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Macau Junkets – The Beginning Of The End For VIP Casino Players

The casinos of Macau have a heavy dependency on high rollers coming across the border from China. Macau-based junkets offer incentives and even credit to these wealthy Chinese players. They receive a fat commission from the casinos themselves for providing players who will happily spend millions of dollars at a single sitting. It goes without saying, that this creates a massive need for money laundering and wire fraud. As a result, China is cracking down on Macau casinos to stop all junkets.

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Macau Junkets Cease Operations

Recently it was announced by two huge casino operators in Macau that they would be ceasing their junket operations. The Melco Resorts and Entertainment and the Wynn Macau both stated that old VIP services would cease as they were terminating all existing agreements with Macau jackets.

In many ways, this isn’t really surprising news. From its heady heights a few years ago, gambling in Macau has been gradually declining. As of writing, the casino revenues have fallen for 15 straight months in a row. You have to consider these numbers against all the investment that’s been placed within the Macau Gambling scene, with bigger and bigger gambling palaces and resorts being constructed.

Unfortunately, some of the biggest news coming out of the peninsula concerns junkets that were taking place in VIP rooms. One company that was offering junkets was called Dore Holdings, and they had special access as a VIP room operator. Apparently, they were recently a victim of an inside theft which netted some smart people between HK$200 million and up to HK$2. Obviously, they are a little shy of saying what the exact amount was. Dore Holdings used to work out of the Wynn Macau, which is one of the six biggest casino players to be found in the former Portuguese territory.

What Are Casino Junkets?

One of the first things you have to consider is that, in gambling terms, Macau is around five times bigger than Las Vegas, if we’re talking about gross gaming revenue. For these sorts of sums, thousands of people head over to Macau every day to casinos to win the jackpot by playing on the massive gaming floors and sampling the bright lights and entertainment. But the serious money that moves in the casinos is cordoned off in high roller VIP rooms. And it’s these that are controlled by the secretive Macau junkets system.

The Problems with Macau Junkets?

Well, whenever there’s a lot of cash that needs moving around, then you can be sure there is money laundering going on. There are many rumours that whisper these junket players have closed links to China’s grey banking sector. In fact, the grey banking sector of China is huge, but no Western analyst really knows its size or influence. What we do know is that the grey lending market is the backbone of China’s economic success story. Over the last decade, it has provided liquidity to hoards of Chinese SMEs.

Too Dependent On High Rollers

Today Macau is desperately trying to diversify their entertainment in the same manner that Las Vegas does. Yet they still remain beholden to the fact that 70% of all revenues generated in Macau casinos come from their VIP high rollers. From a business perspective, this is like having all your eggs in one basket. Macau junkets exist to grease the wheels for big-time gamblers from China. These players are in love with jackpot games, like the game of baccarat. With junkets, they can look forward to free travel and free accommodation.

Also, many other high-roller incentives and perks come from playing at the casinos. The house edge for these players is deliberately low. Similar to that you might find if you want to win the jackpot online. For example, at King Billy Casino. Also, we should point out, that contrary to the law, they’re able to move large amounts of cash between mainland China and Macau.

Follow The Money

Legally, a Chinese citizen can only take 20,000 RMB across the border to Macau. This is equivalent to around $3,175. As you can imagine, for many casino players this is a tiny amount to take as their bankroll. So the casino junkets can provide credit to VIP gamblers. They then get a commission from a casino for a slice of the action. These Macau junkets then use grey banks to return the money they’ve collected as debt on mainland China. It then moves back to Macau. Apparently criminal gangs from Fujian and Guangdong provinces are smuggling the cash across the border.

Yet another of the most common jackpot winning strategies is to work with Hong Kong businessmen who happen to own companies on the mainland. Debts in RMB are used to pay these junkets who then use the money to pay off staff wages. The business owner pays the Macau junkets in Hong Kong $ into their accounts in Macau. With such a great exchange rate everybody wins.

There are six main casinos providing junkets with VIP rooms in Macau. These are the Wynn Macau, Sands China, Galaxy Entertainment, SJM Holding, MGM China Holdings and Melco Crown Entertainment. These casinos provide the junkets with dealers, chips, VIP rooms, credit and also give them a fat commission for bringing high rollers into the casino. For their part, the Macau junkets will guarantee a minimum in gross gambling revenue each and every month.

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So Who are the Big Macau Junkets?

Probably the most well-known names within the junket industry are the Neptune group, Dore Holdings and Sun City. Not only do these companies have junkets, but they also have “sub-junkets.” You could look upon these as agents whose job is to try and lure high rollers into the casino with credit and casino incentives. It’s a murky world as the sub-junkets take commissions from the VIP junkets and then they turn around and give this credit to gamblers. The sub-junkets are then in charge of collecting debts, often chasing Chinese players in mainland China.

Do As China Says

One thing to keep in mind is that the Chinese government doesn’t recognize gambling debts. To that end, Macau junkets need to have a personal relationship with their clients, when it comes to collecting debts from them. This has produced its own form of mafia shadow banking sector that is particular to Macau. In other words, you really don’t want to fall into debt with these people. The government of Macau recognizes that this shadowy business needs overhauling. And this is even more urgent now with the decrease in revenues coming into the casinos. In order to attract ordinary gamblers, Macau realises it needs to diversify.

To make a start, Macau’s Gaming Inspection and Coordination Bureau (DICJ) enacted new regulations. These would stop junkets from giving credit to casino players. You have to consider that most Macau junkets operate by offering big spenders from mainland China the opportunity to play in VIP rooms in Macau. They do this by offering them huge lines of credit. Now with this cut-off, Macau junkets can no longer make money from their existing business model.

Macau Junkets Begin Closing

Thanks to Macau’s DICJ stepping in, early December saw many operators decide to shut down their Macau junkets. For example, Melco Resorts and Entertainment immediately closed down all junket operations at their City of Dreams and Studio City casinos. Melco also operates Altira Macau, which is in the Taipa district. This casino has also decided to stop all junket operations next summer. They are looking at plans to attract the mass market of gamblers from the Chinese mainland, as opposed to a small coterie of VIP players. Of course, they will struggle to find gamblers, as they are perfectly happy using online casino sites, like King Billy Casino.

Linda Chen, who is the CEO of Wynn Macau on the Cotai Strip, said the company would terminate all Macau junket agreements. This is at both the Wynn Palace and the Wynn Macau for the end of 2021. As a result, both Wynn and Melco have announced the stoppage of their junket services. But the other four operators have yet to make any announcements. To that end, it’s unclear whether MTM China Holdings, Galaxy Entertainment Group, Sands China and SJM Holdings will actually put a stop to their Macau junkets.

The Untouchable Are beginning To Fall

One thing that doesn’t help the cause of junkets is the fact that recently, the Macau junket kingpin, Alvin Chau Cheok-Wa, was arrested. This was for cross-border gambling and money laundering. What’s interesting is that, in spite of the many years that junkets have been going on, this is the first time that the police in Macau decided to target a top gaming industry executive. Obviously, times are changing. We can now see real pressure coming from the mainland Chinese government. They are now leaning on the gaming industry in Macau to clean up their act.