Macau’s intended criminalisation of unlicensed money-changing within a casino setting for the purposes of gambling may have the effect of driving such trade out of casinos to other places in the city, say several experts canvassed by GGRAsia.
The provision, part of a draft bill being scrutinised in the city’s Legislative Assembly, specifies that unlicensed money-changing would be criminalised when taking place in gaming or non-gaming areas of casino venues.
Criminalisation “may slow down the flow of ‘money changers’ in and around casinos,” but “it’s unlikely to end” their presence in the market, said António Lobo Vilela, a former adviser to the Macau government on gaming-related matters.
“They will likely proliferate elsewhere, in some other scenario – outside of casinos or their surroundings – or guise,” he noted.
Mr Vilela added: “The business could be reduced to a ‘cash courier’ activity: the money change is done outside Macau, and Macau is the place where the funds are made available.”
Macau lawyer Bruno Ascenção told GGRAsia: “The money exchange activity in Macau will likely shift away from casinos but will continue as long as there is a steady flow of tourists to the region.
“The capital flow restrictions imposed by mainland China create a need for mechanisms to bypass these restrictions. And these mechanisms will persist until such restrictions are lifted.”
Mr Vilela said that were Macau’s criminalisation step to make a major dent in such unauthorised activity, the cash “amount at stake is tremendous, and probably none of the players want it to disappear completely”.
He observed, referring to the decline of the Macau junkets – known officially as gaming promoters – that traditionally helped arrange Macau gambling credit for VIP players from the mainland and beyond: “The void left by the casino gaming promoters’ ‘disappearance’ involves significant money. The junket activity was valued at around US$17 billion in 2019 and moved around US$600 billion.”
The first figure is based on Macau regulator data for the MOP135.23 billion (US$16.9 billion) in VIP gross gaming revenue – most of it via junkets – generated in 2019.
Mr Vilela added that even in the post-junket era, “high-rollers probably don’t use the ‘money changers’ in and around casinos,” as likely “they arrive in Macau with everything organised in advance”.
‘Premium mass’ risk
More vulnerable, suggested the former government adviser, was the so-called ‘premium mass’ segment.
“The VIP market has long since been replaced by the premium market, and it seems inevitable that the latter will suffer from the decline in ‘money changers’,” suggested Mr Vilela.
He referred to a past route also aimed at getting round China’s limits on the amount of its currency that can be moved from the mainland into Macau.
“Remember the putative sales of pawnshops, the point-of-sale linked to mainland China, so [sales] operations carried out in Macau could be deemed domestic,” he observed.
The criminalisation provision – announced on Friday in an updated draft of the ‘Law to Combat Gambling Crimes’ – will carry a penalty of up to five years’ imprisonment for those found guilty.
The amended bill is likely to receive its second and final reading at a plenary session of Macau’s Legislative Assembly before the end of the calendar year, said on Friday veteran legislator Chan Chak Mo.
Mr Vilela told GGRAsia he would “have to review the final draft,” to understand whether criminalisation would cover “a broader spectrum than ‘money changers’ in and around casinos”.
He added: “If not, it will only drive them outside casinos and their surroundings, which makes little sense.”
Mr Ascenção said that “as with many similar regulations concerning financial transactions,” the issue was not only the wording, “but rather how it is implemented”.
Though he also observed: “Most big players probably have funds outside of the mainland without having to resort to money exchangers.”
Francisco Bandeira, of the MdME law firm in Macau, told GGRAsia: “We anticipate that, in practice, the implementation, use and effect of the added provision, criminalising unauthorised foreign exchange, will not substantially differ from the implementation, use and effect of the illegal loan for gambling provision of Law 8/96/M.”
A number of brokerages said in notes after Friday’s announcement of Macau’s criminalisation plan, that such a step could hurt investor sentiment on Macau’s listed casino firms.
(Updated 5.50pm, Aug 14)
