China takes steps to enforce anti-money laundering laws in Macau

By Christine Duhaime | July 22nd, 2014

According to this report, the People’s Bank of China has signed a Memorandum with the Monetary Authority of Macau to start to take steps to address money laundering in Macau’s casinos. The share price of casino companies operating in Macau fell on the news of the Memorandum.

According to a recent survey of business people who operate and do business in Hong Kong and Macau, money laundering is a huge problem and in fact, is more prevalent there than anywhere else in the world.

Macau’s instance of money laundering derives from it being the gambling mecca of the world. Its casinos earn almost 80% of their revenues from junket operations which bring wealthy gamblers from Mainland China to gamble, often with proceeds of crime. See our article here on the VIP Room junket operations in Macau and here for how that system is ultimately damaging for casinos in Macau and will drive revenues away once a real money laundering crack-down begins in 2014.

The US has considered asking the FATF to accelerate the mutual evaluation of Macau to force the issue of the lax money laundering controls at casinos. The VIP Room regime in Macau is one of the only areas in the world where there is a de facto exemption from modern money laundering, terrorist financing and sanctions controls that is allowed to continue. The reason it is allowed to continue is because, except among members of the US Congressional Committee on China, there is little understanding of how the VIP Room – junket operator system works at casinos for the purposes of gambling and compliance reporting.

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