By Christine Duhaime, B.A., J.D., Gaming Attorney & Certified Anti-Money Laundering SpecialistFollow @cduhaime
In its 2013 Annual Report, a U.S. Congressional Executive Commission has urged Macau to develop law enforcement mechanisms to combat money laundering at its casinos. The Congressional members found that the gambling industry in Macau was reportedly tied to widespread corruption and the laundering of large amounts of money out of Mainland China.
Moreover, they found that the movement of illicit flows of funds from Mainland China to Macau is “fueled by junkets” which reportedly helps wealthy people from the Mainland bypass China’s currency restrictions and move money out of China. The Report cites a professor at the University of Macau who found that, conservatively, US$202 billion in proceeds of crime is funneled to Macau from China annually by junket operators through an underground network and is not reported or declared.
In addition to urging Macau to act on anti-money laundering controls, the Report specifically drew attention to the fact that Macau’s anti-money laundering laws do not have the following: any mechanisms for the freezing of suspicious assets; a currency declaration system; casino customer due diligence obligations; or appropriate thresholds for transaction reports in casinos, all of which are required under the anti-money laundering standards set by the Financial Action Task Force.
Mutual Evaluation & No Progress Made
The Congressional Executive Commission members drew on testimony given by the Assistant Secretary for Terrorist Financing at the U.S. Department of the Treasury in June 2013, in which it was highlighted that six years on, Macau has a ways to go to correct serious anti-money laundering deficiencies noted in the 2007 Mutual Evaluation by the APG, for the FATF. Those deficiencies were:
- Macau lacks asset freezing provisional measures in cases of suspected money laundering;
- Macau is unable to respond to foreign requests on freezing orders;
- Macau does not have a sanctions regime in place and had not implemented U.N. Security Council Resolutions 1267 and 1373 on the financing of terrorism;
- Cross-border currency movement is a significant issue for Macau and yet it does not have a disclosure or declaration system on cross border currency;
- Macau Customs Service do not have the authority to investigate money laundering or terrorist financing cases;
- Most key aspects of customer due diligence (CDD) obligations are not incorporated into the laws of Macau;
- The casino sector presents a substantial money laundering risk and features a number of gaps, including:
- No risk-based assessment of gaming customers and operators;
- Inadequate inspection and oversight of casinos;
- No oversight or inspection of junket operators;
- Lack of communication between the Gaming Inspection and Coordination Bureau (DICJ) and Macau’s Financial Intelligence Office; and
- A high monetary threshold for reporting large transactions at casinos.
The issue with respect to Macau is that the relationship between junket operators and casinos is symbiotic – 75% of the gambling revenues from Macau is from gamblers from China that are clients of the junket operators. They are brought to Macau by the junket operators and gamble in VIP Rooms in casinos. The VIP Rooms are run by the junket operators. They are not reporting (or obliged) entities and are not subject to anti-money laundering reporting requirements. There is also the concern, as noted in testimony by others before the Commission, that junket operators still have ties to organized crime, particularly the triads. The US$202 billion estimated to be removed from China annually through Macau is allegedly moved by organized crime.
In July 2013, Macau announced that it was considering implementing a cross-border currency declaration regime that would require people entering and leaving Macau to make a declaration with respect to funds above a certain limit.
The 2013 Annual Report is titled Congressional Executive Commission on China, Annual Report 2013.