Macau junket operators that bring VIP and high rollers to the special Chinese gambling enclave are being audited by local regulators who are inspecting the financial records of the touring companies.

Macau junket operators China VIP

Macau junket operators that often bring VIPs to the city’s casino resorts by yacht are under close examination by local officials. (Image: Guy Nowell/Sail World)

In a letter toGGRAsia,a website that follows the Asian sector of the casino industry, Macau’s Gaming Inspection and Coordination Bureau confirms “over 60” touring companies are currently being assessed, and that number will more than double as additional companies will be probed in the coming weeks.

The government audits are to look into the financials of the VIP operators who provide gaming credit to their customers in exchange for high-cost travel arrangements. It’s alleged that some wealthy mainlanders use the scheme to funnel money out from underneath China’s highly taxed control.

Macau Market Rebound

China’s crackdown on junkets began in mid-2014 as part of President Xi Jinping’s anti-corruption campaign. The initiative worked in terms of restricting the flow of money from the mainland, but drastically hurt Macau’s thriving economy.

Casinos pulled in $45 billion in 2013, but that number fell to just $28.8 billion in 2015. But the last 12 months has marked a slight rebound for Macau’s gaming industry, as a combination of appealing to the mass market and a resurgence of new junket operations led to the region collecting $30 billion in gaming in 2016.

While resorts begin overhauling their marketing and advertising strategies in order to attract nongaming visitors, March provided some much welcomed news for the VIP sector. The financial report for the first quarter shows VIP gaming revenue growing by nearly 17 percent.

High-stakes baccarat generates the most money, with Macau’s 39 casinos taking $4.43 billion from the game between January through March.

How Junkets Work

Touring companies often act on behalf of the lavish casino resorts in Macau. The city’s six biggest gaming companies, Wynn Macau, Sands China, Galaxy Entertainment, SJM Holdings, MHM China, and Melco Resorts, all heavily rely on their VIP rooms.

Junkets are provided commission by casinos for bringing China’s wealthy gamblers to their resorts. Patrons are enticed through “free” accommodation, travel, and gaming credit. But the extravagant packages cost customers tens of thousands of dollars, and much more.

Suncity Group, one of the leading junket operators in China, starts its packages at around $25,000. Its costliest bundle, the Supreme Travel Package, goes for nearly $650,000.    

Customers typically receive the same amount of gaming chips as the cost of their junket package. Prior to Jinping’s crackdown, customers were able to move their money into Macau, and free it of the country’s high taxes.

China, a communist state, mandates that citizens making just $13,000 or more a year pay 45 percent of their earnings to the government. Wealthy citizens pay even higher tax rates, which is why so many look to lessen their tax burdens by moving money.

Junkets that fail audits and inspections have their licenses revoked or not renewed. There are currently 126 VIP gaming promoters licensed to do business in Macau.