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Singapore
WHEN Chinese businessman Wang Xi first played at the Marina Bay Sands (MBS) casino in Singapore, he hit the jackpot, winning $ 3.7 million.
After more victories on subsequent trips, his luck turned sour and he racked up millions in losses.
After a particularly difficult day in the high rollers room, he threw a glass of water at a staff member and brought his father to review his accounts, according to documents seen by Bloomberg.
The family’s investigation produced a windfall of another kind. In a 2019 lawsuit, Wang claimed that Marina Bay Sands had transferred S $ 9.1 million of his money to third parties in 22 separate transactions without his authorization.
The forms to transfer his money were not signed by him and appear to have been forged, the originals destroyed, according to the lawsuit. The casino settled the case in June and paid Wang, without admitting to having committed a crime.
His lawsuit and others like it shed light on the murky world of third-party transfers that casinos and players use to settle accounts.
Since gambling is illegal on the mainland, so-called gambling operators have stepped in to facilitate it, especially in Macau, a favorite of Chinese players.
It is not easy for Chinese citizens to transfer money abroad, so in addition to booking five-star hotels and private jets, tour operators often act as an informal bank, providing credit to players, hiding profits, and settling losses with casinos and other gamblers.
In Singapore, MBS, the integrated complex owned by American billionaire Sheldon Adelson Las Vegas Sands, prohibits the use of these junkets, concerned that the untraceable flow of money opens the door to money laundering.
Instead, the casino allows customers to transfer money to other players they know, covering losses or sharing profits. Think of it as an informal loan club among millionaires.
For the casino, the so-called “authorization letters” seemed like a way to avoid junkets and, at the same time, facilitate the play of the “whales” that generate so much profit for their business.
Third-party transfers, which are legal, have been used by the casino for years, according to people familiar with the operations.
An internal investigation showed that casino employees shuffled 3,419 transfers worth S $ 1.64 billion between players from October 2010 to December 2018.
One problem for MBS is that multiple employees appear to have hijacked the process from 2013 to 2018.
They would get users to sign a blank authorization form to get started, then fill in the transfer amount and other details for later transfers.
Sometimes they used photocopies of the same document multiple times to speed up moves, copy signatures if necessary, and destroy the originals after the funds were shipped, the people said.
MBS management was largely unaware of the transfer issue until 2018, according to a former compliance executive who was interviewed as part of an internal investigation.
When the executive brought up the issue and tried to address it, the operations and legal teams urged him to back off. His contract was later not renewed, the official told the law firm conducting the investigation.
MBS says it has reduced third-party transfers and tightened security over their use. Documents seen by Bloomberg show that the number of transfers dropped to just six in 2018 from a peak of 1,011 in 2014.
In a June letter to the Singapore casino regulator, MBS said it took steps in 2018 to increase its scrutiny of all transfers and further strengthened the measures this year.
These steps included ensuring that all transfer letters had new “wet ink” signatures and that staff received verbal confirmation from the client before moving funds.
Third Party Transfers “are subject to enhanced due diligence checks, which will include selecting the user and the third party for travel affiliation and the statement of the relationship between the users and the reasons the user makes the payment to third parties. “, he wrote the casino.
“MBS remains focused on having the highest level of governance, compliance and internal controls best practices that are continually improved.”
Unauthorized transfers weren’t the only problem at the casino before they were resolved starting in 2018.
While MBS’s policy is not to deal with junkets, some rogue employees were working with these operators to attract Chinese players, according to documents reviewed by Bloomberg.
There have been cases where Chinese customers said they settled their gambling accounts through the junkets, not passing the money to the casino, resulting in uncollected debts and subsequent legal action.
For example, in 2018, MBS sued a client named Luo Shandong, seeking repayment of S $ 3.5 million in debt and gambling interest, according to court documents.
Luo says he paid the money through Tian Du Gaming Promotion, a group travel company that operated out of the casino’s VIP room.
He says Tian Du provided him with credit and collected refunds on behalf of MBS. The casino denied the connection.
A collections executive at MBS says it was common for customers to inform the casino that they had paid a third party.
The executive would then be required to inform them that the wrong party had been paid, according to the internal investigation.
Whales are the great sources of income for casinos, and some employees say they needed to work with junkets to attract them.
A former marketing executive says that when MBS opened, they had to call the junkets due to a lack of local contacts.
While it’s unclear how much money unauthorized transfers and unpaid debts cost MBS, from 2013 through March 2020, the casino canceled $ 717 million from 928 accounts, according to an internal document seen by Bloomberg.
A former Sands executive says that typical losses for a casino of that size are $ 20 million to $ 30 million a year.
The peak cancellations occurred between 2015 and 2017, the years immediately after the largest transfers, while 67 percent of the dollar value was tied to Chinese customers, the document showed.
The casino denies the transfers contributed to the write-offs.
“Third party transfers are part of the normal course of business within our industry.
“We remain confident that the processes we have in place related to such transfers are secure, with appropriate levels of authorization and controls,” the casino said in a statement to Bloomberg.
“Likewise, because customers sometimes finance their gambling at our property by borrowing funds that they don’t pay back later, write-offs are not uncommon in our business,” the casino added.
“Any suggestion that write-offs are commonly the result of third-party transfers, or that write-offs on our property exceed industry standards, is inaccurate.”
MBS remains under scrutiny. The U.S. Department of Justice (DOJ) is reviewing whether the casino violated money laundering controls in its treatment of high rollers and retaliated against whistleblowers who are current or former employees, according to a subpoena issued in January. to a former chief compliance officer at the casino.
The US attorney’s office in Las Vegas declined to comment on the Justice Department investigation.
“Marina Bay Sands is committed to running the best-in-class compliance program and has dedicated significant resources to building the robust program currently in place,” the casino said in the statement to Bloomberg.
“As part of that program, we evaluate our internal policies on a regular basis and make changes when our business and compliance objectives are not met or our business values are not met.”
The Singapore police force is also investigating transfers in the wake of the Wang case, and the casino has hired another law firm, Davinder Singh Chambers, to conduct an investigation into employee wires.
The Casino Regulatory Authority has completed its investigations and there are no ongoing reviews, says an agency spokesperson.
Singapore had advance reservations about casinos. Prime Minister Lee Hsien Loong was concerned that gambling could bring “undesirable activities”: money laundering and organized crime.
Adelson, the 23rd richest person in the US, accentuated the positive after Singapore ended its casino ban: thousands of jobs, billions of dollars in tourism revenue, and a chance for Singapore to lose its reputation as one of the dreamiest places in Asia. .
A decade later, it seems both parties were right.
MBS is a great success. Despite Covid-19, it is one of the most profitable casinos in the world based on margins, accounting for a third of profits in Adelson’s Las Vegas Sands Corp.
Mr. Adelson shows no signs of backing down. In fact, he is doubling down in Asia as he explores the sale of his Las Vegas properties.
It has already committed to a $ 3.3 billion MBS expansion, which will include a fourth hotel tower, a 15,000-seat stadium and a convention center.
“History has shown us that these businesses are to some extent too big to fail,” says Ben Lee, managing partner at IGamiX based in Macau.
Las Vegas Sands “already had a couple of run-ins with the Justice Department, resulting in minor fines, a slap on the wrist and then business as usual.” BLOOMBERG
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