Edward Davis: “Macau a natural place to launder dirty money”

Macau “could be a natural place” for Chinese organized crime to attempt money laundering. The warning comes from the American lawyer Edward Davis, who has led several civil cases of corruption worldwide. In an exclusive interview with Macau Daily Times, the Miami-based lawyer said that Hong Kong is already part of “a critical path” for dirty money from the Caribbean. “And if Hong Kong is, then Macau will be and it probably is already,” added Davis. The lawyer also emphasized: “What better way to launder money than in casinos, which are very cash-based?”

Macau Daily Times (MDT) – What is Civil Asset Recovery?
Edward Davis (E.D.) – One of the things we have been advocating for some time now is the use of Civil Asset Recovery teams, called CART. This is becoming now more and more widely accepted by Governments who realize they alone don’t have the expertise or the know-how or the resources to get the money back from corrupt actors. It’s one thing to try to put them in jail; another is to get the money and to sue the people at the banking and accounting networks that assist them in hiding this money. And they make no bones about it, the minute they find themselves in the line of fire, they’ll find another line of work, because now they’re not only looking at prison, they’re looking at having to pay the damages when the money is gone.

MDT – How can it help cases of corruption?
E.D. – Why do people commit corruption? What is the real reason why they do it? They do it for money, they don’t do it because they hate the Government or they hate the people or for some ideological reasons. They do it because they’re greedy, and they want access to a certain lifestyle without having to earn it. These people think they’re above the law and frankly most of them are very arrogant because they’re used to dictating to other people. They’re not used to being questioned and they become very adversarial in the process – I’ve had serious death threats against my wife, my children, my colleagues and me. So, the point is that you have to go after the money. At the end of the day if you retrieve the money you start taking the reason they do it away from them. And they might think: “I won’t get to keep the money anyway, so maybe I won’t do it”. Most of these people are not career criminals. They are not hard-bitten narcotic traffickers or ‘mafiosos’, they are just thinking: “I’m helping the people and I’m not getting a good salary” or “I’m sacrificing my life for the Government and I don’t get anything. So a little bit for me is only fair because if I was in private practice they would pay me 10 times what I get here”. They justify in their mind: “I’m just going to take a little bit here” and then it’s more and more and finally it’s huge amounts. At the end of day you have to take the incentive out of it.

Edward Davis: ‘Pizza places in the US are basically cash businesses and the authorities found they were a primary to launder money for organized crime.’

MDT – Does it work?
E.D. - Worldwide, the number of people who are convicted and go to jail is pretty low because many of these cases are never brought forward. It’s very ugly, it’s time consuming, and it’s resource consuming, for one case might take five or six prosecutors. Everybody thinks the solution is to put them all in jail and that will make the problem go away. If that were true corruption would be gone a long time ago. We have a good recording of conviction for corruption cases in the USA, both in local and in the international level. We have very robust laws but for every one company that gets caught there are probably 10 others doing it. To me, the answer is ultimately to follow the money flow. Ironically one of the things that has caused the ability to better trace the money and go after the assets is 9/11 because the laws have tightened up. In regards to the money flow, the same critical path for corruption money is also where the money flows for terrorism and for narcotics trafficking.

MDT - Does that path go through Macau? Is Macau a haven for money laundering?
E.D. – In my experience, not yet, but Hong Kong is. And if Hong Kong is, then Macau will be and it probably is already. I’m from Miami, Florida, and most of our corruption is in Latin America, Caribbean or in the US and a lot of these people who take money are not that sophisticated. They put the money where they can touch it and where they speak the same language. People here in China who steal money, my guess is they do use Macau. Hong Kong has come up because so many former British colonies are in the Caribbean and they use law firms that have offices in Hong Kong, BVI [British Virgin Islands], Bermuda and London, creating, sometimes unintentionally, critical paths where the money flows. First you form a BVI corporation, then a Hong Kong corporation to own the BVI corporation and then you form a Jersey trust to own the shares of the Hong Kong corporation. It makes it very difficult to penetrate through that structure.

‘In my experience, (Macau is) not yet (a haven for money laundering), but Hong Kong is. And if Hong Kong is, then Macau will be and it probably is already.’

MDT – Is the money flowing through Hong Kong coming also from China?
E.D. – I don’t know. One of the reasons I accepted this invitation to come here is that we see big Chinese contractors, with the support of the Chinese Government, now present in a big way in Latin American, in the Caribbean, in the US and in Africa. So we believe that these companies – not all of them of course, but at least some of them – are paying bribes and committing corruption. My sense is that we are going to see more and more of it. In Macau and other places that are friendly, where they don’t ask many questions, with a friendly legal structure and friendly banking structures, money can come in. You have all these casinos. What better way to launder money than in casinos, which are very cash-based? It’s a danger because if I walk in here with 50,000 dollars in cash and there’s a deal where I leave 10,000 and take 40,000, then I can say I won 40,000 dollars. I’ve laundered that money, I’ve made it legitimate. Laundered money ends up in some place where they can find the best interest rate or where they feel comfortable. Where are Chinese people comfortable? My guess is that Macau could be a natural place to hide money.

MDT – Is laundered money going through Macau casinos?
E.D. – In the US experience that has proven to be true. They have done a lot to regulate that over the years but it’s pretty well known now that a problem remains with illegitimate money. A lot of that has been rooted out but people also thought Allen Stanford [owner of Stanford Financial Group, on trial for fraud in the US] was legitimate and after all he was laundering money for the Colombian Cali drug cartel. That [Stanford International Bank] was seemingly a legitimate bank by all appearances, with offices in 11 countries.

MDT – Last year New Jersey gaming regulators considered Pansy Ho unsuitable as a business partner for MGM Mirage, mentioning alleged ties between her father, Stanley Ho, and Chinese organized crime triads. Could the Macau casinos be used to launder money?
E.D.  – Easily and in a number of ways. You overpay in a vendor contract or a security contact or you contract several suppliers for the same thing. One of the most common ways, in Brazil for example, is for the company to set up a subsidiary in Miami and they’ll buy supplies from that company. They send a pen that costs 5 cents to make and charge 50 dollars. Humans are amazingly ingenious in the ways they find to launder money. Pizza places in the US are basically cash businesses and the authorities found they were a primary to launder money for organized crime. They would say they sold 5,000 pizzas in one month but only bought enough ingredients to make 500 pizzas. Yet they have the money from 5,000 pizzas and it became legitimate.

MDT – How about the gaming promoters or junkets?
E.D.  – I had not heard of it, but it seems like the kind of undocumented and uncontrolled arrangement that could be used. The casino is interested in reporting its operation accurately or else it could be shut down, but the junkets can open and close on the following day, so it probably lends itself to that kind of abuse. In the US any business who takes cash over a certain amount, and casinos are one of them, has a duty to report it. If I walk in with 10,000 dollars and I want 10,000 in chips, they have to fill in a Cash Transaction Report. The same would happen if I were to enter a car dealer and buy a car in cash. To monitor and follow cash is the most difficult thing and it requires people at the in-point to report it.

V.Q.