Financial Crime World

Macau’s Casino Gold Rush: An Unveiled Money Laundering Haven with Chinese Connections

Macau’s casino and hospitality sector, which accounts for over half of the city’s GDP, has been a subject of intrigue due to its phenomenal success and the questionable methods driving it.

Macau’s Casino Industry: A Money Laundering Haven?

According to leaked diplomatic cables from Wikileaks, Macau’s casinos recorded a record revenue of MOP 301.6 billion (US$ 39.3 billion) in 2021, with an astounding MOP 11.5 billion (US$ 1.5 billion) earned in October alone 1. The majority of this money comes from China, where gambling is illegal.

  • Booming Tourism from China
    • In 1999, mainland Chinese tourists accounted for 800,000 visits.
    • By 2008, the number had ballooned to approximately 12 million.
    • In 2012, it reached an astonishing 18.3 million 1.
    • Hong Kong and Taiwan visitors added another 11 million in 2012 1.

So, how does the money flow? Chinese regulations permit only 20,000 yuan (US$ 3,200) per person to exit the mainland and a yearly limit of $50,000. High rollers often circumvent these limitations by either depositing money with junkets in the mainland or borrowing from them.

Junkets and Money Laundering

Junkets, which act as gaming promoters, assist in transferring funds from China to Macau’s casinos. This is particularly true in high-stakes games of VIP Baccarat. In many cases, credits are balanced between mainland China and debits in Macau, creating a loophole for money laundering.

  • Role of Junkets
    • Act as gaming promoters.
    • Arrange transportation, visas, accommodations, and even VIP rooms.
    • Manage gambling debts.

However, a substantial portion of the funds that reach Macau’s casinos have been illegally obtained - through bribes, embezzlement, or other means 2.

Triads and Money Laundering in Macau

Triads, or Chinese organized crime units, dominate the junket industry. They engage in various illicit activities, including money laundering, drug, and human trafficking in Macau 3. Diplomatic cables reveal that unregulated junkets cooperate closely with triads to identify customers and collect debts 3.

Limited Regulation and Oversight

Despite nominal regulation, oversight of both casinos and junket operators remains scarce and a significant weakness in Macau’s anti-money laundering (AML) regime 2. Beijing’s crackdown on corruption has led to some arrests of junket operators to combat money laundering 2.

However, concerns persist about illicit funds from Macau entering the American political sphere through corporations like Las Vegas Sands, which derives profits from Macau 4. In response, Macau is expected to implement a cross-border cash declaration system to combat money laundering, but details remain undisclosed 4.

Conclusion

Whether Macau’s implementation of a cross-border cash declaration system will put a dent in the city’s seemingly unstoppable flow of illicit funds remains to be seen.

  1. Source: South China Morning Post: Macau tourist numbers soared from 2008 to 2012 ↩︎ ↩︎ ↩︎

  2. Source: University of California, Berkeley: Jorge A. F. Godinho’s paper entitled “Macau: China’s Window on the World” ↩︎ ↩︎ ↩︎

  3. Source: Foreign Policy: Benjamin Carlson’s article entitled “Triads Control Macau’s Junket Industry” ↩︎ ↩︎

  4. Source: The Guardian: Macau casinos accused of money laundering and organized crime links ↩︎ ↩︎