Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
Audit Your Customers Who Engaged in
Macao Gaming Activities
CAMS AUDIT – WONG CHI IONG
Audit Your Customers Who Engaged in Macao Gambling Activities
1
Contents
1. Executive Summary ................................................................................................... 2
2. Limitation ................................................................................................................... 2
3. APG Mutual Evaluation Report ................................................................................ 2
3.1. 2017 Mutual Evaluation Report ........................................................................... 3
3.2. 2019 Follow-Up Report ....................................................................................... 3
4. DICJ Supervision ....................................................................................................... 4
5. Overview of the Macao Gaming Sector ................................................................... 8
5.1. The Six Concessionaires and Sub-Concessionaires ............................................. 8
5.2. Junket Promoters .................................................................................................. 9
5.3. Types of Gaming Players ..................................................................................... 9
6. Audit Plan Advice .................................................................................................... 10
7. Recommendations .................................................................................................... 11
7.1. Customer Due Diligence .................................................................................... 11
7.2. Source of Funds and Verification ....................................................................... 12
7.3. Transaction Monitoring ...................................................................................... 14
7.4. Training .............................................................................................................. 15
7.5. Suspicious Transactions Reporting .................................................................... 16
8. Conclusion ................................................................................................................ 16
9. Glossary .................................................................................................................... 17
10. References ................................................................................................................. 18
Audit Your Customers Who Engaged in Macao Gambling Activities
2
1. Executive Summary
Anti-money laundering auditors might definitely think that Macao is the hotbed for money
laundering, because Macao is famous for its gaming sector, which is cash intensive and
identity is untraceable. It incurs perpetrators who use it as an important tool for money
laundering. As Kenneth Pemberton indicated in his CAMS white paper, Macao Junket
Operators Pose Financial Crime Risks to Banks—How to Identify, Assess and Address
Those Risks, Macao casinos are linked with triads, organized crime, and financial crime,
especially regarding junkets.
In 2018, total gaming revenue in Macao had reached US$3.7 billion, which is twice the
total gaming revenue of Las Vegas in the United States in the same year. Macao has already
become the largest market for the gaming sector. By using the net winning rate published
by Galaxy Casino, S.A., in 2018 as a reference to calculate the total bet amount for 2018,
it would be approximately US$15 billion. These enormous funds pump into casinos
through different channels. No matter whether players win or lose, funds eventually return
to financial institutions the players belong to, especially in Asia-Pacific regions such as
Mainland China, South Korea, and Japan. Therefore, no matter the country, financial
institutions may have customers engaged in Macao gaming activities.
Risk posed by casinos will transfer to the financial institutions because financial
institutions are the final destination for illegitimate funds. As a result, financial institutions
would be exposed to regulatory, reputational, and financial risk. Therefore, an in-depth
understanding of the casino’s operation processes and anti-money laundering and
combating financing of terrorism (AML/CFT) control is needed.
This white paper will highlight tricky points of verifying the source of funds and assist
AML auditors to better understand the risk of casino-related customers, so they can further
develop the scope in the audit program and enhance the risk control process.
2. Limitation ❖ The background of casinos in Macao will be only briefly introduced. For details,
please refer to the 2017 Mutual Evaluation Report of the Asia/Pacific Group (APG).
❖ Since the policies and procedures of concessionaires and sub-concessionaires
(casinos) are different from each other, the controls and procedures discussed in this white
paper are common practice and may not be applicable to every casino.
3. APG Mutual Evaluation Report APG has published the 2017 Mutual Evaluation Report and the 2019 follow-up report of
Macao, which was adopted by all APG members and has undergone a stringent ex-post
review process by the Financial Action Task Force (FATF) and its global members, to
ensure the quality and consistency of the evaluation standard.
Audit Your Customers Who Engaged in Macao Gambling Activities
3
This section will outline the conclusion of these reports so we can better understand the
regulatory situation and risks of the gaming sector.
3.1. 2017 Mutual Evaluation Report
The 2017 Mutual Evaluation Report points out that the Macao gaming sector is
subject to AML/CFT supervision with resources devoted to higher-risk and material
sectors. The Gaming Supervision and Coordination Bureau (DICJ) has undertaken
adopting sound, risk-based supervisory actions so that compliance is improved.
