The Suncity Group Case Study: The role of Junket Operators Money Laundering and Lessons Learned

This article is based on UNODC Report: Casinos, Money Laundering, Underground Banking and Transnational Organized Crime in East and Southeast Asia: A Hidden and Accelerating Threat

Alvin Chau of Suncity Group was sentenced to 18 years in prison on hundreds of charges relating to organized crime, illegal betting and money laundering enabled. Suncity Group was one of the largest junket operators globally.

What is a junket operator

A junket operator is a person or organization that works with casinos to attract high-wealth individuals to gamble at the casino. They arrange special programs and tours for VIP players and provide them with perks and incentives.

Traditionally, junket operators like Suncity Group facilitate high-roller gambling by:

• Recruiting wealthy clients, primarily from mainland China.  

• Arranging travel, accommodation, and other services.

• Most importantly, providing credit for gambling, circumventing China's capital controls.  

Suncity Group became the largest junket operator in Macau, controlling a significant portion of the VIP gambling market. 

How Suncity Facilitated Money Laundering

According to investigations, Suncity Group did not limit its services to junket operations.  They were part of a larger network that provided underground banking services to various criminal enterprises requiring money laundering or money transfer services. The profits generated from these activities were used to fund criminal enterprises and seemingly legitimate investments.

How? By offering:

• VIP Programs and Tours

• Underground Banking Services

• Cash-in cash-out

• Enabled collusion between players in casinos

• Offsetting transactions

• Misuse of Gambling Accounts for Illegal Transactions

• 'Dummy' Room Transactions

Let’s explore how these tactics work.

Money laundering techniques employed:

• VIP Programs and Tours: Suncity’s junket operation facilitated gambling by high-wealth players through VIP programs or tours. These programs offered incentives and perks to VIP club members and prospective VIP gamblers, creating an environment conducive to high-stakes gambling.

• Underground Banking Services: The junket operation served as an underground banking service provider, providing a range of unregulated financial services, including credit issuance, currency exchange, multi-currency payment, settlement solutions, remittances, and extra-legal debt collection mechanisms. These services were exploited by organized crime for various illicit financial activities.

• Cash-in cash-out: A common money laundering scheme in casinos. A criminal could deposit illicit cash into a casino and then exchange it for chips. The criminal would then gamble a bit and then could simply cash out the chips. Then the cash were presented for deposit in a bank as the proceeds of gambling.

• Enabled collusion between players (intentional gambling losses): Criminals and accomplices worked together to transfer funds between them. The criminals bring their ill-gotten gains into either physical or online casinos. The accomplice, acts as another player in the same game. The criminals lose the money to the accomplice, thereby transferring their illicit funds into the accomplice's clean account.

• Offsetting (mirror transactions): This method works in a similar way to Hawala networks, which involves transferring value across borders using a financial credit and debit system. Facilitating offsetting makes it possible for money to be transferred from an entity in one jurisdiction to an entity in a second jurisdiction, often owned buy the same person.

• Misuse of Gambling Accounts for Illegal Transactions: Buyers and sellers of illegal items could use their gambling accounts as traditional bank accounts to make and receive payments. Once the seller's gambling account is credited, the money can be cashed out, claiming it was a successful gamble.

• 'Dummy' Room Transactions: The gambler would use their credit or debit card to "rent" a room at the casino's hotel. The hotel would then issue a fake bill for the room, which the gambler would pay. The gambler would then be given a voucher for the amount paid, which they could exchange for cash or chips at the casino cage.

  This scheme worked because the casino would never actually have to provide the gambler with a room. The gambler would simply pay for the room and then get the money back in the form of chips. This allowed the gambler to gamble with a lot of money without having to carry around so much cash.

Lessons Learned for Casinos

The Suncity case exposes several vulnerabilities casinos need to address to prevent money laundering:

• Junket Operator Scrutiny: Casinos must thoroughly vet junket operators. Understand their business practices, ownership structure, and red flags that might indicate ties to organized crime.

• VIP Program Oversight: VIP programs can be attractive to high-rollers seeking anonymity for illicit funds. Casinos need clear guidelines and monitoring of VIP programs to detect suspicious activity.

• Anti-Money Laundering (AML) Compliance: Strong AML programs are essential. This includes Know Your Customer (KYC) protocols to verify identities and sources of funds, along with employee training to identify and report suspicious transactions.

• Transaction Monitoring: Casinos need robust systems to monitor transactions for red flags. This includes large cash deposits/withdrawals, unusual betting patterns, and activity inconsistent with declared income.

Why AML officers should care

By understanding the tactics of money laundering through junket operators, AML officers can build a stronger defense against this threat. This knowledge allows them to identify red flags in customer behavior, transactions, and junket operator relationships.

So, keep learning!