State-run People’s Bank of China pledges to crack down on gambling-related cross-border capital flow

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Combating cross-border gambling-related financial chains will be a “major political mission” assigned by China’s Central Government, according to a notice published by the People’s Bank of China.

The notice, issued late Thursday, reveals the bank’s deputy governor Fang Yifei held a meeting in Beijing last week at which he outlined plans to “strengthen and reinforce the governance of cross-border gambling financial chain regulations.”

Representatives from China’s Ministry of Public Security, General Administration of Customs, China Banking and Insurance Regulatory Commission, State Foreign Exchange Administration, Payment & Clearing Association of China, China UnionPay and the NetsUnion Clearing Corp all participated in the meeting.

One of the major focuses of the bank’s new directive, Fang said, would be to cut off cross-border gambling-related capital in order to address major financial risks.

Fang urged all financial institutions to “further improve their political positions, enhance their sense of responsibility and urgency in prevention and control, implement ‘two maintenance’ practices, firmly establish and earnestly implement the overall national security concept, and take on the severance of cross-border gambling capital chains as a firm fight.”

He also listed out several policies on implementation, including enhancing the identification and tracking of capital flow. The central bank also asked all financial sectors to strengthen their capability to more rapidly submit large and suspicious transaction reports, to monitor and analyze money laundering, place more attention on account identity verifications and to implement other risk prevention and control efforts.

Despite the renewed focus on capital flight for gambling purposes, JP Morgan analysts DS Kim, Derek Choi and Jeremy An stated in a note that Macau is not necessarily the target.

“It’s difficult to know what the exact scope of subject matter was, since ‘cross-border’ gambling often refers to ‘illegal gambling,’ particularly online casino operation by junkets such as those from Philippines and Cambodia,” they said.

“We note the China government has recently broken up a series of illegal online casino rings across different provinces, which leads us to think the meeting was probably more related to those incidents (as opposed to Macau SAR, where the business has effectively been closed for 4+ months, and counting).

“In short, we wouldn’t necessarily think the meeting focused on Macau and/or ‘legal’ casino operations; the news seems like a non-event to us.”