In addition, the report specifically mentions that the six casinos demonstrate a sound
understanding of the ML/TF risks and AML/CFT obligations, while junket promoters
display an incomplete awareness of ML/TF risks and AML/CFT obligations. The
casinos have implemented to a large extent the DICJ instruction requirements on
CDD, determination of beneficial ownership, and politically exposed persons (PEPs)
(foreign and domestic), record keeping, and TFS, including coverage on the junket
sector. (APG, 2017, Mutual Evaluation Report, p. 11)
Casinos and their junket promoters work together to implement preventive measures,
with the former acting as both second and first lines of defense. Casinos have been
implementing standards based on their global AML/CFT compliance requirements,
which until the issuance of the revised DICJ AML/CFT guideline in 2016, were
higher than Macao, China’s requirements. (APG, 2017, Mutual Evaluation Report,
p. 11)
The report also mentions that DICJ identifies and maintains a sound understanding
of the ML/TF risks in the gaming sector as a whole, especially at the casinos' levels.
3.2. 2019 Follow-Up Report
Some lapses were identified in the 2017 Mutual Evaluation Report, and DICJ has
made some amendments to the guideline: It has improved its internal controls. But
minor deficiencies remain in DICJ AML/CFT guideline stated in the report:
❖ There is no explicit requirement for casinos to perform name screening
when hiring junior employees.
❖ There is no explicit requirement for an independent audit of the AML/CFT
system. Independent audit is currently a separate requirement of any supervisory
action or testing of the AML/CFT system.
❖ There is no explicit requirement for customer due diligence (CDD) on
occasional transactions, but there is a CDD requirement when establishing stable
business relationships, identifying suspicious transactions, or involving large-sum
transactions.
Audit Your Customers Who Engaged in Macao Gambling Activities
4
4. DICJ Supervision
DICJ is the competent authority to supervise compliance of the AML/CFT laws and
regulations over casinos and junket promoters. DICJ published Preventive Measures for
AML and CFT in 2016 (amended and re-published by Instruction No.1/2019) in order to
enhance the supervision of AML/CFT in the gaming sector. The guideline requires casinos
to implement their AML/CFT obligations; and those who violate their obligations will be
punished.
The following table will explain the regulations of the guideline so we can understand how
the DICJ supervises the gaming sector. The guideline is consistent with FATF standards,
and that is why APG rated R28. Regulation and supervision of DNFBPs as “largely
compliant.”
DICJ Regulation FATF Recommendations
Article 4 AML/CFT Internal Control Policies and
Procedures Article 5 Scopes of the AML/CFT Internal Control
Policies and Procedures
Introduction:
Casinos should have comprehensive internal control policies and procedures. Internal
control-related rules and procedures need to be approved by the DICJ.
Article 6 Risk Assessment R1. Assessing risks and
applying a risk-based approach
Introduction:
According to the 2017 Mutual Evaluation Report, the larger casinos summarized and
demonstrated to the APG team a comprehensive risk-assessment methodology in
identifying and assessing risks associated with the gaming sector, including junket
promoters.
The assessments covered national/geographic risk, customer risk, product and service
risk, risks associated with the nature of the transactions, such as VIP, technology involved
(TITO), etc.
It was also mentioned that one of the major global casinos outlined a risk-assessment
methodology. The risk-assessment report which detailed threats, inherent risks,
vulnerabilities, and residual risks, and demonstrated impressive knowledge of the risk
environment and practices to mitigate those identified risks.
Audit Your Customers Who Engaged in Macao Gambling Activities
5
Article 9 Identification and Verification of Identity R10. Customer due diligence
Introduction:
Casinos should perform CDD, including the obligation to identify and verify.
Junkets are also obliged to submit the information of their customers to casinos for
identification and verification.
Article 10 Reporting Large-Sum Transactions N/A
Introduction:
Any bets or repayments activity aggregated or by single time within 24-hour exceeds
MOP500,000 (USD$62,500), then a large-sum transaction report (REVO) must be filed
with DICJ.
Article 11 Reporting Suspicious Transactions R20. Reporting of suspicious
transactions
Introduction:
Obligation for casinos to summit the suspicious transactions report (STR).
The gaming sector has its indicators of money laundering using casino value instrument,
which can be divided into two types:
1. Indicators for cage is generally a suspicious source of chips, with very little or no
gaming activities. Redemption of chips without gaming records is the most
common suspicious transaction indicator.
2. Indicators for the gaming table are generally a bet against others, parallel even
money betting, etc.
