Inside Asian Gaming

inside asian gaming JUNE 2015 26 Increasing defaults within the informal credit system funding junket operators are now posing a considerable threat to the gaming industry throughout Asia Insights I f it sounds too good to be true, it probably is. It would have paid investors to heed that old adage when Macau junket operator Huang Shan offered them a return of 2.5% a month to provide funds to finance his activities. Mr Huang had run junket operations in Macau for around four years when in April 2014 he suddenly disappeared with an estimated HK$10 billion (US$1.3 billion) of investors’ money. “When Huang Shan disappeared, I believe my company was one of the first to be contacted for help by some of our investment partners in Macau,” says Pacific Financial Services Ltd Director Tony Tong, whose firm specializes in financial services, risk management, money lending and collection services for the financial and gaming industries. “We conducted searches in Macau and Hong Kong and discovered Mr Huang was not in town.” Mr Tong had first met formally with Huang Shan around six months before his disappearance, in late 2013, at the Presidential Suite of L’ArcMacau. He recounts: “Mr Huang started themeeting by giving me an introduction to his company, business model, The Not-So-Golden Triangle junket agency network, credit players and VIP high-rollers, side- bet commission and credit system. He told me that his company had been offering 2.5% return per month to his junket investors, and his investors were very happy with the high return and he had no problem finding investors in China. “Mr Huang also asked me about fund-raising and IPO possibilities for his group. I questioned his high return rate of 2.5% per month, as compared to most other junket companies offering about 1% to 2% per month to investors, and the sustainability of this high-return model, and all the audit, internal-control and compliance procedures required for IPO, including AML (Anti-Money Laundering), KYC (know your customer), risk management, revenue recognition, accounts receivable, provision for bad debt, credit assessment, and legal due diligence issues.” Ultimately, of course, rather than the IPO route, Mr Huang chose to cash out by absconding with investors’ funds. In so doing, he put a spotlight on the potentially shaky foundations of Macau’s junket networks, even before the city’s VIP market