China has dealt another blow to the country’s ‘shadow banking’ industry by taking down an operation linked to illegal gambling.
On Wednesday, China’s official Xinhua news agency reported that authorities had arrested 14 individuals tied to four gangs in the city of Dalian in northeastern Liaoning province. The gangs reportedly offered gambling services in Macau and South Korea, while using the Agricultural Bank of China to process their transactions.
The gangs collectively held over 2k accounts at the AgBank, China’s third largest bank in terms of assets. Each gang reportedly conducted illegal transactions worth over $100k per day, with the total volume of illegal transfers exceeding over $4.5b during an unspecified time period.
The arrests mark the latest result of Beijing’s desire to stamp out movement of ‘gray capital’ derived from illicit activities. Last week, the Ministry of Public Security announced the takedown of an illegal banking network that handled over $64b in unauthorized transactions, a good portion of which involved illegal gambling.
Beijing’s tightening of the financial screws could also impact the growing trend of Macau junket operators signing deals with casinos in other Asian jurisdictions. As Macau’s VIP business has tumbled, junkets have increasingly steered their VIP clients to casinos in countries including Australia, Cambodia and the Philippines.
On Tuesday, brokerage Sanford C Bernstein Ltd issued a note warning that these international relationships could be at risk if Beijing turned a sharper eye on how junkets are getting money to these casinos. Junkets are reportedly using Macau’s banking system to facilitate transfers between their accounts and international casinos to fund VIP play, a process on which Beijing could exert significant pressure.
With China’s President Xi Jinping having declared all-out war on bad behavior by both ‘tiger and flies,‘ Chinese VIPs prefer gambling at international casinos in the belief that such activity draws less attention than in Macau, where Beijing has spies lurking under every baccarat table. But should Beijing clamp down even harder on overseas money movement, the Bernstein analysts believe junket operators could be forced to redirect their VIPs back to Macau, or do like many other junkets and simply give up.