Article 12 Completing and Signing the ROVEs and
STRs
Article 14 AML/CFT Reporting by Junket Promoters
N/A
Introduction:
All reports (including those submitted by the junkets) must be signed and reviewed by
the compliance officer before submission.
Article 15 Politically Exposed Persons (PEPs) R12. Politically exposed
persons
Introduction:
The 2017 Mutual Evaluation Report recommends that DICJ should include international
PEPs in the definition of PEPs to meet FAFT standards. In 2019, DICJ has incorporated
this recommendation into the AML/CFT guidelines. Enhanced due diligence should be
applied for PEPs, their family members, and close associates of the PEPs.
Article 16 Enhanced Due Diligence Related with the
Risks of Operations R19. Higher-risk countries
Introduction:
Casinos should carry out enhanced due diligence measures for their customers, the
representatives or the beneficial owner of those patrons that are adequate and
proportionate to their risks identified, based on the nature of business relationship or type
of transaction, and also the country risk (e.g., high-risk country indicated by the FATF).
Audit Your Customers Who Engaged in Macao Gambling Activities
6
Article 17 Business Relationships with Companies
Within the Same Economic Group
18. Internal controls and
foreign branches and
subsidiaries
Introduction:
These companies are mainly non-Macao registered companies, such as foreign gaming
companies and their related companies and gaming promoters, and they are associated
with the six casinos. The main purpose of these companies is to transfer their funds from
overseas to Macao for gaming-related activities. Such companies need to obtain DICJ's
approval if they want to have a local financial institutions account in Macao.
Casinos are requested to perform enhanced due diligence for companies within the same
economic group in order to identify the source of funds and verify the identity of the
holders and the beneficial owners.
Article 19 Wire Transfers 16. Wire transfers
Introduction:
Any domestic or cross-border wire transfers of funds through financial institutions, no
matter whether it is inward or outward, casinos need to provide the financial institution
with the sender or payee information.
Article 20 New Technologies 15. New technologies
Introduction:
When introducing and using authorized new technologies in the gaming sector, it shall be
subject to enhanced due diligence, identification, and preliminary assessment of the
inherent ML/FT risks, and exercise appropriate and effective measures to mitigate the
potential risks.
Ticket in / Ticket Out (TITO) is one of the new technologies. It is a physical settlement
note for electronic entertainment machines (such as slot machines). TITO can be divided
into registered and anonymous, depending on whether the customers have inputted their
membership number into the machine. Anonymous TITO can be used as a tool for money
laundering. For this reason, casinos set a limit to the TITO, the maximum denomination
is MOP 50,000 (USD$6,250). That is how casinos take effective measures to mitigate the
potential risks.
Article 21 Scope of the Enhanced Due Diligence N/A
Introduction:
When entering into a stable business relationship with high-risk customers, senior
management approval should be obtained. Furthermore, casinos should obtain additional
information about the customers, their representatives, or the beneficial owners; perform
enhanced monitoring over those transactions; and increase the frequency to update the
CDD information.
Article 22 Obligation to Refuse Transactions N/A
Introduction:
When front-line staff members find a transaction suspicious, they can refuse to carry out
the transaction, such as refusing to redeem the customer’s chips for cash. Afterward, an
STR should be filed.
Audit Your Customers Who Engaged in Macao Gambling Activities
7
Article 23 Confidentiality 21. Tipping-off and
confidentiality
Introduction:
This complies with FATF recommendations 21. STR and REVO are confidential and
cannot be disclosed to third parties.
Article 24 Document Retention 11. Record keeping
Introduction:
This complies with FATF recommendations 11. All necessary records on transactions
should be maintained for at least five years.
Article 26 Due Diligence and Updating of Suspected
Terrorists Database 35. Sanctions
Introduction:
Casinos should take all the necessary measures to prevent entering into any kind of
business or commercial relationship with a person suspected of terrorism, or with those
individuals designated as terrorists by domestic or international competent authorities.
Before entering a relationship with the players and when the database is updated, a name
screening is required.
Although the requirement highlighted by the DICJ guideline included only those
suspected of terrorism, the 2017 Mutual Evaluation Report indicates that casinos have
implemented higher standards. They also include PEP lists, U.N. sanctions list, and the
FATF high-risk countries list in their database.
