Macau’s largest junket operator, Suncity, has come under fire in China for its extensive online gambling operations.
A Reuters report says the Economic Information Daily, an online news site sponsored by China’s state-run Xinhua News Agency, has taken aim at the company, accusing it of cultivating an offshore online market on the mainland that is illegally siphoning billions of yuan out of the country and causing harm to the social and economic order.
Claiming to have interviewed 30 gamblers, the site accuses Suncity Group of actively signing up Chinese players who gambled in its VIP rooms in Macau to its online gaming and proxy betting services. It also claims the junket is enabling players to bet through online casinos in the Philippines and Cambodia that utilize underground banks to evade China’s currency restrictions.
“The annual amount bet through online gambling in the mainland is more than 1 trillion yuan (US$145 billion), equivalent to nearly twice the annual income of China’s lottery,” the report claimed.
SunCity Chairman Alvin Chau Cheok Wa denied the allegation at a hastily called—and very short—press conference on Saturday. He said SunCity has not participated in online gaming and has obeyed all the laws of Macau and China. He also denied he was on China’s “wanted list.”
In addition, Chau said that his company would not participate in any gaming activity outside of Macau that is not recognized as legal by Macau law, even if it is legal in another jurisdiction.
According to Reuters, it’s the first time a Macau junket has been singled out for online gaming activity. The accusations come as China faces slowing economic growth and pressure to limit capital outflows.
But it’s not the first time that capital flight has emerged as a sore point in Beijing’s dealings with Macau, the self-governing territory that is the only place in China where gambling is legal. In 2014 and 2015, the government launched a nationwide crackdown on corruption and extravagant spending by members of the Communist Party elite. Casino revenue in Macau plummeted as high rollers from the mainland, the core of the territory’s VIP-centric gaming industry, stayed away en masse.
The junkets were not denounced by name in the crackdown, but it’s well-known that they control the VIP market as the middlemen who bring high rollers to play, extend credit and comps and collect on their gambling debts, which are not legally enforceable in China. They are thought to operate as a shadow banking system for moving capital out of the country.
In the international law enforcement community, the junkets have been under scrutiny for decades, most notably in the United States, for their alleged ties to Chinese organized crime and their alleged role in facilitating money laundering and illicit capital flows.
Ironically, as Macau has grown with billions of dollars of gaming-related investment from publicly traded companies in the U.S and the junkets have sought to shed their shady image, Suncity has led the way, investing outside the territory in the operations and development side and diversifying into an array of non-gaming industries.
Suncity quickly issued a denial of the report, at least as far as its operations in Macau, where online gambling also is illegal. It declared the company a “legitimate institution granted with (a) junket promoter license” that “has no possession of any casino and gaming tables, neither does it operate any online gaming business.”
“The junket promoting business, operated by the company and other related companies in Macau and other geographical areas, is rigorously licensed to perform in accordance with legal requirements and the license conditions,” the company said.
Macau’s Gaming Inspection and Coordination Bureau, told Reuters that any violations of local laws and regulations would affect the qualifications of junket operators and result in “serious action” by the agency. It was reported locally that officials with the bureau had met with Suncity representatives to discuss its activities.
Brokerage Sanford C. Bernstein said in a client note that the report “could be a warning message for Suncity and maybe other online gaming/proxy betting operators to tone down excessive offshore play.
“Junkets may face greater scrutiny on their offshore businesses, some game play may gravitate back to Macau as players may retreat from online play, and junkets may face greater scrutiny in Macau on how they interact with players,” Bernstein warned.
