Countries/Jurisdictions of Primary Concern - Macau
Macau, a Special Administrative Region (SAR) of the People’s Republic of China, is not a significant regional financial center. Its financial system, which services a mostly local population, consists of banks and insurance companies as well as offshore financial businesses, such as credit institutions, insurers, underwriters, and trust management companies. Both sectors are subject to similar supervisory requirements and oversight by Macau’s Monetary Authority.
With estimated gaming revenues of $30 billion for 2015, Macau is still the world’s largest gaming market by revenue, although monthly gaming revenue has fallen consecutively for the past 18 months. The gaming industry relies on loosely-regulated gaming promoters and collaborators, known as junket operators, for the supply of wealthy gamblers, mostly from mainland China. Increasingly popular among gamblers seeking anonymity or alternatives to China’s currency movement restrictions, junket operators are also popular among casinos aiming to reduce credit default risk because they are unable to legally collect gambling debts on the mainland, where gambling is illegal. This inherent conflict of interest, together with the anonymity gained through the use of the junket operator in the transfer and commingling of funds, as well as the absence of currency and exchange controls, present vulnerabilities for money laundering, encourages Chinese capital flight, and fosters underground financial systems such as fei-chien or “flying money.”
Macau government officials indicate the primary sources of laundered funds, derived from local and overseas criminal activity, are gaming-related crimes, property offenses, and fraud.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: NO
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, credit and insurance entities, casinos, gaming intermediaries, remittance agents and money changers, cash couriers, trust and company service providers, realty services, pawn shops, traders in high-value goods, notaries, registrars, commercial offshore service institutions, lawyers, auditors, accountants, and tax consultants
Number of STRs received and time frame: 1,807 in 2015
Number of CTRs received and time frame: Not applicable
STR covered entities: All persons, irrespective of entity or amount of transaction involved
money laundering criminal Prosecutions/convictions:
Prosecutions: 1: January 1 - June 30, 2015
Convictions: 0: January 1 - June 30, 2015
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Macau is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.apgml.org/members-and-observers/members/member-documents.aspx?m=fded343f-c299-4409-9cfc-0a97d89b6485
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
Macau’s financial intelligence unit (FIU) is an essential component in coordinating efforts to develop long-term AML/CFT infrastructure and in developing close collaboration with other FIUs, including the signing of memoranda of understanding and collaboration agreements with foreign counterparts.
Important deficiencies remain. Legislation that would strengthen Macau’s customer due diligence (CDD) requirements has been pending for over three years, as has legislation to improve the jurisdiction’s cross-border currency controls. Macau has yet to implement an effective cross-border cash declaration system.
China only allows the equivalent of $50,000 a year per person to be moved out of China. To circumvent the currency restrictions, junket operators in Macau sometimes are used. For example, Chinese gamblers can deposit money with junkets in the mainland and use that money in Macau, or they can borrow from junket agents. If they deposit the money, the gamblers can then use the funds in Macau. Once they are finished gaming, they can take their winnings in U.S. or Hong Kong dollars and invest it in property or offshore tax havens. Much of the money funneled through junkets originates from corruption, embezzlement, and other illicit activities. The junket operators help arrange for visas, travel, and accommodations. Organized crime, including triads, are active in the gaming services and are engaged in loan-sharking, prostitution services, etc.
In August 2015, the People’s Bank of China (PBC) signed a memorandum of understanding with the Macau Monetary Authority on bilateral exchanges on AML regulations, information exchange mechanisms, and on-site inspections, giving mainland China authorities better access to information. The agreement is designed to bolster efforts to crack down on graft, capital flight, and underground banking.
As a SAR of China, Macau cannot sign or ratify international conventions in its own right. China is responsible for Macau’s international affairs and may arrange for its ratification of any convention to be extended to Macau. Conventions extended to Macau include: the 1988 Drug Convention (1999), the UN Convention against Transnational Organized Crime (2003), the UN Convention against Corruption (2006), and the International Convention for the Suppression of the Financing of Terrorism (2006).
While Macau’s AML law does not require currency transaction reporting, gaming entities are subject to threshold reporting for transactions over MOP 500,000 (approximately $62,640) under the supplementary guidelines of the Gaming Inspection and Coordination Bureau. Macau should lower the large transaction report threshold for casinos to $3,000 to bring it in line with international standards. The government also should continue to strengthen interagency coordination to prevent money laundering in the gaming industry, especially by introducing robust oversight of junket operators and mandating due diligence for non-regulated gaming collaborators. The government should take action on its long-pending legislation regarding CDD and cross-border currency controls. Macau also should enhance its ability to support international AML/CFT investigations.