China’s central bank, the People’s Bank of China, and the Monetary Authority of Macao have signed what the former calls a memorandum of understanding on “bilateral exchange” regarding anti-money-laundering (AML) information sharing, cooperation and training.
The memorandum was announced on Friday on the website of the People’s Bank of China. The notice did not give specifics on such exchanges.
Several media outlets reporting the news – including Reuters news agency and the South China Morning Post – highlighted the risk of money laundering being conducted via Macau’s casino industry.
Macau’s Financial Intelligence Office recently said there was a 14 percent year-on-year increase in suspicious transaction reports – also known as STRs – in the city during 2014. It added that the gaming sector generated 1,370 reports – or 75.6 percent – of the 2014 STR submissions. Gaming saw a 20 percent year-on-year rise in STRs.
Investment brokerage Sanford C. Bernstein Ltd in Hong Kong said in a note on August 19 that while so-called underground banks in China were often involved in moving money cross-border to Macau to circumvent mainland China’s capital controls, it didn’t automatically mean that the source of such money was from illegal activities.
Analysts of the brokerage added: “Junkets and, to a larger extent, Macau’s casino system, is not a preferred or economical way to transfer money out of China.”
They stated: “When money flows through the casino or junket system, we estimate that it results in an average loss of 20-25 percent of the original capital, which is significantly higher than the transaction cost of 2 percent to 5 percent through underground banks.”
Sanford Bernstein additionally estimated that Macau gamblers deriving their wealth from what it termed “corrupt endeavours” had already exited the local casino market due to the mainland authorities’ anti-graft campaign, and “likely will not return”.
The People’s Bank of China said in its Friday statement that the mainland and Macau would adopt recommendations from a global anti-money-laundering body – the Financial Action Task Force – to strengthen regional supervision against money laundering.
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Analyst at Roth Capital Partners