Article 27 Function of AML/CFT Compliance N/A
Article 28 Compliance Officer
Introduction:
Casinos should maintain an independent, permanent, and effective compliance function,
and ensure that adequate powers, means, and resources are provided to the compliance
function to perform the duties and have the authority for timely access to all relevant
information.
The compliance officer should be functionally independent to perform the AML/CFT
duties and should coordinate the implementation of all AML/CFT policies and internal
control procedures in order to prevent AML/CFT crime.
Article 29 Compliance Culture N/A
Introduction:
Casinos need to build up a companywide culture for AML/CFT. These duties should be
specifically the obligation of the board of directors for legal persons, or the holders of
gaming licenses in case of natural persons.
Article 30 Duty of Employee Training N/A
Introduction:
Each casino has its own AML/CFT training manual for its employees. The training plan
needs to be evaluated and approved by DICJ. Some casinos even require their staffs to
meet the international AML/CFT standard.
Casinos conduct AML/CFT evaluation annually to ensure their staff members keep a
good understanding of their AML/CFT obligation. Staff who fail the evaluation are not
allowed to perform front-line operations.
Audit Your Customers Who Engaged in Macao Gambling Activities
8
Not Simplified Due Diligent Is Allowed N/A
Introduction:
According to the 2017 Mutual Evaluation Report, simplified measures are not provided
for in the DICJ AML/CFT guideline for the gaming sector as it is high risk.
(DICJ Instruction No.1/2019 English Version, P4-21)
We can rely on the relevant documents issued by the gaming sector as a source of
information to identify customer risk because they have implemented comprehensive
controls to mitigate the ML/TF risk.
5. Overview of the Macao Gaming Sector
CDD is a fundamental part of AML/CFT controls. In order to mitigate the risk of customers
engaged in gaming activities, the best way is to have a deep understanding of the
background and operation of the gaming sector, including the six casinos and junkets. Then
we will discuss the types of gaming customers that might be encountered and briefly
introduce their characteristics and gaming behavior. Finally presented are the additional
services provided by the gaming sector which are closely related to customers engaged in
gaming activities.
5.1. The Six Concessionaires and Sub-Concessionaires
In 2002, the Macao SAR government issued three gambling licenses (commonly
known as "concessionaires") through international bid. Subsequently, the Macao
government had made an alteration on the concession contract and allowed three
more companies to have a sub-concession relationship with the three concessionaires
(commonly known as "sub-concessionaires").
Therefore, there are a total of six casinos:
1) SJM Holdings Limited (Macao local company), concessionaire
2) MGM Grand Paradise Ltd. (international company) entered into a sub-concession
contract with SJM.
3) Wynn Macao Limited (international company), concessionaire
4) Melco PBL Gaming (Macao) Limited (Macao local company), entered into a sub-
concession contract with Wynn
5) Galaxy Casino, S.A. (Macao local company), concessionaire
6) Venetian Macao Ltd. (international company), entered into a sub-concession
contract with Galaxy
At year-end 2018, there were a total of 41 casinos in Macao. Among the total number,
SJM has 22 casinos; MGM has 2 casinos; Wynn has 2 casinos; Melco PBL has 4
casinos; Galaxy has 6 casinos; and the Venetian has 5 casinos.
The six casino companies are directly supervised by the DICJ. Three of them are
international companies, required to implement more rigorous AML/CFT control.
Audit Your Customers Who Engaged in Macao Gambling Activities
9
5.2. Junket Promoters
Junket promoters are not owned by the casinos; they contract with casinos. Casinos
would offer the promoters venues, gaming tables, and staff (mainly dealers and
security). Junket promoters are responsible for ushering the wealthy players to Macao
by offering luxury travel and accommodation promotions (Duggan, 2017).
VIP junket promoters have two types of remuneration models. The commission
model is a fixed rate of VIP rolling chip turnover, and the win rate model is when
VIP junket operators share the gross gaming win/loss with casinos (Master, 2011).
5.3. Types of Gaming Players
The gaming sector in Macao categorizes the customers into two main types: mass
gaming players and VIP players.
5.3.1. Mass Gaming Players
Mass gaming players are generally occasional players, who play table games and
slot machines on the mass gaming floors. The amount of wagering is small, and
additional services may not be used by the mass gaming players.
CDD does not necessarily need to be done unless players conduct large-sum
transactions (more than MOP 500,000 [USD$62,500]) or a lower threshold per
casino’s risk appetite). Customer service staff will approach the players and
persuade them to have a membership in order to trace their gaming activities.
