreasonable to require the auditor tocomply with the paragraph, and the auditor completes the audit as soon aspracticable.4) On receiving an auditor’s report, the Regulator may, by written noticegiven to the licensee, require the licensee to give the Regulator furtherinformation about a matter relating to the licensee’s operations mentionedin the audit report.5) A licensee must comply with a requirement under subsection (4) withinthe time stated in the notice.6) An audit is to be undertaken at the licensee’s own expense.7) A licensee that contravenes subsection (1) or (5) shall be liable to pay afine not exceeding United States Dollars: Five Hundred Thousand(US$500,000) or its Philippine Peso equivalent.SPECIAL AUDIT28. 1) The Regulator may, by notice in writing to the licensee, require thelicensee to cause the books, accounts and financial statements for theoperations conducted under its License to be audited for the periodspecified in the notice if the Regulator is satisfied that the licensee:a) may have insufficient financial, technical or other resources toconduct interactive games in accordance with its License andthe provisions of this Act; orb) may have undertaken fraudulent acts in conducting interactivegames under its License; orc) May have provided false or misleading reports under section26 222) The audit must be undertaken at the licensee’s own expense within theperiod specified in the notice by an auditor qualified for appointment andapproved by the Regulator.3) The auditor must give a copy of the report to the Regulator immediatelyafter completing it.4) A licensee that contravenes subsection (1) or (2) shall be liable to pay afine not exceeding United States Dollars: Five Hundred (US$500,000) orits Philippine Peso equivalent.INVESTIGATION OF LICENSEE29. 1) The Regulator may, at any time, conduct the investigations and make theinquiries the authority considers to be necessary to enable him or her todetermine whether a licensee:a) is a suitable person to continue to hold a License; orb) is complying with the provisions of this Act, the regulations orthe code.2) A licensee must pay to the Regulator the reasonable costs incurred by thelatter in conducting any investigation and making any inquiry.PART 4INTERACTIVE GAMING LEVYLIABILITY TO LEVY30. 1) A levy (“interactive gaming levy”) is imposed on the gross winnings ofthe licensee’s operations under its License.2) Subject to subsection (3), interactive gaming levy is to be calculated andpaid on a basis prescribed by the regulations.3) For the purposes of this section, the gross profit of a licensee’s operationsunder its License for a particular period is to be worked out using thefollowing formula: 23Gross winnings = Amount played - Amount of winnings - Merchant Discountwhere:“Amount played” is the total amount received during that period by thelicensee from those operations; and“Amount of winnings” is the total amount paid out as prizes to playersduring that period by the licensee in respect of those operations.PAYMENT AND RETURNS FOR CALCULATION OF GAMING LEVY31. 1) Interactive gaming levy is payable by the licensee within fifteen (15) daysafter receipt of billing invoice.2) A licensee must provide to the Regulator the information needed forcalculating interactive gaming levy within five (5) days following themonth in respect of which the gross profit was made. The informationmust be provided in an approved form.3) A licensee that contravenes subsection (1) or (2) shall be liable to pay afine not exceeding United States Dollars: Five Hundred Thousand(US$500,000) or its Philippine Peso equivalent. A second contraventionshall result to the cancellation of license.PENALTY FOR LATE PAYMENT AND UNDERPAYMENT32. 1) A licensee must pay to the Regulator a penalty on any amount ofinteractive gaming levy outstanding (“the unpaid amount”) as at the end ofthe period allowed for the payment.2) The penalty is:a) 7.5% of the unpaid amount; andb) a further 5% of the unpaid amount for each month or part of amonth during which the unpaid amount is not paid. 243) If any part of an underpayment of interactive gaming levy is due to fraud,there is to be added to the levy an amount equal to 3 times theunderpayment.RECOVERY OF AMOUNTS33. An amount of interactive gaming levy and any penalty payable under thisPart are debts due to the Regulator by the licensee and may be recovered by the Regulatorby action in a court of competent jurisdiction.PART 5REGULATORFUNCTIONS AND POWERS OF REGULATOR34. 1) The Cagayan Economic Zone Authority or its duly appointed MasterLicensor is the Regulator.2) The Regulator must:a) administer this Act; andb) process applications for Licenses made under section 4 andadvise the Chairman on such applications; andc) perform the other functions conferred on the Committee by thisor any other Rules and Regulations.3) The Regulator has power to do all things necessary or convenient to bedone for or in connection with the performance of its functions.4) The Regulator must perform its functions in accordance with any generalpolicy directions given by the Chairman in writing. However, theChairman must not give directions that are inconsistent with this Rulesand Regulations.CODE OF PRACTICE 2535. 