The Chinese unit of Las Vegas Sands Corp. will be increasing its scrutiny of Macau junket operators which may lead to parting ways with partners who account for two-thirds of the betting in the world’s largest casino hub.
Junket operators, who have a vital role in bringing wealthy gamblers from mainland China, are asked to provide information about their businesses to Sands as the US is looking to improve its results in obstructing money laundering and other wrongdoing. Junkets in Macau are more involved in gambling than in other parts of the world as they aren’t subject to the same regulatory attention as land-based casinos.
But with these steps they are risking the alienation of high rollers and offending local authorities who oversee the casinos in Macau. At the same time, Sands and other casino giants with a presence in Macau have stepped up their efforts to attract recreational players on their own, reducing the dependence on the junket business which has a lower margin.
“It is as political, as it is financial,” said I. Nelson Rose, a professor from Whittier Law School in Costa Mesa, California, an expert in the the casino industry.
Many of the requirements for these steps are coming from the Nevada Gaming Control Board which is boosting its oversight the Macau operations of U.S. casinos, with teams being sent to monitor Sands, Wynn Resorts Ltd and MGM Resorts International. All three U.S. companies have publicly traded subsidiarieson the Hong Kong stock exchange. Sands China is the market’s biggest operator with a 23 percent share in this year’s first quarter, according to Barclays Plc’s investment-banking unit.
Casinos in Macau have been reliant on junket operators for many years to find gamblers on the mainland and for bringing them to the former Portuguese colony. Acting as middlemen they serve a vital role as they lend to Chinese players who face limits on the amount of money they can bring from home. They also act as debt collectors.
Last month’s conviction of Carson Yeung, a prominent investor in the Neptune VIP Club gambling syndicate, for money laundering also shined a light on how junket owners operate in Macau.
The lax laws allow criminals to transform their cash into gambling proceeds that look legitimate. In an October Congressional report the figure of $202 billion was quoted as being laundered every year through Macau and the underground banking system that exists there.