Membership of the mass gaming players is a hierarchical structure, and the
membership level reflects the degree of the customers' participation in gaming.
5.3.2. VIP Players
VIP players are large-value betting customers (the betting threshold is MOP
500,000 [USD$62,500]). Casinos and junkets would pay additional attention and
must conduct CDD for VIP players. VIP players generally do not bring cash with
them; instead, they use markers when they are gaming. VIP players used to have
one kind of membership card, and there is no hierarchy structure within the VIP
membership.
VIP players are further divided into premium players and junket players.
Premium players are brought into casinos through direct marketing by casinos.
These players are often granted gaming credits by casinos after considering the
financial capabilities of the players. Junket players are referred to the casinos by
junket promoters. (APG, 2017, Mutual Evaluation Report, p. 17)
In order to earn a commission, VIP players usually need to join the rolling
program. They must use non-negotiable chips rather than cash chips.
Commission is based on the volume of conversion to non-negotiable chips and
deducted by volume of conversion to cash.
Audit Your Customers Who Engaged in Macao Gambling Activities
10
Because junkets are under the supervision of casinos and have poor awareness
of AML/CFT, the identification of the junket and the reporting of suspicious
transactions are less effective. That is why junket players pose greater ML/FT
risk than premium players,
5.4. Additional Services Provided by the Casinos
Casinos will issue a slip when the following transactions are finished; the players
can request to reprint the slip a few days later.
5.4.1. Deposits and Withdrawals
The casinos allow players to make deposits as long as they are members. The
form of deposits and withdrawals can be cash or chips, and there is no limitation
for the deposit/withdraw amount.
5.4.2. Credit Line
Based on its understanding of the VIP players, casinos could issue a credit line
to the VIP players, commonly known as “marker.” Marker is short-term, interest-
free, and for gaming purposes only. In order to prevent customers from using it
for non-gaming purposes, marker is issued as "non-negotiable chips." It means
players cannot cash out the non-negotiable chip if the marker remains unpaid.
In addition, the casinos would ask players to offer a cashier order or remittance
in advance as collateral.
5.4.3. Foreign Currency Exchange
Players need to exchange foreign currency into Hong Kong dollars cash or chips
(also Macao dollars, but it is rare because the Hong Kong dollar is much more
tradable) in order to engage in gaming activities. It is a one-way exchange, which
means it is impossible to exchange back to its original currency.
VIP players can use a foreign currency preservation service so they can get the
equivalent chips. Then they can be partially or fully redeemed in the foreign
currency at the same exchange rate within a certain period of time.
6. Audit Plan Advice
First of all, auditors should also review the risk-assessment report to see whether the report
has already identified the Macao casino risk. The CDD section of the report may not
necessarily reveal the risk because everyone can engage in the gaming activities, but
auditors should check the emerging trend section of the report. That specific risk is the
trend that can be discovered in the transaction pattern.
Once that risk is identified, then auditors should determine the audit objective and the audit
scope. The audit objective should be checking whether there is sufficient control
Audit Your Customers Who Engaged in Macao Gambling Activities
11
implemented to mitigate the risk posed by the customers who engaged in Macao gaming
activities.
In practice, many customers claim that their funds are derived from gaming. However, a
casino’s operation is complex and diverse, and there is no way to discern whether
customers are telling the truth. So, the audit scope should focus on transaction monitoring
and how the front-line staff deals with the customers.
The risk is definitely related to the front-line department, and the auditor should hold a
meeting with the department head. Auditors should ask if the head realizes the bank is
exposed to the risk, and if there are any controls to mitigate the risk. Auditors should also
have interviews with the front-line staff to find out whether they know how to deal with
that customer or not. The audit questionnaire should include the CDD process and source
of funds verification.
Auditors should sample some related transactions to ensure that sufficient supporting
documentation has been obtained. They should also ensure that the documentation is
credible enough to support the transaction and that the purpose of the transaction is
reasonable.
The following section will provide some corrective action recommendations that auditors
may give to the AML compliance department in order to improve the AML program.
7. Recommendations
7.1. Customer Due Diligence
When customers are engaged in Macao gaming activities, the following information
needs to be updated:
7.1.1. The casino at which they gamble: The degree of monitoring
controls varies from casino to casino, while international gaming companies
implement more stringent measures.
