GGRAsia – Politically-linked a target of Macau AML update: lawyer

Politically-linked a target of Macau AML update: lawyer

Jun 15, 2016 Newsdesk Latest News, Macau, Top of the deck

Macau’s recently revised rules on anti-money laundering (AML) procedures have focused in particular on casino gambling by so-called “politically exposed persons” – sometimes referred to as PEPs – and on “unidentifiable beneficiary” players in Macau junket rooms, said an advisory note from a leading law firm in Macau.

“The play of politically exposed persons and of unidentifiable beneficiary players in junket rooms… are in focus in the instructions,” noted Rui Pinto Proença, a partner and head of corporate and gaming practice at MdME Lawyers. He added that such categories of player had “been perceived” as posing more of a risk – in relation to criminal activities – than other types of casino player.

The new AML rules – also covering rules for the combatting of terrorism financing – are available in written form only in Chinese and Portuguese, Macau’s two official languages. The new rules were enacted on May 13, according to Macau’s casino regulator, the Gaming Inspection and Coordination Bureau, also known by its Portuguese acronym DICJ.

The more stringent controls covering PEPs come as the authorities in mainland China continue their crackdown on corruption. The cleanup on the mainland has been perceived by several gaming industry observers as having had a knock-on effect on the Macau VIP gambling market, as wealthy players seek to avoid attracting the sort of attention that can come from dropping large amounts of cash at the gambling tables.

Mr Proença said, regarding the May 13 rule update, known as Instruction no. 1/2016: “The new instructions – the first issued since the new director of DICJ took office late last year – impose generally more stringent obligations than their predecessors but also promote the introduction of a risk-based approach to internal controls by the entities to which they apply: casino operators, management companies, gaming promoters, and the concessionaires of sports betting, animal racing wagering and lotteries.”

Mr Proença added: “An increase of supervision and enforcement by government authorities is also to be expected.”

Prior to the enactment of the new AML instruction, the Macau government had announced that the use of telephones by those sitting at VIP gambling tables would be banned with effect from May 9.

Use of telephones at tableside can– according to analysts – facilitate what is known in the industry as “proxy betting” whereby a gambler not physically present in the gaming room can communicate via telephone or other digital device to instruct a “proxy” sitting at the table – usually a junket representative – to make a bet on the person’s behalf.

A number of gaming lawyers have told GGRAsia that such “proxy betting” can run the risk of breaching an important protocol of AML procedures in relation to casino gaming, namely ‘know your customer’. Although proxy betting was not officially allowed by the regulator, industry insiders say it was a regular practice in Macau prior to the May ban.

Healthy development

Instruction no. 1/2016 revoked the previous AML and combatting of the financing of terrorism instruction for the gaming sector, which had been in force since November 2006. These instructions substantiated Macau’s Anti-Money Laundering Law and its Counter-Terrorism Law.

“The new instructions are in line with government policies of promoting the healthy and sustainable development of the gaming industry by mitigating the risks of association with criminal activities,” stated the note from MdME Lawyers.

Mr Proença drew attention in his advisory alert, to the fact that the new rules had made a “differentiation between domestic and foreign politically exposed persons,” and had obliged casino operators to “approve the play of PEPs at a board- or executive-level,” within the relevant casino firm, as well as introducing “enhanced identification duties and continuous monitoring of PEPs play”.

With regard to issues such as proxy betting, MdME Lawyers noted that the new rules had created a definition of ‘ultimate beneficiary’ with regard to casino play, and determined “comprehensive” minimum standards of identification and suitability checks.

The legal firm also noted that casinos’ internal controls on AML and terrorism financing must be pre-approved by DICJ and were subject to “periodic internal routine examinations under the relevant compliance officer”.

“The minimum requirement of cash transaction reports remains unchanged at MOP500,000 (approximately US$60,000), despite international pressures to decrease it,” noted Mr Proença.

A DICJ spokesperson told GGRAsia last month that, “in regards to the large sum transaction reporting threshold, the DICJ consider[s] the MOP500,000 as an appropriate amount especially when there are other measures in the AML Instruction no. 1/2016 that would help to mitigate the money laundering risks.”