Macau’s Gambling Hub: A Hotbed for Money Laundering Through Casinos?

Macau, a prosperous gambling center on China’s south coast, is known for its financial success. With an annual per capita Gross Domestic Product (GDP) of $82,613.301, 80% of which is attributed to its casino industry [1], Macau stands as one of the world’s most successful gambling hubs. However, the allure of Macau extends beyond its lucrative finances, drawing in money launderers from all corners of the world.

Casinos: Perfect Cover for Money Laundering

Casinos are a prime target for money laundering due to their reliance on cash transactions and the vast crowds they attract [3]. With a majority of visitors coming from overseas, casinos offer anonymity for individuals looking to clean their ill-gotten funds. In March 2016, thieves stole $101 million from the Bangladesh’s Central Bank and laundered $81 million of this illicit gain through Philippine casinos overseas [4].

• The Financial Action Task Force (FATF) has long recognized the potential for money laundering in the casino industry and extended its Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) protocols to cover non-financial institutions, including casinos, in 2003 [5].

The Rise of Junkets

Junkets, a common tourism practice in Macau, have only heightened the risks [6]. These tours offer traveling guests transportation, accommodations, and meals, often targeting wealthy or VIP gamblers. These individuals can easily move funds through international bank accounts, deposit in Macau, and withdraw their winnings in US or Hong Kong dollars, facilitating money laundering.

Pressure from Regulations

In response to increasing concerns of money laundering through casinos, Macau authorities have introduced stricter regulations. Concessionaires, sub-concessionaires, and junket promotors in Macau now face additional obligations, such as:

1. Retaining daily records
2. Conducting customer due diligence
3. Reporting large transactions
4. Monitoring politically exposed persons

Casinos are also required to jointly comply with all AML regulations alongside junkets.

Risks Extend Beyond Macau

As more gambling hubs emerge worldwide, countries extending their gambling operations into foreign territories create new challenges for AML regulations [10]. With inadequate governance over the casino actions and feeble borders of high-risk nations, there is an increased risk of casino money laundering.

Conclusion

The financial success of Macau’s casino industry has attracted money launderers, drawing attention to the pressing need for stronger AML regulations. Casinos, in particular those in Macau, must comply with applicable AML laws and diligently assess their due diligence procedures to maintain their legal status and protect against financial crimes [11]. The expansion of gambling operations into new territories brings about new risks for money laundering and emphasizes the importance of maintaining vigilance against financial criminal activities.

Sources

[1] World Bank. (n.d.). Macau SAR. Retrieved May 14, 2023, from https://data.worldbank.org/country/macao-sar [2] Congressional-Executive Commission on China. (2018). 2018 Annual Report. Retrieved May 14, 2023, from https://www.cecc.gov/pages/annual_reports [3] Financial Action Task Force. (2008). Guidance Note on AML/CFT Measures for the Gaming Sector. Retrieved May 14, 2023, from http://www.fatf-gafi.org/media/fatf/documents/recommendations/guidance/documents/fatf-gaming-guidance.pdf [4] Reuters. (2016, March 21). Bangladesh central bank chief resigns over $101 million heist. Retrieved May 14, 2023, from https://www.reuters.com/article/us-bangladesh-bank-heist-idUSKCN0W20GC [5] Financial Action Task Force. (n.d.). FATF History. Retrieved May 14, 2023, from http://www.fatf-gafi.org/historical/index.html [6] Asia Pacific Group on Money Laundering. (2017). Evaluation Report: Macau SAR. Retrieved May 14, 2023, from http://asiamoneylaundering.org/content/uploads/2017/01/AML-EP-Macau-2017.pdf [7] Macau Gaming Inspection and Coordination Bureau. (n.d.). Licensing of Junket Promoters. Retrieved May 14, 2023, from http://www.dicj.gov.mo/en/Works/19/31/index.aspx [8] Bloomberg. (2016, August 4). Macau Gambling Revenue Drops Most in Five Years, as VIP Crackdown Bites. Retrieved May 14, 2023, from https://www.bloomberg.com/news/articles/2016-08-03/macau-gambling-revenue-drops-most-in-five-years [9] AFP. (2017, April 13). Macau Junket Operators Go Global as Chinese Crackdown Bites. Retrieved May 14, 2023, from https://www.bloomberg.com/news/articles/2017-04-13/macau-junket-operators-go-global-as-chinese-crackdown-bites [10] The Diplomat. (2020, January 14). The Risk of Casino Money Laundering in Philippines. Retrieved May 14, 2023, from https://thediplomat.com/2020/01/the-risk-of-casino-money-laundering-in-the-philippines [11] American Casino Guide. (n.d.). How Casinos Can Prevent Money Laundering. Retrieved May 14, 2023, from https://www.americancasinoguide.com/prevention/moneylaundering.html