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China – US union calls for action over Macau’s junkets

By - 10 July 2015

The International Union of Operating Engineers (IUOE), a US-based trade union, has sent a communication to Wang Qishan, Head of the Chinese Communist Party’s Central Commission for Discipline Inspection (CCDI), to highlight flaws in Macau’s regulation of the VIP junket system.

Gaming promoters are licensed in Macau to recruit and often provide credit to high rollers, many from mainland China, to gamble in exclusive VIP rooms inside Macau casinos. The junket industry has over the past decade been a driving force in Macau gaming, typically accounting for over half of the gambling revenue generated in the Special Administrative Region.

Macau law states that only licensed gaming promoters are authorized to engage in the activity of junket promotion. The license is contingent on the promoter’s substantial shareholders and administrators passing a finding of “suitability” by the Macau gambling regulator. The finding of suitability, which examines an applicant’s personal, professional and financial background along with their personal and professional associations, is a vital provision in the law, as it allows the government regulator to conduct a broader investigation of a license applicant and identify problematic or questionable associations.

The law does not, however, require these strict licensing protocols for other influential participants in the junket industry, such as the third-party financiers, credit guarantors and profit participants of gaming promoters. Through these channels individuals with problematic backgrounds are positioned to acquire substantial interest in and control over junket operations.

“Macau’s gambling industry, and its high roller junket system in particular, has clearly been a key point of interest for the Communist Party’s anti-corruption efforts,” IUOE representative Jeff Fiedler stated. “But we believe that the Party’s current anti-corruption initiatives cannot fully meet their objectives without increased regulation of Macau’s junket industry, particularly the third-party profit participants, credit guarantors and financing syndicates of a junket operation.”

“Commonsensically,” said Mr. Fiedler, “if a third party acquires all of the profits of a junket or finances the bulk of its operations, then the third party is positioned to exert control over the junket.”

“If Macau wants to bring greater transparency and accountability to the junket system, it can take basic steps to improve its regulatory structure,” Mr. Fiedler asserted. “For starters, all individuals and entities that acquire more than a five percent interest in the profits generated by a gaming promoter should be licensed and pass a finding of suitability by the Macau gambling regulator,” stated Mr. Fiedler. “Further, any individual or entity providing financing or guarantees of over a certain threshold for a junket should also be licensed and found suitable.”

Mr. Fiedler added: “The burden of regulation should not necessarily fall entirely on Macau. It is our observation that US gambling regulators have been deficient in oversight of American casino operations in Macau by their apparent willingness to tolerate a lack of meaningful regulation of critical participants in the Macau gaming world. US regulators can and should do more, as well.”

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