Police and Thieves in the Street - Macau Casino Junkets, Crime, and Corruption

The Asian Crime Century briefing sixteen

The Macau Court of First Instance last week sentenced casino junket tycoon Levo Chan to 14 years imprisonment after being found guilty of charges relating to organised crime, illicit gaming activities, fraud, and money laundering. Mr. Chan and four other defendants were also ordered to pay a total of HK$779.7 million (US$99.36 million) in compensation to the Macau government and four major casino operators. Coming just three months after the conviction of Alvin Chau, CEO of the Suncity junket, on similar charges, the question is why did nobody in the Macau authorities and the licensed casino operators do anything about this major organised crime activity for so many years?

Levo Chan originally faced 83 charges, but the judge reduced this to 34 due to legal technicalities. The key charges related to allegations that Chan and his ‘Tak Chun’ casino junket had facilitated under-the-table bets in Macau casinos, and in doing so defrauded the Macau government of HK$575.2 million (US$73.3 million) in gaming tax and at least HK$135 million in revenue for the city’s gaming operators between 2014 and 2020.

“Under the table bets”, or “Side gambling”, is unauthorised clandestine parallel wagering by a player at the casino table and a third party who is wagering a larger multiple of the amount on the table. In Macau, side gambling is believed to have taken place in junket controlled VIP rooms but not on open gaming floors. The most common multiple of side gambling is believed to be a ratio of 10 to 1 (i.e. for one dollar bet at the table, a multiple of ten is the real bet by the third party).

Side gambling is attractive to customers and junket operators as no high value transaction report is filed with the casino and the regulator. Table bets can be kept at a lower level than the threshold for high value transaction reports, hence not triggering the need for a report.  In addition, the unknown amount wagered is not part of gross gaming revenue and is hence not taxed.

The Macau authorities could not tolerate side betting because the government did not receive the correct sum in gaming tax (39% of Gross Gaming Revenue) as the difference between the actual wager and table wager was not known to the regulator and therefore not taxed. The sum in gaming tax saved was then pocketed by the junket and the player in the form of ‘rebates’ from the junket. Also, the licensed casino where the junket operated did not receive the correct commission from the junket as most of the actual betting sum was not declared.

Not only does the Macau government benefit from substantial compensation, but there are major awards to MGM Macau (HK$3.83 million), Wynn Macau (HK$36.84 million), Sands China (HK$47 million), Galaxy Entertainment (HK$81.1 million), and SJM (HK$35.65 million).

As not only has Levo Chan been convicted but also four other defendants, it is clear that the offences were part of the general business of the Tak Chun junket company. Crimes of illicit gambling activities like under-the-table betting, fraud, money laundering and involvement in a criminal group are substantial and indicate that Tak Chun junket was involved in prolonged and complex criminality.

This case follows the conviction in January 2023 of Alvin Chau, former CEO of Suncity, for leadership in a criminal organisation, 103 counts of illegal gaming activities in licensed venues (under-the-table betting), 126 counts of illegal gaming activities in licensed venues (under-the-table betting), 54 counts of fraud, 3 counts of attempted fraud, and one count of illegal gaming activities (proxy betting). Chau was sentenced to 18 years imprisonment, six other defendants were also ordered to pay the Macau Government civil compensation of US$833 million, and also pay over US$250 million to gaming operators of the city as compensation for their lost revenue. The Suncity and Tak Chun cases show that Macau casino junkets were involved in prolonged and complex criminality for many years.

Even earlier, in 2014, the major shareholder of the Neptune Group junket was arrested by the Hong Kong Police on suspicion of laundering over HK$ 1.8 billion (US$ 230 million) through banks in Hong Kong. Cheung Chi Tai is well known to the Hong Kong police as a senior leader of the Wo Hop To Triad society, active in his early years in the Aberdeen fish market and given the nickname ‘Tsang Pau’ (掙爆), referring to his ability as an ‘explosive money maker’. Cheung Chi Tai was also implicated in the case against Carson Yeung, the owner of Birmingham City Football Club until 2014 who was convicted in 2015 of five counts of money laundering and sentenced to six years imprisonment. Evidence during the trial showed that Cheung had transferred HK$20 million (US$ 2.55 million) to Carson Yeung, which was believed to be the proceeds of crime.

These major casino junkets, Neptune, Suncity, and Tak Chun, have all been associated with known or suspected Triads for several decades.  And yet the Macau casino license holders as well as the Macau government authorities knew nothing about this prolonged and complex criminal operation. For all of the years that these two huge casino junkets have engaged in under the table bets, fraud, money laundering, and organised crime, and nobody in the Macau government or licensed casino management saw anything suspicious?

The reality is that Macau has been a haven for criminality dominated by Triad societies (Chinese criminal secret societies) throughout its history, and the government as well as casino operators have turned a blind eye to them so that all of them could accumulate huge wealth in the past two decades.

In 1997, the Macau 14K and the Wo On Lok triad societies were in open violent conflict, leading in the first five months of the year to over a dozen murders, following 21 murders in 1996. Wan Kuok Kui, then leader of the Macau faction of the 14K, destabilized the balance of power in the Macau underworld and caused the conflict by trying to capture market share from rival triad factions. The violent conflict only ended when Antonio Baptista, the Portuguese head of the Macau Judiciary Police, personally arrested Wan Kuok Kui in May 1998, leading to his conviction on charges of criminal association, loan sharking, and illegal gambling and a sentence of imprisonment for 15 years.

The Triad conflict stemmed from competition for control of the lucrative casino VIP rooms and vice (prostitution was often included in VIP packages for wealthy gamblers). VIP Rooms were introduced by STDM and Stanley HO to bring high rollers into Macau’s casinos.  The VIP Rooms were leased to “junket” groups that were responsible for bringing customers from the PRC into Macau to gamble, as well as managing the illegal aspects of this business such as giving credit and recovering debts.

After the “settlement” of the Triad conflict in Macau and the opening up of casino licenses to admit US and other investors, there was an unspoken arrangement allowing Triad controlled junkets to continue to operate as long as they did not engage in violence, did not threaten social harmony, and of course were patriotic to the People’s Republic of China. For almost 25 years this unspoken agreement has allowed Triads to get rich from casino junket business as well as the related online betting and money laundering from Macau.

To illustrate the scale of wealth accumulated by Macau junkets and Triads, in July 2019 a PRC state-owned news agency report denounced Suncity for facilitating online gambling and claimed that the annual amount wagered by Suncity mainland clients in the online casinos it operates from Southeast Asia was over a trillion-yuan, equivalent to a staggering $150 billion. In 2019, the People’s Bank of China’s estimated that illegal-betting related capital outflows from the PRC were around CNY 1 trillion (USD 154 billion).

The end result was that the Triad dominated junket business became far too successful, enabling far too many government officials and businessmen to move the massive proceeds of corruption out of the PRC. A blind eye from the Macau authorities as well as the licensed casino operators helped. The sheer scale of this criminal enterprise became the downfall of Alvin Chau and Levo Chan, but police and thieves prospered off this criminality in Macau for 25 years.