In Ma­cau, the chips may be stacked against a ban on phone bet­ting

▶ To slow money laun­der­ing, Ma­cau tries ban­ning phone bet­ting ▶ Lax reg­u­la­tion “will cre­ate a loop­hole”

Bloomberg Businessweek (North America) - - The Global Tech -

In a pri­vate room of a Ma­cau casino’s ex­clu­sive gam­bling area for VIP cus­tomers, a sin­gle player sits at a bac­carat ta­ble. As the cards are turned, the man, a hired hand, gives a play-by-play ac­count via an ear­piece wire­lessly con­nected to his mo­bile phone. Hun­dreds, if not thou­sands, of miles away on the other end of the call is the real gam­bler, a player be­yond the bor­der in China.

Vari­a­tions of that sce­nario were de­scribed by five peo­ple who work

at Ma­cau’s jun­ket op­er­a­tors, out­fits that front money to high rollers and bet on their be­half us­ing wire­less head­sets—in vi­o­la­tion of the city’s new May 9 ban on us­ing phones at bet­ting ta­bles. Pre­vi­ously, sur­ro­gates could ef­fec­tively place bets ini­ti­ated via phone as long as they dis­closed who was on the other end, say jun­ket op­er­a­tors. Now, three gam­bling pro­mot­ers who con­duct busi­ness at in­de­pen­dently run VIP rooms in­side Ma­cau casi­nos op­er­ated by SJM Hold­ings and Melco Crown En­ter­tain­ment told Bloomberg they’re sur­rep­ti­tiously us­ing head­sets to evade the ban, with the proxy play­ers some­times hid­ing the de­vices in their hair. They asked not to be iden­ti­fied be­cause the ac­tiv­i­ties are il­licit.

The pre­ferred game is bac­carat, where the player bets whether his hand or the dealer’s is clos­est to nine. Some jun­kets now as­sign two agents; one plays at the ta­ble and an­nounces the re­sults loudly while a part­ner sits nearby with an open phone line to the gam­bler, say two jun­ket op­er­a­tors.

A state­ment from Melco said its casino fa­cil­i­ties, in­clud­ing VIP rooms, meet lo­cal reg­u­la­tions. SJM didn’t re­spond to re­quests for com­ment. An­gela Leong, SJM’S ex­ec­u­tive di­rec­tor, said in a May 17 interview that Ma­cau casi­nos, in­clud­ing SJM’S, have in­creased mon­i­tor­ing to pre­vent phone bet­ting.

Ma­cau first banned the prac­tice in 2001 to pre­vent money laun­der­ing. Main­land gam­blers can get credit lines from Ma­cau jun­ket op­er­a­tors, who are re­paid by the play­ers in­side main­land China. But the gam­bling credit stays out­side China, away from scru­tiny by the Chi­nese gov­ern­ment and its cur­rency con­trols—and where it can be cashed out in Ma­cau as gam­bling pro­ceeds.

Even af­ter the 2001 law, reg­u­la­tors didn’t en­force the phone-bet­ting ban as long as op­er­a­tors re­ported the bets and gam­blers’ iden­ti­ties to Ma­cau’s gam­bling reg­u­la­tor, says lo­cal leg­is­la­tor José Maria Pereira Coutinho. “There’s a sit­u­a­tion of per­me­abil­ity for money laun­der­ing that the gov­ern­ment must pay full at­ten­tion to af­ter the ban,” he says. “A reg­u­la­tion with­out ef­fec­tive im­ple­men­ta­tion will cre­ate a loop­hole.”

The law took an­other blow from the SARS (se­vere acute res­pi­ra­tory syn­drome) epi­demic in 2003, when the Gam­ing In­spec­tion and Co­or­di­na­tion Bureau let jun­ket and casino op­er­a­tors use elec­tronic de­vices to com­mu­ni­cate with ta­bles to re­duce the risk of spread­ing the in­fec­tion. That fa­cil­i­tated phone bet­ting, say jun­ket op­er­a­tors and Coutinho. Such bets hit $2.6 bil­lion in 2015, es­ti­mates Daiwa Cap­i­tal Mar­kets Hong Kong an­a­lyst Jamie Soo.

It’s un­clear how well the ban, which en­tirely for­bids us­ing mo­bile phones, will work, be­cause there’s no longer a sys­tem for re­port­ing bet­tors. And the rule doesn’t come with sanc­tions for vi­o­la­tors, ac­cord­ing to the gam­bling reg­u­la­tion bureau.

Casino rev­enue num­bers sug­gest Pres­i­dent Xi Jin­ping’s cor­rup­tion crack­down scared China’s high rollers away from gam­bling ta­bles—and prompted them to pick up the phone in­stead. Last year’s phone-bet­ting to­tal was up 15 per­cent from the year be­fore, even though casi­nos’ so-called VIP rev­enue dropped 40 per­cent, Soo says. For small jun­ket op­er­a­tors, phone bet­ting may have ac­counted for as much as 50 per­cent of rev­enue, he says.

Phone bets have been an av­enue for wealthy Chi­nese to skirt China’s cur­rency con­trols lim­it­ing out­flows to the equiv­a­lent of $50,000 a year. The gam­bler-cum-money-trans­fer­rer never leaves the coun­try, mak­ing it eas­ier to con­ceal his or her iden­tity. Other coun­tries, in­clud­ing the U.S. and Sin­ga­pore, have also banned phone bet­ting to avoid money laun­der­ing. Not all such bets fa­cil­i­tate money laun­der­ing, and some coun­tries, in­clud­ing the Philip­pines, al­low the prac­tice.

More staff and se­cu­rity guards will be hired to con­duct checks and mon­i­tor ac­tiv­i­ties in the VIP rooms through sur­veil­lance cam­eras, says Paulo Martins Chan, di­rec­tor of the gam­bling bureau. �Daniela Wei

$2.6 bil­lion Es­ti­mated value of phone bets placed in Ma­cau in 2015, up 15 per­cent from the year be­fore

The bot­tom line Some high rollers are plac­ing bets at Ma­cau casi­nos by phone, de­spite a ban. Re­mote bet­ting lets play­ers re­main anony­mous.

Edited by James E. El­lis Bloomberg.com

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