Gaming Law International

Companies from Asia move into Las Vegas to cater to Chinese consumers abroad

Earlier this month Reuters published an article that Malaysian casino operator, Genting Bhd, closed a deal on the purchase of a 87-acre plot of land in Las Vegas, representing the largest investment in Las Vegas since at least 2008. The announcement follows on the heels of the announcement by China's largest property developer, China Vanke Co. Ltd., that it had formed a joint venture to develop two high-rise condominium towers in Las Vegas. Both projects are presumably aimed at targeting mainland Chinese consumers who prefer to purchase goods and services from Chinese companies when travelling abroad.

The deals are worth about US$1 billion combined. According to the article from Reuters, the transactions signal a move of Asian corporations away from investment into natural resources in the US or Canada and into services industries that cater to Chinese consumers abroad. 

The foray of these companies poses a risk to existing casino and entertainment establishments in Las Vegas because they will target Asian consumers who have been the principal generators of gambling revenues in Las Vegas since 2010.

"If you're smart, you start settig up places for Chinese people to stay and things for them to buy," Derek Scissors, an economist with the Heritage Foundation a Washington-based organization that advances free enterprise and limited government, told Reuters.

And smart is exactly what China Vanke Co., Ltd. and Genting Bhd appear to be by venturing into Las Vegas. 

China's new cashless casino bar opens

As China's first casino, albeit a cashless one, opens gaming executives and service providers around the world are watching to see if it will result in the introduction of real gambling in the country. Jesters Casino Bar, part of the new Mangrove Tree Resort World on Sanya Bay on Hainan Island, China, is the first approved form of gambling in China outside of Macau. Gamblers can gamble with real money but cannot win cash - instead they win point redeemable for goods and services at the Mangrove Tree Resort. Casino watchers expect that within a year or two, the Chinese government will allow real money payouts at this location and many others. If gambling is legalized in China, the government and service providers stand to earn billion and billions of revenues a year. You can read more from Reuters here. 

Philippes offers discounts to junket operators to lure high rollers into casinos

According to this article by Reuters, the two new casinos in the Philippines are hoping to lure junket operators from Macau to bring gamblers from China to gamble in the Philippines by offering lower gambing taxes and lucrative payment terms. 

There are approximately 200 junkets operating in Macau. They typically bring wealthy gamblers from areas such as China, and rent VIP rooms in Macau casinos for their clients to gamble. Junkets operators issue credit to their high-roller clients, and earn commissions from the funds gambled by their clients at casinos. They generate about 70% of the funds gambled in Macau. 

There are identified money laundering risks with junkets, from the Financial Action Task Force and other organizations, in the context of gambling. The risks exist because there are gaps in controls and weak supervision of their operations. Junket operators control the movement of money to and from the casinos which can obscure the anti-money laundering processes. Moreover, they bring in high rollers to gamble who are subject to relaxed money laundering vetting, not more, as is required. 

Despite these risks, the Philippines is hoping to enter into arrangements with junkets to help grow the national gambling market and join Macau and Singapore as one of Asia's top gambling destinations. Analysts predict that the gambling market in the Philippines will reach $3 billion by 2015.

The two new casinos are Solaire Resort and Casino on Manila Bay, owned by Bloomberry Resorts Corp., which is controlled by billionaire Enrique Razon Jr.,and is a $1.2 billion project slated to open in March 2013; and Belle Grande Casino in Entertainment City Maninla, owned by Belle Corp., which is controlled by billionaire Henry Sy, and Melco Crown Entertainment Ltd., owned by Australian billionaire James Packer and Hong Kong businessman Lawrence Ho, and is slated to open in March 2014. Melco Crown is listed on the Hong Kong Stock Exchange.

Revenues up just slightly in Macau

Macau's gambling industry earned CAD$3 billion last month, the second highest ever in its short history, according to figures released by the Gaming Inspection Coordination Bureau ("DICJ"). Gross revenues rose 5.5% over last year, representing the slowest growth since 2009. Gross casino receipts were up 6.3%. The figures alleviate previous concern that the cash-flow from gamblers originating from China has dried up. As a result of Chinese banking regulations which restrict funds that can be removed from China to approximately $50,000 per person per year, gambling in Macau remains a popular vehicle for removing currency from China. Macau has 35 casinos, 5,498 gaming tables and 17,035 slot machines and is one of the most active gambling markets in the world. 

