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Junkets ‘encourage money laundering’: Wiki cables

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image ‘Oversight of both casinos and junket operators is limited and remains a serious weakness,’ according to leaked US diplomatic cables

The local gaming sector’s dependence on VIP gaming operators, known as junkets, is “a formula that facilitates if not encourages money laundering,” according to leaked US diplomatic cables.
A cable titled ‘The Macau SAR economy at 10: Even jackpots have consequences’ says “oversights of both casinos and junket operators is limited and remains a serious weakness in Macau’s AML [Anti-Money Laundering] regime”.
Junkets work with local casinos and independently run VIP rooms that accounts for more than half of Macau’s gaming revenue, “allowing players to avoid identification,” says the document released last week by whistle-blower website WikiLeaks.
“Know-your-customer and record-keeping requirements are significantly looser than in other international gaming venues,” the document signed December 2009 states.
The cable was sent from the Consulate General of the US in Hong Kong to the US Department of State. It acknowledges that junkets “must register and are subject to nominal regulation in Macau”.
But “Government efforts to regulate junket operators in Macau have been aimed at limiting competition, rather than combating illicit activities,” the document stresses.
Junkets “allegedly work closely with organised crime groups in mainland China to identify customers and collect debts,” the consulate added.
In 2009 Beijing’s tighter policy on visas for Macau slowed visitor arrivals, in what was seen as an attempt to cool down gaming growth.
But the cable claims “periodic tightening of Chinese Individual Visitor Scheme permit requirements may reflect Chinese government concern about corrupt officials laundering money in Macau”.
The MSAR Government spokesperson office declined to make any comments.

‘Periodic tightening of Chinese Individual Visitor Scheme permit requirements may reflect Chinese government concern about corrupt officials laundering money in Macau’

Corruption woes

“The dream to get rich quick, the huge flows of cash, and the attraction of high-paying jobs in the growing casino sector continues to challenge the MSAR’s ability to combat corruption and illicit financial activity,” the document warns.
Under the subtitle ‘Macau Laundry Service’ the cable says “massive flows of money and relatively weak controls over financial transactions make Macau a target for those seeking to launder illicit funds”.
“Despite rapid progress, particularly with regard to regulation and oversight of Macau’s financial sector, weaknesses remain,” the US Consulate wrote.
The cable mentions the case of Banco Delta Asia, which was “a useful tool for the North Korean regime to transfer funds related to illicit trade”.
The bank is forbidden from doing business with US financial institutions, which effectively prevented it from conducting any foreign currency transaction.
The 2009 cable also recalls the conviction of former secretary for Transport and Public Works, Ao Man Long, to a 28-year prison sentence for corruption and money laundering.
“While applauding the investigation and conviction of Ao, critic’s charge that he could not have engaged in corrupt practices for so long without the knowledge of other senior Macau officials,” the US Consulate stressed.
The document adds that, following Ao’s arrest, “approvals for new construction projects stalled as Macau officials took extra care to avoid the appearance of impropriety” – a view shared by local businessmen, executives and lawmakers.
“Macau’s explosive economic growth, a public outreach campaign to encourage reporting, and increased CCAC [Commission against Corruption] resources have led to significant increases of corruption cases in recent years,” another cable signed January 2010 says.

Labour tensions

‘Many industry observers believe one or more foreign producers of copyrighted content must file lawsuits in Macau to force the antenna companies out of business’

The gaming boom has “fundamentally altered the nature of Macau’s economy, bringing increased prosperity but also (…) increasing social tensions,” the cable says.
On the one hand the strict quota system that forces companies to hire local workers has increased wages.
“Rising demand for casino workers, however, has led to criticism that Macau’s youth are forgoing higher education and training to make easy money as card dealers and croupiers,” the US Consulate wrote.
On the other hand “the influx of foreign labour since 2004 has increased social tensions and protests against illegal and foreign workers,” the document adds.
“Concerns that foreign labour will supplant local Macanese workers makes labour and immigration policy a sensitive political issue,” another cable signed January 2010 says.
The Law for the Employment of Non-Resident Workers, which came into effect on April 2010, requires imported labour to leave the territory for six months before applying for a new work permit with a different employer.
This law would “severely restrict workers’ ability to change employers,” an October 2009 cable warned.
But four lawmakers said the bill would not sufficiently protect Macau resident worker rights and called for specific caps on imported labour.
“They also stated that real estate developers should receive stiffer punishment for the illegal workers employed by local contractors,” the document adds.
“If enacted, such a provision would impact US gaming companies that might occasionally employ local contractors and thousands of migrant workers to complete the various construction projects around Macau,” the US Consulate warned.
A December 2009 cable also pans the government’s strategy for economic diversification.
“Macau interlocutors note that with limited land, a small labour force, and huge returns on property and gaming investments, there is little incentive for investors to look at more difficult and less lucrative investments in other industries,” the document says.
The development of Hengqin Island should “lessen pressure on Macau to diversify its economy within its own borders,” the US Consulate wrote.

Antenna piracy

The leaked US diplomatic cables also mention the long-lasting conflict between public antenna companies and Macau Cable TV.
“Piracy of television signals (and much US-origin program content) is rampant,” a January 2010 cable says. “The Consulate General continues to raise these issues with Macau officials.”
A March 2009 cable had already criticised authorities’ “inability to resolve this issue,” despite acknowledging that “Macau’s outdated copyright law makes it difficult for law enforcement to act against software piracy and control digital/internet IPR infringement”.

‘Rising demand for casino workers, however, has led to criticism that Macau’s youth are forgoing higher education and training to make easy money as card dealers and croupiers’

A new copyright law has remained frozen at the Legislative Assembly since February with lawmakers still waiting for a new version of the draft law.
Last month the Court of Second Instance rejected an injunction filed by Macau Cable TV, even though it acknowledged that “the illegal activity” of public antenna companies was causing financial losses to the concessionaire.
“Many industry observers believe one or more foreign producers of copyrighted content must file lawsuits in Macau to force the antenna companies out of business - or at least disable their ability to sell pirated signals to Macau’s households,” the cable says.

Water acting

Water conservation initiatives were launched mainly to counter criticism from Zhuhai officials and “perceptions of waste,” according to a January 2010 cable, quoting MSAR officials.
While the Guangdong province was experiencing a major drought and Zhuhai was rationing water usage in 2009, the territory launched conservation initiatives such as a water fee rebate programme.
“Macau officials shared that their conservation efforts were in large part politically driven, given that Zhuhai would perceive downstream Macau as ‘wasting water’ if it did not implement measures,” the US Consulate wrote.
Local water conservation initiatives, “although environmentally sound, were mainly announced in reaction to complaints from Zhuhai officials,” the cable emphasises.
“Officials told us these measures were primarily ‘for show, to counter perceptions of waste’ and that there was no urgent concern over the water supply,” the document adds. The conservation efforts could “counter the perception of a wasteful and extravagant Macau”.
Despite assurances from mainland China that the territory would not suffer from water supply shortages the US Consulate said the city must reduce its dependence.
“Macau still needs to invest in sea water desalination facilities to secure its long-term water supply. However, because Macau’s sea water quality is ‘muddy’ and therefore harder to treat, the water intake port will have to be further offshore, making the project more expensive,” the cable explains.
“Nonetheless, Macau officials say they are investigating it [sea water desalination] as part of a long-term option,” the documents reveals.

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