Junket operators in Macau branching out in effort to improve reputation and diversify business but financial crime concerns remain

By Christine Duhaime | June 30th, 2013

Junkets branching out

According to this article by Reuters, traditional junket operators (also known as VIP gaming promoters) in Macau are branching out to diversify their businesses and improve their reputation.

The largest junket operator, Suncity Group, is planning to open its own casino and has expanded into mining and iron ore operations in Indonesia. It certainly has the cash flow to expand – it’s monthly gambling turnover in Macau is US$17 billion. The largest junket operators account for half of the monthly junket turnover of US$75 billion.

Gambling in Macau generates revenues of US$38 billion annually and over 75% of that comes from junket operators who independently operate VIP Rooms at the major casinos.

In exchange for commission payments tied to the rolling chip turnover, junket operators tap into their extensive social networks in Mainland China through sub-agents to recruit wealthy gamblers to play in Macau at private VIP Rooms. These high rollers are transported to Macau by junket operators who also extend credit to them to gamble at the casinos. Gambling debts are collected by the sub-agents in Mainland China. The casinos are not involved in the operation of VIP Rooms and in fact the clients lists (and clients) belong to the junket operators, not the casinos.

The most lucrative asset owned by junket operators is the VIP client lists. By relying on junket operators to run VIP Rooms, Macau casinos may have unwittingly spelled their own demise if junket operators ever decide to open casinos and compete with them.

Leveraging their lists of wealthy clients, junket operators have branched into financial services in Hong Kong. Suncity, for example, has a securities, forex and commodities trading arm, and Golden Resorts Group has a financial services group with Kingston Financial. Jimei Group has branched out to the Philippines where it has a securities firm and provides wealth management services.

Junket operators are also leveraging politics – both Polyanna Chu, the owner of Golden Resorts Group and Suncity’s CEO Alvin Chau – have joined the Chinese People’s Political Consultative Conference, China’s parliamentary advisory body.

The money laundering concerns arise in respect of the fact that junket operators recruit high rollers from Mainland China to Macau, and some of the money gambled by high rollers is alleged to be from corruption. Funds from high rollers, even if legitimately earned, are conveyed to Macau on behalf of high rollers in circumvention of the foreign export currency bank regulations which limit the amount of money Chinese residents can remove from China. In order to circumvent these restrictions, funds are advanced to high rollers in Macau by way of credit, and debts subsequently collected in China. Funds transferred out of China illegally is proceeds of crime.

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