Taiwan votes to allow gambling

The residents of Matsu, a Taiwanese archipelago of 19 islands in the Taiwan Strait, voted yesterday in a referendum to allow gambling and approved the construction of a casino resort. The approval for the casino resort is just the first step in the process - the government first needs to draft and enact gambling legislation. Matsu was selected because of its proximity to the bustling cities of Xiamen,Fuzhou and QuanZhou in Fujian Province, China, where significant numbers of wealthy Chinese residents live. The Matsu casino resort is expected to compete with customers from China who frequent the casinos in Macau.

Nevada gambling commission said to be looking into junkets

According to a report in the Las Vegas Review-Journal, Nevada gaming regulators are increasing their scrutiny over the operation of junkets to Macau-based casinos that are owned or controlled by U.S. gambling companies amid allegations raised by U.S. gaming union officials that Macau-based junkets affect the integrity of U.S. gaming operations. 

There are approximately 200 junkets operating in Macau. They typically bring wealthy gamblers from areas such as China, and rent VIP rooms in Macau casinos for their clients to gamble. Junkets operators issue credit to their high-roller clients, and earn commissions from the funds gambled by their clients at casinos. 

Mark Lipparelli, Chairman of the Nevada Gaming Control Board, said in an interview this week that outside junket operators, which receive commissions from casinos for their work, are "becoming an area of increased attention for us."

Legalized gambling in the U.S. and Canada is premised on the preservation of the integrity of the gaming industry. In order to obtain and maintain a U.S. state gaming registration, casino operators have to operate their casinos in a way that will not negatively affect the integrity of the gaming industry as a whole. As a result any link, however small, to criminality with a casino operator affects the integrity of the operator and the industry. The concerns with criminality arise from the fact that there is an identified money laundering risk with junket operators because, among other things, there are gaps in controls and weak supervision of their operations. Junket operators control the movement of money to and from the casinos which can obscure the anti-money laundering process. 

When gambling regulation works - how Macau casino operations are affecting American gaming regulators

The Las Vegas Sun has an excellent story that captures the connection between gambling operations in different jurisdiction by the same casino operator and the role of gambling regulators here. Reporter Liz Benston reports that the sometimes shady way in which casino VIP rooms are operated with the use of junkets in Macau will impact Atlantic City casino operators who also operate, or hope to operate, in Macau. That's because in order to maintain a U.S. state gaming registration, casino operators have to operate their casinos in a way that will not negatively affect the integrity of the gaming industry in that state. The smallest link to criminality with a casino operator will affect its integrity, and therefore the integrity of the state's control over the industry. The FATF has repeatedly expressed its concern over casino junkets as a potential vehicle for money laundering in Asia. 

Macau to regulate casino market

Macau's chief executive, Fernando Chui, announced today that Macau will start regulating the growth of its casino market. "Apart from those we have agreed in principle in the past, in construction and those already approved, we will regulate (approval of the building of new casinos) in the future," Chui told a news conference. Chui said the government plans to set up a regulatory body to monitor the growth of the gambling industry. 

Sands China profit up 22%

Sands China Ltd., the Macau casino operator controlled by billionaire Sheldon Adelson, reported a 22% increase in 2009 profits. Net income increased $213.8 million from $175.7 million a year earlier, the company reported. Sands China has the second-biggest market share among Macau casinos. Last year, revenue from baccarat, blackjack, slot machines and other gambling grew 9.7% to a record $15 billion in Macau. 

World Cup gambling rings busted in China

According to the China Post, over the past few weeks, Chinese police have raided nine groups in Beijing and in the southwest of China and arrested 77 people alleged to have participated in Internet-based gambling rings that took millions of dollars worth of World Cup bets from thousands of gamblers. One of the gambling rings in Chengdu, a city in the southwest, apparently handled US$120 million in bets.

Asia -- the fasting growing casino market

This article in the Taiwan News about the growth of the casino industry in Asia is worth a quick read -- here are some fascinating statistics about Asia reported in the article:

• Asia is home to the fastest growing casino market;
• Revenues from Asia's licensed casinos may grow 20% to US$13 billion this year;
• Illegal casinos are estimated to have revenues in the range of US$100 billion annually; and
• Asia's growing wealth is creating a new pool of big players likely ready and willing to gamble.