A crackdown on junkets in Macau and further afield in places like Australia has seen organized crime gangs shift their activities to Southeast Asia, where there has been a huge increase in the number of illegal land-based and online casinos in recent years. We take a look at the issue.
In early January 2024, Macau’s Gaming Inspection and Coordination Bureau (DICJ) released its list of licensed junkets for the year ahead, with the number of junkets falling to just 18 – half of the 36 junkets licensed a year earlier and continuing a trend that has accelerated in recent times.
Junkets once ruled the roost in Macau, with the 235 junkets operating in 2013 generating in excess of 75% of the SAR’s gaming revenues. But a series of crackdowns by mainland Chinese authorities on graft, capital outflow and cross-border gambling has stifled the industry – in Macau at least – with junket numbers falling each and every year since.
The killer blow was landed in late 2021, when a joint operation between local Macau and mainland authorities led to the arrest of Alvin Chau, the CEO of leading junket operator Suncity Group and long considered Asia’s junket king. The arrest of Chau, who was later jailed for 18 years, and of Tak Chun Group’s Levo Chan, jailed for 14 years, ultimately led to the collapse of the Macau junket model, while significant changes to Macau’s gaming laws – prohibiting the operation of junket rooms in casinos and banning junket operators from inking revenue share agreements with the city’s concessionaires – have many predicting all VIP gaming will be done inhouse within a matter of years.
Further afield, the collapse of Suncity and Tak Chun has been felt as far afield as Australia – where both once ran multiple VIP rooms – as well as the Philippines and Cambodia, with Australia going so far as to effectively ban its casinos from entering into partnerships with Asian-based junkets altogether.
This action was taken in the wake of multiple inquiries into Crown Resorts and Star Entertainment Group which highlighted the fact that their Asian-based junket partners were closely linked to organized crime and triad gangs.
In a recent presentation at the annual Regulating the Game conference held in Sydney in mid-March, Amanda Wood – Managing Director for Forensic Investigations and Intelligence at Kroll – said it had been “absolutely essential for junket operators in Macau to have some kind of relationship with a triad group.”
But the strong actions taken by the governments of China, Macau and Australia against junket operators have only served to create a new dilemma for those observing the movements of organized crime groups worldwide.
In a January report by the United Nations Office on Drugs and Crime (UNODC), it was noted that years of progressive enforcement and regulatory efforts – targeting cross-border cash movement, the casino industry and related money laundering – had seen these groups “revolutionize” the crime environment in Asia and specifically in Southeast Asia, where much of their focus has shifted to.
This is led in part by casino and junket operators, who the UNODC says have effectively become bankers for organized crime. “Many casinos and connected businesses like junkets have physically relocated into autonomous areas and Special Economic Zones across the region that, in some instances, have become safe havens and breeding grounds for criminal networks,” according to comments from UNODC Regional Representative Jeremy Douglas.
While Macau was once the epicenter for those linked to junkets, the focus now is almost entirely on Southeast Asia and specifically the famed Golden Triangle region where the borders of Myanmar, Thailand, Laos and mainland China converge.
It is to here, says Wood, that many of the criminal actors once involved in Macau’s junkets have now relocated their interests.
“What we know about organized crime is that any type of disruption activity undertaken by law enforcement or by regulators is ultimately met with a change in activities,” she explained. “The need to move a lot of funds doesn’t go away just because we say that junkets are now banned in certain casinos, so rather than dissipating in response to the enforcement activities, the criminal activities of the former junket operators and their associates have remained, although the mechanisms through which they now move and launder funds have become increasingly distributed and opaque.
“Many of the same criminal elements associated with the former Macau-based junket operators are continuing to operate underground across Southeast Asia and have evolved to utilize new and increasingly complicated methods to obfuscate funds flows.”
Myanmar’s Shan State has long held the dubious reputation of being a global leader in the production of illicit drugs – heroin being its primary export for many years but with a greater focus on methamphetamine more recently.
According to the UNODC’s report, titled Casinos, Money Laundering, Underground Banking, and Transnational Organized Crime in East and Southeast Asia: A Hidden and Accelerating Threat, the demise of Macau’s junkets has driven “exponential growth” in the Southeast Asian casino industry, with more than 340 licensed and unlicensed casinos operating across the region as of end-2022. In many instances, licensed and unlicensed casinos are co-located, with licensed casinos often providing banking services for the unlicensed casinos in that area. Their primary business? Laundering the funds generated by drug production and other illicit activities.
Perhaps the most infamous of Southeast Asia’s casinos is Kings Roman, located in Laos, which is said to offer far more than gambling services: namely human trafficking, prostitution and the sale of endangered wildlife.
Its owner, Zhao Wei, who holds a 99-year lease to operate a Special Economic Zone in Laos’s Bokeo Province, has been sanctioned by the United States and other nations for his involvement in illegal activities such as money laundering and drug distribution.
Yet tracking the movement of funds is becoming increasingly difficult, with criminal enterprises also moving online in their pursuits.
“Online casinos and cyberfraud have recently mushroomed across Southeast Asia, particularly in the Mekong since the onset of the COVID-19 pandemic,” said UNODC’s Douglas.
“Alarmingly, organized crime groups running many of these operations have done so with growing sophistication, through the use of data mining and processing, blockchain technology and, increasingly, generative artificial intelligence.
“The acceleration of globalized crime networks centered in the Mekong aided by technology has dramatically expanded criminal revenue streams. This has necessitated a revolution in the regional underground banking architecture, resulting in the development of systems and infrastructure capable of moving and laundering massive volumes of state-backed fiat and cryptocurrencies.
“While casinos and junkets have for years served as vehicles for regional underground banking and money laundering, the proliferation of online gambling platforms, e-junkets, and both illegal and underregulated cryptocurrency exchanges in Southeast Asia has changed the game, allowing for faster anonymized movement of funds.”
It is amid this new landscape that global law enforcement agencies find their hands increasingly full. As Wood notes, the Special Economic Zones of the Golden Triangle region have largely developed into “self-governing enclaves with national governments restricted, unable or unwilling to actually control what goes on inside the borders of the zone”.
China has made at least some successful moves to interrupt illicit operations in these areas, applying increasing pressure to Myanmar’s military government to crack down on the many scam centers that dot its borders. Late last year, a series of raids on compounds controlled by local warlords saw thousands of Chinese trafficking victims liberated and returned home to the mainland.
But the problem is so widespread that such actions barely touch the surface. And the move to online means of dispersing illegally-gotten funds is adding in new layers of complexity.
“Due to limited access to Special Regions, Special Economic Zones and casino and cyberfraud compounds, it is not possible to determine the full extent of these operations,” the UNODC said. “However, recent cases relating to the dismantling of illegal online gambling and cyberfraud operations, rescues of victims of human trafficking, seizures of bulk cash and virtual assets, as well as arrests of known organized crime figures, demonstrate that the scale of the industry is massive.”
At the same time, it added, the integration of new technologies and “white-label” service providers has meant it has “never been easier to set up an online casino operation”, irrespective of gambling laws within a given jurisdiction.
And yet the fight goes on.
“Failure to address this landscape will have consequences for Southeast Asia and other regions as organized crime reinvest to further innovate, professionalize and consolidate operations,” the UNODC report states.
“Fundamentally, it is important that the region more effectively understand, monitor, prevent and respond to transnational organized crime challenges related to casinos, underground banking and technological innovation.”
