Chak Kuong Lao, CAMS: Safeguarding Macau’s AML Effectiveness

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According to a report published by Macau’s Financial Intelligence Office (GIF) in July 2019, the total number of suspicious transaction reports received by GIF during the first half of 2019 was 1,376—a 37.1% decrease compared to the same period in 2018. This change was mainly attributed to the strides of the financial sector and other institutions. With an effective international standard anti-money laundering (AML) framework and working group to identify risk, Macau has been able to improve its AML procedures and establish better defenses against potential money laundering activities.

The “ACAMS Inaugural Macau Symposium—‘Enhanced AML and Financial Crime Tools & Techniques’” hosted nearly 300 attendees on June 27, 2019. Hue Dang, CAMS-Audit, head of Asia Pacific at the Association of Certified Anti-Money Laundering Specialists (ACAMS), conducted an interview with Chak Kuong Lao, CAMS, president of the Macau Anti-Money Laundering Specialists Association (MAMLSA) and the ACAMS Macau Chapter, to discuss the AML trends in Macau and how Macau is making a positive contribution toward combating money laundering.

ACAMS Today: Although the 2017 Macau Mutual Evaluation had an excellent outcome, what are some of the challenges that Macau continues to face in combating financial crime?

Chak Kuong Lao: Macau achieved very positive results in the Asia/Pacific Group on Money Laundering (APG) mutual evaluation report published in July 2017. Yet, there were three areas that received poor ratings, including the low prosecution rate. Criminal investigators have utilized weak investigative techniques in the detection of money laundering and have had low efficiency in obtaining evidence, which resulted in suspects not being prosecuted in a timely manner as well as illegal funds not being frozen. In connection to this, it is recommended to strengthen the professional training for criminal investigators. In response to this deficiency, the government repositioned the reporting structure of the GIF from secretary for economic and financial affairs to the secretary for security since December 2018. This is conducive to the communication and information exchange between the criminal investigation department and GIF to facilitate a quicker response to criminal cases.

AT: What does the Macau Chapter hope to achieve with the inaugural launch of the Macau symposium?

CKL: MAMLSA is following the approach of “going-out, bringing-in” to introduce, promote, exchange and share the status of the effectiveness of AML measures in Macau. This symposium was Macau’s first “bringing-in” approach, where professionals and scholars in the AML field from nearly 10 countries were invited to discuss the AML development and commitment of the gaming industry, which has always been considered sensitive to AML. During the symposium, the culture of compliance in the gaming industry was one of the key issues discussed. Thus, the symposium attracted regulators from the gaming industry, law enforcement agencies, gaming sector practitioners (including gaming intermediaries) and professionals from the financial sector who are highly relevant to the gaming industry.

We were delighted to have senior executives in the compliance and risk management functions from all six Macau gaming concessionaires to share and exchange views on AML practices and experiences, as well as emphasize the importance of the compliance culture. The discussions were interactive—the audience actively participated and raised many interesting and thought-provoking questions. The symposium truly achieved the “bringing-in” approach by engaging with the gaming industry.

AT: How are you overcoming the AML challenges in the financial and gaming industries?

CKL: Financial and gaming sectors can definitely overcome the challenges and risks from money laundering activities through deeper understanding, communication and collaboration:

  1. Put yourself into each other’s shoes. By this, I mean that the gaming industry should try to understand the AML laws and regulations set forth by the Monetary Authority of Macau (AMCM) for financial institutions. On the other hand, the financial sector, especially banks, should try to understand regulations set forth by The Gaming Inspection and Coordination Bureau (DICJ) for the gaming industry (including gaming intermediaries) with an aim to understand fully the specifications in AML for other industries.
  2. The foundation of cross-industry understanding on AML laws/regulations and guidelines can be formed through cross-industry exchanges and/or individual networking. This facilitates learning and face-to-face exchanges on provisions for other industries who aren’t clear. More importantly, it provides an opportunity to understand how other industries implement controls, including specific situations and effects to address the relevant AML laws/regulations and guidelines.
  3. Furthermore, industries could reach a consensus and form a cross-industry mechanism or standard upon which everyone can abide. Of course, this cross-industry mechanism can report to regulatory authorities, such as AMCM, DICJ and/or GIF for advice and seek support from the government.
  4. Both industries should fully perform their duties diligently in accordance with the applicable laws/regulations and guidelines, as well as cooperation mechanisms and methods that have been agreed upon, rather than passing the buck to each other.

Through the four points above, the financial and gaming industries can provide positive contributions toward safeguarding Macau’s AML effectiveness and maintaining a positive image.

AT: How is the Macau Chapter galvanizing the casino industry to change the outside perspective around the money laundering threat?

