IAG APRIL 2016 - page 4

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Letting the light inonMacau’s junkets
ince Macau’s gaming downturn turned out to be not just a short-term dip but a
protracted slump the city’s leaders have been talking continuously about improving
industryoversight. Inapolicy addressbefore the launchof the sector’smid-term review
a year ago, for example, Chief Executive FernandoChui stated his government planned
to “enhancegaming-related lawsand regulations, strengthensupervisionof thegaming industry,
regulategamingbusinesses’ operationand continue topush for responsiblegaming.”
Greater transparency has often beenmooted as ameans to this end. If the government is
serious about achieving a well-regulated casino industry it could open theGaming Inspection
and Coordination Bureau (DICJ) to public supervision. This is the norm for jurisdictions in
Europe and North America. The stated mission of the Massachusetts Gaming Commission,
for example, is to “create a fair, transparent and participatory process for implementing the
expandedgaming law.”
Macau’s important but beleaguered junket sector is one area where nobody will deny
the DICJ has not done a perfect job. A series of thefts from gaming promoters, including an
astonishingUS$1.3billion stolen from theKimrenGroup in2014, hashighlighted theirwork as
unlicensedandunregulated lenders; borrowing from investors tofinancehigh-rollinggamblers.
Both inside Macau and abroad, there is also a widespread perception of organized crime
involvement inMacau’sVIP rooms (seepage 20 article).
Politicians and academics have criticized the Bureau with claims that its process for
handing out licenses to the junkets lacks openness. “You cannot look at applications. They are
confidential,”says legislator JoséPereiraCoutinho. “Idon’t knowwhat they [theDICJ] aredoing.
Nobody knowswhat they aredoing.”
In January the DICJ made a step forward when it introduced a requirement that junkets
compile and submit monthly accounting reports. Of a total of 176 junkets in operation, 35
were unable to do so and had their licenses revoked. The downturn was no doubt pushing
some out of business, but it’s clear otherswere not deemed fit to be running their own casino
operation. On top of stricter accounting, Kwok Chi Chung, who is president of the junket
group the Association of Gaming and Entertainment Promoters, has said he favors widening
licensing requirements beyond junket operators themselves to include the collaborators they
sub-contract to recruit gamblers.
Yet even expanded licensing requirementswould leave plenty of space for abuse. As things
stand, it’s entirely up to theDICJ topressure each gamingpromoter todisclose every financier
andprofit participant in itsbusiness. Thesemaybe influential stakeholdersor even the junket’s
trueowners, even though their namesdonot appear onofficial paperwork.Wedon’t knowhow
muchdue diligence theDICJ is doingon the promoters it is giving licenses to; how thoroughly
it is investigating them for suitability. As Coutinho says, the Bureau doesn’t have to give out
informationon any of these things.
Theway forward is transparency. TheDICJ could open the process to the public, letting us
know the identity of the casinos that junkets contract with, the chip volume that junkets roll,
their shareholders, key employees and collaborators. Like some jurisdictions, it might even
allowordinary citizens to attend thehearings it holds to assess the suitability of applicants.
Last October, the DICJ issued a statement saying it would revise “as soon as possible”
the Administrative RegulationNo. 6/2002, which regulates the conditions and procedures for
issuinga license toagamingpromoter. The revision, it said,would focuson implementingnew
requirements for capital and the shareholding structureof junket operators, introducing tighter
rulesonaccountingandauditing.Crucially, thestatement also talkedaboutmakingpublicmore
information about the gamingpromoters, “to guarantee that the people involvedwith a junket
operator are suitable, leading tomore transparency in the sector.”
Yet while new accounting rules have been brought in, improved transparency has not.
The US Supreme Court Justice Louis Brandeis famously remarked that sunlight is the best
disinfectant.On transparency, it’s time tomove forward.
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