So how does a country like China, which strictly limits currency exports, fuel a gambling boom that has seen its tiny territory of Macau emerge in less than a decade as the largest casino market in the world by far, in revenue terms the size of seven Las Vegas Strips? It’s a question that has intrigued law enforcement agencies in the West for years, particularly those affiliated with the government of the United States, where Chinese money has been rolling into Las Vegas’ private baccarat salons by the train load.
Baccarat, the game of choice for China’s high rollers, first overtook blackjack as the highest-grossing table game on the Strip in 2009, and it has grown to the point where it now accounts for more than 40 percent of total Strip table win—43 percent last year at the 17 largest casinos by gaming revenue—good for $1.58 billion in 2013. Given that the game comprises on average all of 9 percent of total table inventory, it’s clear that some really big bets are being laid down.
“This is a serious issue that could radically alter the way that casinos do business,” as Geoff Freeman, president of the American Gaming Association, the industry’s national lobbying arm, put it recently.
Analysts attribute the game’s sudden impact to the success of the three Nevada licensees—Las Vegas Sands, MGM Resorts International and Wynn Resorts—whose Macau subsidiaries now generate a sizable portion of their corporate profits.
Sands says it no longer allows customers to transfer funds internationally and limits the use of checks or money transfers from business accounts. It also restricts the amount of cash customers can withdraw from their casino accounts in a given day. And it has bulked up on former FBI agents, regulators and attorneys experienced in anti-money laundering law to help it monitor high-roller activity.
Chinese law says its citizens aren’t allowed to take more than the equivalent of US$50,000 per year out of the country. Chinese companies can exchange yuan for foreign currencies, but only for approved business purposes, such as paying for imports or approved foreign investments.
The reality is something else entirely. Macau’s casinos raked in $45 billion last year, most of it from mainland Chinese gamblers. Through the first three months of 2014, gaming revenue was tracking just shy of $1 billion a week.
Data analyzed by The Wall Street Journal in 2012 suggested that in the 12 months through September of that year, about $225 billion flowed out of China, equal to about 3 percent of the nation’s economic output.
VIP gambling is the locus of these concerns, a secretive world built on sprawling, more or less loosely organized junket syndicates comprised of thousands of agents and sub-agents who provide the high rollers, most of them from the mainland, who account for two-thirds of those casino billons.
Last month’s conviction in a Hong Kong court of businessman and junket investor Carson Yeung for money laundering has shined a light on their activities, but it was with an eye on FinCEN—the Macau government having evinced little interest in the sector—that Sands China was reported recently to be stepping up scrutiny of its junket partners, a policy that could reduce the number of junkets willing to work with the company.
“The AGA is dedicated to strengthening the gaming industry’s relationship with FinCEN and supporting their critical goal of protecting the United States,” Freeman said. “With our industry partners, we are also helping FinCEN to better understand the nuances of the gaming business and our commitment to compliance.”