7.1.2. What kind of player they are: VIP players pose more risk than
mass gaming players; and junket players are the most at risk. DICJ relies on
casinos to carry out supervision of junkets, which makes the degree of
supervision relatively low.
Membership cards may be the best supporting documents to prove which
casino the customers gamble at and what kind of player they are.
Audit Your Customers Who Engaged in Macao Gambling Activities
12
7.1.3. Which gaming activities they engage in: Based on the time
consuming, cost and rebate, we would know the money-laundering risk of each
gaming activity. Baccarat has the characteristic of high-betting amounts, fast
speed, low cost, and high rebates, making it the best tool for money laundering.
Type Risk Level
Baccarat High
Fantan, Cussec, Roulette Medium
Blackjack, Paikao, Fortune 8,
Texas Holdem Poker, Mahjong Low
However, according to DICJ 2018 gaming statistics, 88.7% of the gaming
revenue was made from baccarat (this section is for reference only).
7.2. Source of Funds and Verification
The simplest way to launder dirty
money is gaming illicit funds for the
purpose of generating certifiable
winnings. The source of funds
should be verified based on two
parts: 1) source of initial stakes, and
2) winnings. As usual, if account
activity is not commensurate with
the customer’s known profile (e.g.,
age, occupation, income), financial
institutions should obtain further
information from the customer on
the source of funds, especially for
large cash transactions.
7.2.1. Source of Initial Stakes
In this section, initial stakes that casinos are willing to receive will be
summarized. We would further discuss the upstream risks.
7.2.1.1. Cash
❖ Cross-border Transportation: According to Law No. 6/2017 Control
of Cross-Border Transportation of Cash and Bearer Negotiable
Instruments, travelers bringing in to Macao currency or bearer negotiable
instruments equal to or exceeding MOP 120,000.00 (USD $15,000), or its
equivalent in another currency, are legally bound to declare the funds.
Funds that have not been declared are suspected as illegal funds. It would
Audit Your Customers Who Engaged in Macao Gambling Activities
13
be rated as a high risk for a source of funds.
ATM cross-border withdrawal: It was the most commonly used
illegal source in the past because perpetrators could use numerous
financial institutions cards to withdraw cash, and their identity is hard to
define.
However, as a result of the implementation of KYC ATM measures,
since 2017, players need to pass the biometric verification, so it is no
longer possible to be a source of large amounts of cash. It would be rated
as a high risk for a source of funds.
❖ Encashment: Use of overseas debit cards for encashment is done
from jewelry/watch shops, pawnshops, and mobile phone retail shops. The
discount of encashment would be treated as a handling fee. In fact, it is
used to avoid capital control. It would be rated as a high risk for a source
of funds.
❖ Borrowing: In order to avoid the capital control, many overseas
players would like to borrow from underground banking. These sources of
funds are suspicious, and the borrowing activity itself is illegal.
It is the riskiest source of funds.
7.2.1.2. Credit Cards: Withdrawal cash from a credit card has an
upper limit, and funds flow is traceable. Casinos would verify whether
the player is the card owner before purchasing chips. Customers can keep
their receipts as supporting documents for transactions. It would be rated
as a low risk for a source of funds.
7.2.1.3. Traveler's Cheque: This is a relatively small amount, and it
is hard to use in a large volumes. Traveler’s cheques would be treated as
foreign currency when purchasing casino chips. It would be rated as a
low risk for a source of funds.
7.2.2. How to Identify Winnings
7.2.2.1. Proof of Winnings
Casinos record customers' gaming activities in the unit of “trip”. Trip is a
continuous and uninterrupted period of gaming, which can last for several
days. Casinos use trip to determine whether customers have gaming
activity within the casinos and whether the cash-out activity involves
money laundering.
For the winnings during trip, the casinos are willing to issue a winning
letter to customers.
Audit Your Customers Who Engaged in Macao Gambling Activities
14
7.2.2.2. Issuance of Winning Cheque
Perpetrators may purchase chips from other money launderers or un-
associated casino patrons with “clean” backgrounds. This is done at a
price greater than the chips' face value. That is why we have to verify the
winnings.
The six casinos are willing to issue cheques to players only for their
winnings. Casinos are also responsible to issue winning cheques for junket
players.
The initial stakes cannot be included in the winning cheque to prevent the
transfer of suspicious funds into legitimate funds. The payee of a winning
cheque can only be the player himself.
