Macau Casinos Fall Victim to Huge Vegas-style Scam

Illegal, under-the-table betting is depriving Macau casinos of up to 50 percent of all gambling revenues, a report Monday said, in a scam reminiscent of the mafia's Las Vegas heyday. The widespread "skimming" could have lost the city's giant casinos more than 100 billion Hong Kong dollars (13 billion US) in the past five years, according to a recent survey of industry executives.

If the size of the scam is accurate, the English-language daily said it would represent the biggest known example of casino skimming ever, costing the Macau taxpayers 40 billion dollars over five years. The survey asked five senior executives at licensed casinos in Macau how big they thought the problem was and, on average, the respondents said the illegal activity represented 78 percent of the official market for VIP gamblers.

Manual Joaquim das Neves, director of Macau's Gaming Inspection and Co-ordination bureau, denied the problem was so widespread, but conceded it needed to be addressed.

"The government is aware of this problem and has been taking measures to prevent it," he was quoted as saying by the newspaper.

Side-betting occurs when a gambler and a junket agent -- the key figures in bringing high-rollers to each casino and much sought after by operators -- negotiate an "off-table" agreement before entering a casino.

Under the agreement, each amount bet on the table will be matched or multiplied by an separate "off-table bet" between the two sides, without the casinos' knowledge. The bet would avoid the high 40 percent tax on gross casino revenues in Macau, allowing the junket operator to offer a better return to the gambler.

"A high tax rate will always provide an incentive for some operators to take revenue 'off the table'," said David Green, a partner at financial services firm PricewaterhouseCoopers in Macau.

"Side betting is notoriously difficult to detect; I suspect it affects all casino jurisdictions with VIP operations. It should be recognised for what it is: a financial crime."

The tiny southern Chinese territory has become a gaming haven in recent years, attracting major US casino operators from Las Vegas. Last year, it overtook the total revenues for 40 gaming centres along Las Vegas's famous strip on the back of fervent gambling from mainland Chinese. Organised crime bosses played a major role in the financing of hotels in "Sin City" helping speed up the city's development in the 1950s and over the next 30 years skimmed millions of unreported, untaxed dollars out of the city.

Their decline from the end of the 1960s was depicted in the film "Casino" starring Robert De Niro, with the film's ending showing the destruction of the old hotels to make way for the gambling palaces.

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