CKL: MAMLSA does not have the ability to galvanize the gaming industry; thus, it relies heavily on practitioners within the industry, which includes concessionaires and intermediaries, to perform their duties diligently in accordance with relevant and applicable laws/regulations, guidelines and international standards. Nevertheless, MAMLSA is happy to provide assistance via the following methods:

  1. . Encourage collaboration between the gaming and financial industries via MAMLSA’s hosted forums/seminars where professionals from both industries are invited for discussions.
  2. Discuss AML standards in the gaming industry, including various levels of AML training
  3. Actively provide AML trainings to professionals in the gaming companies and gaming concessionaires with an aim to enhance AML knowledge.
  4. Provide views and recommendations to regulatory authorities, gaming industry and intermediaries from an AML expert perspective.

AT: From your perspective, does the money laundering threat remain elevated around junket operators?

CKL: I believe AML measures will always pose a compliance challenge for gaming intermediaries. It is with no doubt that the gaming industry is sensitive and highrisk; however, if gaming concessionaires/intermediaries are properly regulated and comply accordingly, the associated AML risk will be manageable and can thrive in a healthy and orderly manner.

I believe AML measures will always pose a compliance challenge for gaming intermediaries

Gaming intermediaries play a crucial role as their business mainly focuses on the VIP gaming floor. In addition, gaming intermediaries are the first contact point to liaise with gamblers and most likely high rollers. It is important for gaming intermediaries to act diligently and perform quality AML measures such as know your customer (KYC) and customer due diligence and report to authorities when they encounter suspicious customers or transactions per standard procedure. Unfortunately, due to fierce competition between intermediaries and to maximize profit margins, there have been cases where some individuals will lower the threshold of KYC and perform illegal actions that lead to AML risk.

In order for gaming intermediaries to seriously value AML compliance work—apart from regulation by gaming concessionaires and regulators—it is recommended that the DICJ should consider including assessments on AML controls for intermediaries and make this one of the key criteria in the evaluation during the annual license process. Secondly, each gaming intermediary, especially the large one, should establish a designated department with sufficient professionals to be responsible for AML compliance. Lastly, it is necessary to provide professional training, promote awareness and enhance AML knowledge across all employees in different levels.

AT: In your opinion, what will the anti-financial crime landscape look like five years from now in Macau?

CKL: Although the 2017 APG’s results have indicated Macau has effective AML measures, the government’s AML work doesn’t end here. On the contrary, the government has been updating its AML regulations, which involve multiple departments and enterprises across different sectors. Moreover, since Macau pursues the policy of free trade and gaming as the leading industry as well as the continuous innovation in financial products and rapid changes of financial crimes, it is expected that AML measures will encounter new challenges.

The gaming industry is often considered a high-risk area in money laundering; as such, the gaming industry plays a pivotal role in Macau’s reputation on the global stage

According to the Statistics and Census Service, Macau’s gaming companies and gaming intermediaries account for about 49% of Macau’s industrial structure. The gaming industry is often considered a high-risk area in money laundering; as such, the gaming industry plays a pivotal role in Macau’s reputation on the global stage. As of today, Macau has adopted and enacted a relatively strict set of laws, regulations and guidelines; gaming concessionaires who fail to comply will be impacted during their gaming license renewal or be fined and interviewed by regulatory authorities. In addition, there are more than 100 registered gaming intermediaries in Macau and—due to historical reasons—the barriers to enter this sector were relatively low in the early years, resulting in the capability of gaming intermediaries being varied and AML compliance being not as valued. Therefore, additional work is required.

Money laundering deception has seriously jeopardized public interest. In recent years, telephone deception has been particularly significant. In the past, the elderly were the primary targeted group, whereas today university students and teachers are also victims. These frauds involve young people with high education, as well as significant amounts of money. Due to the conveniences provided by the internet and advanced payments methods, criminals are able to hide their identities when committing fraud. In the past, criminals mainly used foreign bank accounts to collect the illegal proceeds; however, we recently noticed that many local bank accounts were “borrowed” to collect illegal proceeds. People “lend out” their accounts for the collection of illegal proceeds without being aware of the fact that they could be charged with violating AML laws. As such, the general public must have a basic understanding with regards to AML in order to prevent themselves from being used by criminals.

To conclude, as an association of AML professionals, MAMLSA has been promoting AML awareness in schools, supporting higher education institutions to develop relevant degree courses, setting up Certified Anti-Money Laundering Specialist (CAMS) exam centers and providing training for trainthe-trainers courses. With these actions in place, there is a solid foundation in the development of AML professionals and AML education for the general public in Macau. Furthermore, MAMLSA is developing a new gaming-industry-oriented AML certification with an aim to provide additional examples to the Macau’s gaming industry. Through these extensive trainings, I hope that in the near future—in addition to safeguarding Macau’s AML image—more businesses from different industries and sectors will operate in Macau in a regulated manner.

Interviewed by: Hue Dang, CAMS-Audit, head of Asia Pacific, ACAMS, Hong Kong, hdang@acams.org