1) The Regulator must prepare a code of practice for licensees.2) In preparing the code of practice; the Regulator may consult with alllicensees.3) Without limiting the code of practice, it may provide for the following:a) the standards to be complied with by licensees conductinginteractive games;b) the prizes in interactive games conducted by licensees;c) the payment of winnings by licensees to players;d) the way in which disputes between players and licensees are to beresolved.4) The code of practice is a regulation for the purposes of this Rules andRegulations.5) A licensee that contravenes a provision of the code of practice shall beliable to pay a fine not exceeding United States Dollars: Five HundredThousand (US$500,000) or its Philippine Peso equivalent.COMPLAINTS36. 1) The Regulator must cause to be investigated any complaint made to it orto the Master Licensor about a licensee’s operations.2) However, the Regulator does not have to investigate a complaint if in itsopinion the complaint is petty, frivolous or vexatious.APPOINTMENT OF INSPECTORS37. 1) The Committee may appoint all or any of the following to be an inspector:a) any person, including a person who is not a publicservant, who has appropriate qualifications and expertise.2) An inspector has the following powers:a) to inspect, examine or test any interactive games or interactivegaming equipment used by a licensee in conducting operations 26under the License;b) to require a person to produce documents or answer questionsabout such games or equipment;c) to enter any premises used by the licensee for conductingoperations under its License and seize:i. any such games or equipment; orii. any other books, document or thing (includingelectronically stored information);on those premises that the inspector considers will afford evidence of thecommission of a violation of any of the provisions of this Rules andRegulations.3) An inspector must obtain the consent of the owner or occupier of thepremises to exercise the powers under paragraph (2)(c) or in theabsence of consent must obtain a search warrant from the proper Court.4) A Court must not issues a warrant unless it is satisfied by information onoath that:a) an offense against this Rules and Regulations has been or is beingcommitted, or is likely to be committed, on the premises; andb) evidence of the commission, or likely commission, of theoffence is likely to be found on the premises.REPORTS38. 1) The Regulator must, within 2 months after the end of each year, providethe Chairman with a report relating to the Regulator’s activities for thatyear.2) The Regulator must provide the Chairman with any additional informationhe requires about a matter contained in a report.CONTRACTING OUT SERVICES AND WORK 2739. 1) The Regulator may enter into an agreement with a person or any entitywith appropriate qualifications and expertise to provide services to, or toperform work for, the Regulator.PART 6MISCELLANEOUSAPPEAL RIGHTS40. 1) An applicant for a License, or a licensee, as the case requires, may appealto the Chairman against the following decisions of the Master Licensor:a) to refuse to grant a License under section 5;b) to impose conditions on any License under section 8;c) to suspend or revoke a License under section 11;d) to refuse to rescind the suspension of a License under section13;e) to refuse to renew a License under section 15;f) to refuse the approval of a transfer of a License under section17;g) a decision prescribed by the regulations as a decision in respectof which an appeal can be made.2) An appeal must be made not more than 28 days after the date on whichthe appellant is notified of the decision appealed against or within suchfurther period as CEZA may allow.3) The Chairman may:a) refer the matter back to the Master Licensor with directions toreconsider the whole or any specified part of the matter; orb) confirm, reverse or modify the decision appealed against, andmake such orders and give such directions as may be necessaryto give effect to the decision of the Master Licensor. 28CONFIDENTIALITY41. 1) A person who is, or was, an inspector or employee or officer of theAuthority responsible for administering this Rules and Regulations mustnot disclose information obtained by the person in performing functionsunder this Rules and Regulations.2) Subsection (1) does not apply to the disclosure of information if thedisclosure is:a) made for a purpose under this Rules and Regulations; orb) made under an approval of the Regulator given under thissection; orc) authorized by any other Act or law, or an order of the Court.3) A person who contravenes subsection (1) shall be liable to pay a fine notexceeding United States Dollars: Ten Thousand (US$10,000) or itsPhilippine Peso equivalent.FORFEITURE42. A court that finds a person guilty of an offence under this Rules andRegulations may order that any interactive gaming equipment or otheritem used, or intended to be used, by the person in the commission of theoffence is forfeited in favor of CEZA.ORDERS43. CEZA may make orders and memorandum not inconsistent with thisRules and Regulations for the better carrying out or to give effect to theprovisions of this Rules and Regulations.APPLICATION OF CERTAIN OTHER ACTS44. 1) To avoid doubt, the Foreign Investment Act of 1991 (R.A 7042) applies inrelation to an applicant for a License and a licensee. 292) To avoid doubt, Republic Act No. 7922, “the Cagayan Special EconomicZone Act of 1995”, is the only Act under which authority is granted toissue gaming licenses within the Cagayan Economic Zone and Free Port.COMMENCEMENT45. This Rules and Regulations commences on the day of its Adoption.
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