Pressure to generate revenue in unfavorable economic environment could increase money laundering in gaming sector – Report

The pressure to generate revenue under difficult operational conditions could increase the conduct of anti-money laundering and counter-terrorist financing (AML/CTF) compliance and regulatory risk for casino operators in the SAR of Macao, points out a report by Thomson Reuters.

A report by Reuters on money laundering and misconduct in the casino industry worldwide indicated that jurisdictions and regulators around the world have renewed scrutiny of the fight against money laundering and the financing of terrorism, with enforcement activities taking a “more aggressive turn”, highlighting how Macau regulators have gone “so far”. to classify casino money laundering misconduct as a threat to financial stability and security”.

Regarding the Macao SAR case, the Reuters report touched on the recently approved amendment to the Gaming Law, which gives the SAR Chief Executive the power to revoke gaming concessions granted to casinos for reasons national security or for failure to pay taxes on time.

“Operators could be forced to forfeit concessions such as gaming tables or be asked to pay additional taxes if they fail to generate sufficient revenue to meet new minimum gaming tax requirements, a development that could have unintended consequences for driving risk,” the compliance and risk assessment by regulatory intelligence expert, Helen Chan, points out.

The report highlighted how the higher tax requirements have raised concerns in the industry which continues to suffer financial losses due to limited visitor numbers in the city, and with SAR businesses and casinos remaining closed to the following the city’s worst community outbreak to date.

In the approved amendment, the effective tax rate on gross gaming revenue, already the highest in Asia, would be reduced from 39% to 40%.

The basic tax rate of 35% would not change, but two additional levies to support cultural activities, infrastructure and other programs of the government and the Macau Foundation would increase from 4% to 5% combined.

Gambling operators could see these two additional levies reduced or waived if they can prove that they have attracted players from other jurisdictions to the SAR.

At the same time, Macau SAR authorities ordered the suspension of all commercial and industrial activities in the city – including casinos – for seven days from midnight on July 11, except for those maintain the normal functioning of society.

Around 1,600 confirmed Covid cases reported since June 18, and almost no tourism or gambling revenue at the same time.

“Although casinos have been allowed to stay open, residents have been asked to stay home, and analysts believe casino revenue in the coming weeks will be close to zero,” Reuters warns.

“The pressure to generate revenue under difficult operating conditions could increase conduct and regulatory risk for operators of casinos in the center of gambling”

S&P Global Ratings analysts recently said in a webinar that Macau SAR’s gross gaming revenue for all of 2022 could reach levels below a third of 2019, with something close to a ” full recovery” now unlikely until the second half of 2023.

The report also notes that while Macau “has not examined money laundering risks in the gambling industry as rigorously as casino regulators in other jurisdictions”, law enforcement agencies have acted in cases where cross-border activities and enforcement actions in other jurisdictions are involved.

As an example, he mentioned the arrest of the founder and CEO of the former Macau Suncity casino Junket, Alvin Chau, for organized crime and money laundering in November 2021 with 20 other people, in a trial scheduled for September 2 of this year.