There are multiple steps to issuing a winning cheque. Cage would settle
winnings for the players. Then it would ask the gaming table operation
department to verify the winnings and make sure that the players have
gaming activities on the gaming table. If necessary, it will also confirm
with the surveillance department. The compliance department will
perform name screening again to ensure no designated terrorist suspect is
involved. Finally, a winning cheque will be issued by the finance
department.
If a player does not request to issue a winning cheque at the moment of
cash out, he/she will no longer be able to ask for a winning cheque.
If the initial stakes are transferred into the casinos by remittance, the initial
stakes and winnings can also be requested to be remitted at the same time.
7.3. Transaction Monitoring
7.3.1. Cash/Cheque Deposit
Cash or cheque deposit is the most
important step for criminals to legalize
funds. Casinos generally do not obtain
relevant evidence for the source of
funds, and they rely on the self-
certification made by the players, so
their source of funds may remain
doubtful.
Deposits and withdrawal slips issued
by casinos can only be used as a
reference and cannot be treated as
proof of the source of funds. Therefore, financial institutions need to further
verify the source of funds for the upstream.
Audit Your Customers Who Engaged in Macao Gambling Activities
15
Customers are advised to ask casinos to issue a winning cheque instead of
cash. Be careful, a junket would issue a cheque but not a winning cheque.
Cheques issued by the six casinos are the most credible.
If customers insist on depositing cash, it is recommended that customers
request that the casinos issue a winning letter as a supporting document. Even
if the customers do not request it when they cash out at the casinos, they can
ask the casinos to issue it even after the trip is over.
If customers indicate that it is only a temporary deposit and will soon be
withdrawn for gaming, it is recommended they use the casino's deposit service
to avoid excessive cash withdrawal records at the financial institutions.
When customers deposit in non-HKD, auditors need to pay attention to how
they exchange back to foreign currency, because Macao casinos generally use
the Hong Kong dollar for settlement unless they use the foreign currency
preservation service.
7.3.2. Remittance
7.3.2.1. Outward Remittance: Remittance to casinos is used for
gaming or as collateral to issue a marker or repayment for marker.
Remittances to the six casinos are more reasonable and credible. Pay
attention to whether the remittance is to repay the customers’ own marker
because repayment by a third party is also a common suspicious
transaction indicator.
7.3.2.2. Inward Remittance: Casinos are willing to remit the
winnings and initial stakes by the original route and beneficiary. Pay
attention to whether the customers have remitted to the casinos before.
7.3.3. Promissory Notes
Usually issued by local financial institutions, a promissory note is used to issue
a marker or repay the existing marker. Afterward, it is better to ask for a marker
slip as a supporting document.
7.3.4. Clean Collection
Because the cheques issued by casinos are all issued by local financial
institutions in Macao, if players bring it back to their home countries, they need
to use the clean collection service. Since the cheque itself is the best support
for the transaction, there is no need to ask customers for further information.
7.4. Training
Financial institutions should provide frontline staff with training related to gaming
customers, and assist them to develop a better understanding so they can focus on
customer due diligence and determine which documentation they should obtain.
Audit Your Customers Who Engaged in Macao Gambling Activities
16
In addition to educating frontline staff, customers should also be educated. They are
advised to keep relevant documents of gaming. Since the documents issued by the
six casinos are more credible evidence if there are any winnings, try to ask them to
issue a cheque or ask for a winning letter.
7.5. Suspicious Transactions Reporting
Relevant information obtained through the CDD process and transaction
monitoring process should be mentioned in suspicious transactions reports (STRs).
Information should include which casino, which gaming activity, gaming amount,
whether suspicious funds are from the initial stakes or winnings, and whether
marker repayment involves a third party.
8. Conclusion
From the APG Mutual Evaluation Report and DICJ guidelines, we can know that the
Macao government is not letting its gaming sector become a money-laundering hotbed;
instead, it has adopted various measures to make sure Macao meets the international
standards. After understanding the regulation and operation of the gaming sector, auditors
are able to find out which portion of customers is vulnerable to money laundering. We
should focus on the residual risk and take corresponding control to mitigate the risk.
According to Kacy Drury’s CAMS white paper, Casinos Are Financial Institutions?, we
can understand the banking sector and the gaming sector have something in common: They
are both regulated and required to perform customer due diligence, transaction monitoring,
and suspicious transactions reporting, as well as have their own compliance officer to
manage various money-laundering risks. It is not only banks that want to mitigate the AML
risk, but also the casinos. We should know that we are not competitors, but rather
companions. We should learn from each other.
