The Chinese government is cracking down on the illicit use in Macau of the state-banked UnionPay debit card to spirit tens of billions of yuan out of the country in violation of national currency controls.
The South China Morning Post reports that UnionPay is imposing a series of measures in a “committed” drive to “combat overseas money laundering, capital flight and other illegal bank card use” in the booming casino enclave.
Gaming insiders and security sources in Macau told the newspaper that the anti-corruption drive launched by President Xi Jinping is zeroing in on transactions processed on hundreds of illegal hand-held card-swiping devices that have poured into Macau illegally.
Analysts say the amounts involved could have totaled more than RMB40 billion (US$6.4 billion) last year alone, effectively circumventing a law that prohibits Chinese citizens from taking more than RMB50,000 out of the country in a year.
A Macau consultant familiar with the city’s ubiquitous pawnshops estimated RMB200 billion in transactions are conducted in Macau each year through UnionPay cards, around 20% of them through mobile devices.
“Otherwise, mainland gamblers cannot get enough money to gamble,” said John Bruce, Macau director of risk consultancy Hill & Associates.
The devices also are used to evade tax on the mainland, which is why they require authorization for use there.
The Macau government called the use of the devices “sporadic” and says they “were dealt with by police”. The central government, however, believes the problem has reached such dimensions that it can no longer be ignored.
The phenomenon also hints at the scale at which actual gaming revenue is being under-reported. Officially, Macau’s casinos booked US$45 billion last year, but estimates are that the real number may be as much as twice that.
At any rate, the crackdown will come as welcome news to the pawnshops, which flourish by allowing mainland gamblers to put expensive retail purchases on their cards which they then sell back to the shops for cash, minus a commission.
The Macau General Chamber of Pawnbrokers figures the illicit swipe trade has caused their business to decline as much as 40%.
“We want the government to take enforcement action to combat such illegal transactions and set up a new law if necessary,” said the group’s president, Chou Chin Leong.
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