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”

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

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