A federal commission studying U.S. relations with China recommended closer examination of gaming in Macau, saying weak financial controls in the district pose “significant risk” of money laundering and terrorist financing.
The report issued Wednesday by the U.S.-China Economic Security Review Commission stopped short of saying U.S. security interests might be at stake. But commission Chairman William Reinsch said what it found “was disturbing and raises the question that possibility is out there.”
The 12-member panel, composed of experts in trade, intelligence, defense and international affairs, said it “did not seek nor did it find evidence of wrongdoing by any U.S.-based casino company, either in Macau or in Las Vegas.”
But several commissioners suggested that federal oversight or regulation of U.S. gaming companies doing business in Macau might be merited.
The commission recommended the United States press Macau, a special administrative region of China, to fix shortcomings in its financial regulations.
Detailed news link: click here
Brief extract from the report:
Money Laundering in Macau
Macau in 2001 liberalized a home-grown, monopolistic concession system and opened bidding for casino operation licenses to a limited number of foreign casino operators. The introduction of new and larger casinos led to substantial increases in cash flow, which consequently presented an increased risk for money laundering within Macau’s financial and gaming institutions.* Among all financial institutions, casinos generally present the greatest risk for money laundering. ‘‘It is the variety, frequency and volume of transactions that makes the casino sector particularly vulnerable to money laundering. Casinos are by nature a cash intensive business and the majority of transactions are cash based . . . It is this routine exchange of cash for casino chips or plaques, TITO [ticket-in,ticket-out] tickets,† and certified cheques, as well as the provision of electronic transactions to and from casino deposit accounts, casinos in other jurisdictions, and the movement of funds in and out of the financial sector which makes casinos an attractive target for those attempting to launder money,’’ according to the Asia-Pacific Group on Money Laundering and the Financial Action Task Force, a Paris-based intergovernmental body.
In Macau there is an even larger risk of money laundering within the VIP gaming room operations, which are physically conducted within the casinos but remain outside of the casino’s official oversight. The risk is further enhanced because so much of the money that is wagered in Macau goes through the loosely regulated VIP rooms. In 2012, VIP baccarat rooms in Macau casinos accounted for 69.3 percent of total revenue from games of chance.
The structure of VIP gaming operations—as an independent contractor of the casino—dates back to the 1930s and is legal under Macau law. But regulatory oversight of VIP rooms, junket operators, and affiliates who supply the clients and manage the money remains opaque and prone to substantial abuse. ‘‘The movement of funds associated with gaming-related tourism is poorly understood and may pose particular money laundering risks, e.g., international movement of funds for casino junket operations.’’ The PRC’s strict capital controls that limit the amount of money individuals can carry to or otherwise transfer from mainland China to Macau have created a unique opportunity for the VIP gaming rooms to participate in a grey financial market. Large sums of renminbi (RMB) are moved through the independent VIP gaming room operations with the help of junket operators and their affiliates on the Mainland. That renminbi can be converted to Hong Kong dollars by gamblers in the casino and then transferred abroad through a variety of legitimate means, such as bank or casino wire transfers.
Link to the detailed report (section Macau and Hong Kong): click here