Money laundering For junket operators
Bloomberg has a great story on the rise and fall of Carson Yeung Ka-shing, the Hong Kong businessman and owner of the Birmingham City football club, convicted earlier this week of Â laundering $93 million through, inter alia, junket operators and casinos in Macau.
Mr. Yeung was arrested in June 2011, and charged with five counts of laundering HK$721 million pursuant to Â§25(1) and (3) of the Organized and Serious Crimes Ordinance (Cap. 455). Section 25(1) makes it an offence if a person deals with property knowing or having reasonable grounds to believe is proceeds of crime. Mr. Yeung had HK$721 million in five bank accounts and only reported HK$1.7 million as income. Since 2001, various people made deposits into Mr. Yeung’s bank accounts – 400 of those were cash deposits totalling HK$98 million – and subsequently withdrew those same sums.
Carson Yeung moved funds for Â Neptune VIP Club, a junket operator in Macau. One of Neptune’s owners, Cheung Chi-tai, is alleged to be the head of a powerful Hong Kong Triad gang. According to the evidence at trial, more than HK$18 million was washed by Mr. Yeung for Mr. Cheung.
Close to 80% of the revenues earned by Macau casinos come from junket operators who recruit wealthy people from Mainland China to gamble in VIP Rooms in Macau. The junket operators extend massive lines of credit to the gamblers and gambling debts are repaid in China, then transported back to Hong Kong, illegally. These activities are illegal because it is illegal to: (a) export currency or value outside of China above a certain limit without written consent of the Chinese authorities; (b) collect gambling debts in China; and (c) use proceeds of crime. The funds collected by junkets from gamblers in China is proceeds of crime and those funds are re-lent to other gamblers who are similarly brought to Macau to gamble and the funds are subsequently laundered many times over.
For more specifics on how the junket system works and the financial crime risks, see hereÂ (“Macau junket operators use trade show to polish image”) and hereÂ (“Macau casinos face regulatory balancing act”).
Mr. Yeung became a significant shareholder of Neptune Group but according to the news article, he and its original founder, Lin Cheuk Fung agreed not to file disclosure statements in respect of the share sale with the Hong Kong Stock Exchange so that investors would not know of his investment in the company. It is uncertain whether investors or the Hong Kong Stock Exchange are taking any action on the securities misrepresentation and failure to make a material disclosure against theÂ law firms involved in the transactions and preparation and filing of the false disclosure statements or against Mr. Yeung and Mr. Lin.
According to the news article, one of China’s richest men, Huang Guangyu, the founder of Gome Electrical Appliances Holdings Ltd., who is currently incarcerated in China for bribery, used China’s underground banking system to move millions of dollars to Hong Kong to repay Macau casino gambling debts owed to Neptune and other VIP junket operators.
Mr. Yeung was a hair dresser and he alleged that he made millions legitimately on the penny stock market.