This white paper has unveiled the mystery of the gaming sector, and assisted auditors to
improve the audit plan and enhance the audit process. Although the gaming sector is a high-
risk industry for money laundering, its risks are not irreversible. I hope AML auditors can
become inspired and improve the AML audit program.
Audit Your Customers Who Engaged in Macao Gambling Activities
17
9. Glossary Casino(s)
CDD
DICJ
FATF
ML/TF
PEP
ROVE
STR
Concessionaire(s)/Sub-Concessionaire(s)
Customer Due Diligence
Gaming Inspection and Coordination Bureau
Financial Action Task Force
Money Laundering and Terrorist Financing
Politically Exposed Person
Report of Large Amount Transaction
Suspicious Transactions Report
Audit Your Customers Who Engaged in Macao Gambling Activities
18
10. References Almase, C. (2013, July 19). Everything you wanted to know about casino markers.
Almase Law Blog. Retrieved from https://almaselaw.com/2013/07/everything-
you-wanted-to-know-about-casino-markers/
Asia/Pacific Group. (2017, December). Anti-money laundering and counter-terrorist
financing measures, Macao, China: Mutual evaluation report. Retrieved from
http://www.apgml.org/members-and-observers/members/member-
documents.aspx?m=fded343f-c299-4409-9cfc-0a97d89b6485
DICJ. (2019). DICJ Instruction No.1/2019. Retrieved from
http://www.dicj.gov.mo/web/files/anticrime/DICJ%20Instruction%201-2019-
English.pdf
DICJ. (n.d.). Information of casino address and websites. Retrieved from
http://www.dicj.gov.mo/web/en/information/contacts_casino/content.html#sjm
DICJ. (n.d.). Macao gaming history. Retrieved from
http://www.dicj.gov.mo/web/en/history /
Drury, K. (2014, July). Casinos are financial institutions? ACAMS. Retrieved from
http://www.acams.org/wp-content/uploads/2015/08/Casinos-are-Financial-
Institutions-K-Drury.pdf
DSEC. (n.d.). Statistics of tourists. Retrieved from
https://www.dsec.gov.mo/TourismDBWeb/#/information/0?lang=mo
Duggan, W. (2017, July 15). Casino stocks 101: What is a junket? Benzinga. Retrieved
drom https://www.benzinga.com/general/education/17/07/9779330/casino-stocks-
101-what-is-a-junket
GIF Macao. (n.d.) Casino_Newsletter_Issue_2_201105. Retrieved from
https://www.gif.gov.mo/web1/doc/Newsletter/Casino_Newsletter_Issue_4_20110
5.pdf
GIF Macao. (n.d.). Casino_Newsletter_Issue_1_200910. Retrieved from
https://www.gif.gov.mo/web1/doc/Newsletter/Casino_Newsletter_Issue_1_200910.pdf
Audit Your Customers Who Engaged in Macao Gambling Activities
19
GIF Macao. (n.d.). Casino_Newsletter_Issue_2_201005. Retrieved from
https://www.gif.gov.mo/web1/doc/Newsletter/Casino_Newsletter_Issue_2_20100
5.pdf
Master, F. (2011, October 21). Factbox: How Macau's casino junket system works.
Reuters. Retrieved from https://www.reuters.com/article/us-macau-junkets-
factbox/factbox-how-macaus-casino-junket-system-works-
idUSTRE79K2DS20111021
Master, F. (2011, October 21). Factbox: How Macao's casino junket system works.
Reuters. Retrieved from https://www.reuters.com/article/us-Macao-junkets-
factbox/factbox-how-Macaos-casino-junket-system-works-
idUSTRE79K2DS20111021
Moe, A. (2018, April 20). How to get and use casino credit. Liveaboutdotcom. Retrieved
from https://www.liveabout.com/using-casino-credit-537562
Nevada Gaming Control Board and Gaming Commission. (updated 2020). Gaming
revenue information. Retrieved from https://gaming.nv.gov/index.aspx?page=149
Pemberton, K. (2017). Macao junket operators pose financial crime risks to banks—How
to identify, assess, and address those risks. ACAMS. Retrieved from
http://files.acams.org/pdfs/2017/Macau_Junket_Operators_Pose_Financial_Crime
_Risks_K.Pemberton.pdf