Las Vegas Sands curbs VIP money transfers; pawn shops fuel Macau’s gamblers

las-vegas-sands-money-transfersCasino operator Las Vegas Sands (LVS) will no longer conduct international money transfers on behalf of its high-rollers and will no longer allow gamblers to transfer funds from their bank accounts using an alias. On Thursday, the Wall Street Journal reported that Sands was overhauling its compliance procedures as a result of increased scrutiny by gambling regulators at home and abroad.

Sands has long permitted high-rollers to deposit money with a casino in one jurisdiction then allowing them to withdraw the funds in another jurisdiction in which Sands operates. (Such transfers totaled $118m between 2007 and 2010.) But last year, Sands was investigated for transferring $100k from Las Vegas to Macau on behalf of an alleged triad figure, while Sands’ handling of millions of dollars on behalf of an alleged Mexican meth dealer and millions more for a former Fry’s Electronics exec later convicted of taking illegal kickbacks drew further scrutiny. In October, it was reported that Sands was close to a deal to resolve these cases, but no announcement has yet been made.

According to the WSJ, Sands is retraining its staff around the globe on US anti-bribery laws. Last summer, emails surfaced suggesting Sands had received offers to settle land-rights issues in Macau in exchange for a high-ranking Chinese official receiving $300m, prompting the Department of Justice to investigate Sands for potential violations of the Foreign Corrupt Practices Act. Sands has reportedly assigned three former FBI agents to its properties in Las Vegas, Macau and Singapore, tasking them with improving the company’s anti-money-laundering protocols and to provide better scrutiny of the VIP gamblers and junket operators with which Sands conducts business.

Commenting on the changes, Sands president Michael Leven said: “The world is changing. There are more people in government concerned about procedures. There are more international funds moving around and more stress about where the money comes from and where it’s going.” The US Treasury’s Financial Crime Enforcement Network is reportedly considering amending laws that would regulate casinos more like banks, i.e. requiring them to collect identification records for their VIPs and verify the source of these high-rollers’ finances. Given that it’s already looking to sell its Sands Bethlehem property, could this increased scrutiny prompt Sands to consider ditching the US altogether and transfer its corporate HQ to Asia?

With China also keeping a tight eye on how money moves through casinos, it’s no wonder that gamblers are forced to get creative in order to indulge in their chosen form of entertainment. Research by auditors KPMG revealed that the number of Chinese consumers traveling abroad in 2012 hit 71% of those surveyed, compared to just 53% in 2008. Of those who traveled abroad, 72% purchased luxury items like cosmetics, watches and designer handbags. Some 60% of these shoppers identified Hong Kong, Taiwan and Macau as their top locations for such purchases.

According to Credit Suisse Group AG analyst Gabriel Chan, many of these luxury purchases in Macau have less to do with status-conscious consumers and more to do with ‘premium mass’ gamblers funding a casino visit. Chinese citizens are limited to bringing RMB 20k ($3.2k) with them when they leave China, and are permitted to withdraw just RMB 10k cash per day from ATMs while they’re abroad. With minimum bets at some premium mass tables starting at RMB 1.6k ($258), that doesn’t leave much room for error.

Chan claims these gamblers, who lack access to the credit provided by Macau’s VIP junket operators, purchase high-priced goods from Macau pawnshops on their debit or credit cards, then trade in the goods for cash at the same shop. A local pawnshop owner told Bloomberg News the typical commission on such transactions is 5% to 10% of the cash refund. Unlike in Hong Kong, Macau pawnshops are allowed to have a retail business on the premises and these now account for as much as 70% of profits. The Macau General Chamber of Pawnbrokers says the number of shops in Macau has risen three-fold to about 170 over the past decade. Like the man said, where there’s a will, there’s a way.