Macau’s system of contractual deals for VIP gaming was established in the mid 1980s and had an important role in the supply of VIP players to the casinos, despite the limited government regulation in place to control such activity. In broader terms they were private agreements, under the general framework of commercial law, submitted to the authorization of the Gaming Inspection and Coordination Bureau.
Following the liberalisation of the gaming sector, Macau government assessed the situation and concluded that the concentration of Macau’s gaming revenues on the high-stakes gaming sector (and the taxes thereof) was closely linked to the junkets’ activities and that therefore specific regulation was justified.
To obtain a junket license the applicant must undergo a licensing procedure that aims mainly to confirm their idoneousness and of their shareholders, directors and principal employees or collaborators. The current regulation places a great emphasis on the fact that the procedure and subsequent investigations after the license is granted are aimed to determine whether or not the applicant or the license holder is fit to develop the junket activity.
If the applicant is a company it is required that their corporate purpose is solely the junket activity and its registered capital can only be held by individuals and not by companies, so that the authorities can identify the ultimate beneficiary of the junket business.
Following the approval, a junket licence is issued and the business registration is concluded. The junket licence is valid for a calendar year from 1st January to 31st
requests must be submitted by 30th
December, being that the renewal September.
The junket company is then able to operate according with the applicable laws and the terms and conditions set forth in the agreement signed with the gaming operator.
The junket commission cap
As VIP gaming assumed such preponderance and junkets had such impact following gaming liberalization it was only a matter of time before the gaming operators lured the best junkets to work with them by offering higher commission rates. This led to a situation where the gaming concessionaires were offering such high commissions that their profit margins was being squeezed to the limit.
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It is determined that only casino operators are legally authorized to provide gaming credit, but junket operators can also be an authorized gaming credit provider if they enter into “credit provision agreements” with gaming operators. The provision of gaming credit by any other third party is forbidden and unenforceable.
Credit provision agreements between a gaming operator and a junket operator and its
In order to protect gaming operators and end the “junket commission war” Macau’s Government introduced amendments to the junket activity regulation determining that a maximum commission cap on the commissions and other types of payments to junkets by the casino operators can be set through a dispatch Macau’s Secretary for Economy and Finance. It was also clarified that any bonuses, gratuities, services or other pecuniary advantages owed to any parties connected to junkets will be considered as commercial payment. It is irrelevant if the payments are made in Macau or abroad, directly or through a third party in which the junket has a stake or a relationship.
Such cap was set at 1.25% of the total wager (net rolling) regardless of the basis used for its calculation and came into effect on 22nd September 2009.
The Government controls the effectiveness of such cap with the legal obligation that the casino operators to file with the Gaming Inspection and Coordination Bureau a copy of any agreements entered into with the junket operators and any other complementary agreements or documents involving obligations or payments equal to or higher than one million patacas (US$120,000).
Provision of gaming credit
Gaming credit provision is a key element in the success of Macau’s gaming industry. Since many of the VIP high rollers are mainland Chinese limited to bring in a maximum of RMB20,000 (US$2,950) across the border, gaming credit provision, especially through junket operators, provides alternative forms of funding.
The granting of gaming credit is regulated under Law no. 5/2004, and is in force since 1st
July
2004. The provision of gaming credit occurs when a credit provider transmits to a third party the ownership of casino chips for games of fortune and chance without the immediate payment of money.
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