A Wikileaks Cable Explained The Money Laundering Formula That Turned Macau Into A Gigantic Economic Success

Macau China

Photo: AP

Shares of Macau-based casinos got slammed in the last day amid reports of the mainland cracking down on the junket operators that ferry rich players into high-roller rooms.Junket operators are widely believed to be associated with organised crime and money laundering.

So how does it work?

This was actually the subject of a Wikileak that was supposedly sent in 2009 from the American Consulate in Hong Kong. It’s about as concise of an explanation for the controversy as you could find:

The casino and hospitality sector now accounts for  well over half of Macau’s GDP.  Yet its phenomenal success is based on a formula that facilitates if not encourages money laundering.  Mainland Chinese gamblers account for a large share of the lucrative VIP gaming market, betting literally  billions of dollars despite Chinese government-imposed  capital controls that restrict Chinese residents to taking  just USD 50,000 worth of currency out of China each year

Success of the VIP market in Macau depends on “junket  operators” who arrange visas, supply local currency financing  and provide access to VIP gaming rooms in Macau casinos.  VIP  gambling accounts for over 60 per cent of Macau’s casino  revenues. 

Although they must register and are subject to  nominal regulation in Macau, these facilitator organisations  allegedly work closely with organised crime groups in  mainland China to identify customers and collect debts.  Junket operators work directly with Macau casinos to buy  gaming chips at discounted rates, allowing players to avoid  identification

Know-your-customer (KYC) and record-keeping  requirements are significantly looser than in other  international gaming venues.  Government efforts to regulate  junket operators in Macau have been aimed at limiting  competition, rather than combating illicit activities.  Oversight of both casinos and junket operators is limited and  remains a serious weakness in Macau’s AML regime.  Periodic  tightening of Chinese Individual Visitor Scheme permit  requirements may reflect Chinese government concern about  corrupt officials laundering money in Macau.

Read the full cable here >

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