MACAU BUSINESS A
Chinese citizen who comes to Macau to play VIP baccarat will typically spend a minimum of 100,000 yuan. But China only permits 20,000 yuan a trip and $50,000 a year per person to be taken
out of the Mainland. So how can this high roller player circumnavigate the rules? One of the solutions can be using the services of an underground bank, several of which operate in Guangdong Province, enabling him or her to spend “all the money” he or she wants in Macau. One year ago, the Guangdong Provincial Public
Security Department announced that 83 cases had been busted, involving some 207.2 billion yuan, in less than a year. According to Chinese media outlets, the number of cases has jumped sevenfold since 2014. Other data from the same sources: 79 criminal headquarters were uncovered, 231 suspects were arrested, with cash in different currencies seized, amounting to more than 37.15 million yuan, while 3,491 suspicious accounts were frozen, involving 665 million yuan. At the same press conference the head of the Economic Crime Investigation Bureau, Huang Shouying, conceded “underground banking is rampant in Guangdong as the neighbouring province serves as the frontier of ‘open and reform.’” The problem is so serious that China’s Ministry of Public Security has reiterated on several occasions its determination to crack down on underground banking, while the Mainland’s central bank speaks of its intentions to act against underground banks, offshore company accounts and other means of moving money gained from corruption.
The Macau Connection
Huang Shouying added that the underground banks had “primarily sprung up in Shenzhen, Zhuhai, Guangdong, Dongguan, Foshan and other cities in the Pearl River Delta and other coastal cities, as well as some hometowns to overseas Chinese.” From these locations, there’s always a connection with Hong Kong, Macau or Taiwan, according to the same bureau head.
In point of fact, the problem exists in Macau, as the
Monetary Authority of Macau recognises. “AMCM has been keeping a close eye on the matter should it have an implication on the banking sector of Macau; and going after the cases should be within its purview.
Additionally, the law enforcement agency has been co-operating with AMCM to cope with any illegal/unauthorised financial activities,” an Authority told Macau Business. No more details were given, despite our insistence, in particular about the number of cases that have already been analysed. One of the more interesting questions would be to see if any junket was involved in these investigations, as it is a common accusation that they often use the underground banking system to transfer money out of China to fund VIP players in Macau casinos. Guangdong police revealed last November that “at
least 207 billion yuan was channelled out of the province last year” in illegal money transfers, “with some cash channelled to Hong Kong and Macau.” And it was widely reported in China (by Xinhua) that Li Huabo, former section director of the finance bureau in Poyang County of Jiangxi Province, had transferred 12.81 million yuan with the help of an underground bank in Foshan City in Guangdong to gamble in Macau.
How they work Foshan case officers said the underground bank
used by Li had pocketed about 30,000 yuan commission for laundering/transfering the 12.81 million yuan. According to several sources, underground banks
Bin Laden a client “Underground banking is a generic term used to
describe any informal banking arrangements which run parallel to, but generally independent of, the formal banking system. Underground banking systems are also referred to as alternative remittance systems, informal funds transfer systems and informal value transfer systems,” explains
Rob McCusker, from the Australian Institute of Criminology. Underground banking systems (fei ch’ien or flying money) exist not only in China but also in India (known as hawala), Pakistan (hundi), Paraguay and Canada. In the U.S. the 9/11 Commission’s report (2004) maintained that ‘Osama Bin Laden relied generally upon established hawala networks operating in Pakistan, Dubai and throughout the Middle East.’
FEBRUARY 2017 19
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