China Crackdown Hits Macau
Apr. 15, 2015
A record 31 million tourists traveled to Macau last year, and a good number of them went there to gamble. Billions of gambling dollars continue to pour into China's special administrative region, but the influx is slowing.
After climbing for a decade, casino revenues fell for the first time in 2014. The figure for March is down by nearly 40 percent from the same month last year. Many attribute the fall to China's anti-corruption campaign, which has has left crooked officials reluctant to use a shadowy system that's helped them skirt the law.
35 casinos compete for space in the Las Vegas of Asia. The VIP rooms are said to be the site for money laundering. One casino dealer says the practice occurs on a huge scale. "I've seen guests spend up to 25 million US dollars in chips in one visit," he says. "Money laundering is everywhere."
Networks called "junkets" that bridge Macau and mainland China facilitate the illegal activities. A number of the VIP customers are bureaucrats and senior Communist Party officials who receive bribes. They hand the bribe money to brokers in mainland China. "When a VIP uses a broker, he does not need to open an account, or provide his own private information," the former dealer says.
The brokers use multiple underground banks to transfer the money to an account in Macau. This allows the party officials to travel to Macau empty handed. Once in Macau, the money entrusted to the brokers is handed back to the party officials, who use it for gambling. After gambling away some of it, the money the officials end up with is theirs, designated as "earnings at casinos".
However, the Chinese government is increasing efforts to eradicate corruption and casinos are a special area of attention. "We must strengthen the supervision and management of the casino industry, and actively develop new growth sectors," President Xi Jinping has said.
As a result of the government's crackdown, party officials are not receiving the bribes they expected. The number of bureaucrats and senior party officials visiting Macau has declined drastically. Others are fleeing Macau owing huge debts.
The situation inspired Charlie Choi, who used to be part of the Junket system, to start up a debt collection business. He collects information from casinos on senior party officials and businessmen with connections with bureaucrats who have outstanding debts.
"Violent organized crime groups used to collect gambling debts," Choi says. "But we employ a more reasonable and peaceful approach." He posts their names, photographs and other details on a website, including the amount of money they owe.
"One man is a party official and the president of a coal mining company," he says of just one of his many cases. "He's one of the richest men in Shanxi Province, but he has run up debts of 55 million US dollars."
Choi's operation has taken on 850 cases, with outstanding debts totaling 1.8 billion US dollars.
Anchors Sho Beppu and Aki Shibuya spoke with correspondent Takuma Yoshioka live from our bureau in Hong Kong.
Beppu: Takuma, how dependent has Macau become on this dirty money from mainland China?
Yoshioka: There is no specific figure indicating how much this money has contributed to the boost of Macau's casino industry. However, more than 60% of total revenues come from the VIP rooms. And we have talked to a number of people who actually witnessed corrupt Chinese bureaucrats and Communist party members operating behind the scenes.
One example is Lew Mon-hung, who used to be a committee member of the Chinese People's Political Consultative Conference. He testified that a relative of a local government chief who had once served as a central government minister approached him five years ago and encouraged him to use 1.2 million dollars in casino chips as a bribe to set up a private dinner that would facilitate a provincial construction project. Lew says that such slush funds for the cozy relationship between public and private sectors have been supporting casinos in Macao.
Shibuya: How serious is Chinese President Xi Jinping about this casino crackdown?
Yoshioka: He has pledged to go after "both tigers and flies" in his anti-corruption campaign. That means he and other top party leaders intend to prosecute corrupt officials, regardless of their positions. Chinese authorities are investigating the money spent by Chinese officials in casinos. And they're reportedly using surveillance camera footage to track down people who regularly visit VIP rooms. Already, the decline in casino revenue in Macau is a sign that officials are staying away. And we expect that trend will continue.
Shibuya: How are businesses in Macau responding?
Yoshioka: Some casino-related businesses are trying to move their operations to other countries, for example, in Southeast Asia. It looks like some of them are aiming to attract Chinese VIP officials. Carrying out illegal activities such as money laundering in Macao has become very difficult. But it won't be easy to fundamentally change corrupt Chinese officials who have acquired a taste for the dirty money. As a Chinese proverb says: "For every policy coming from the top lies a countermeasure from below." It's still unclear if President Xi's crackdown will completely eliminate corruption in China.