The Suncity Case: Legal and market implications

The arrest of the CEO of the largest junket operator in Macau, Suncity Group’s Alvin Chau, for alleged involvement in illegal activities related to online gaming and money laundering late last week has put the city at maximum alert on the potential direct and indirect repercussions.
On Tuesday evening, news broke that the group was shutting down all its VIP room business, along with other operations. This has contributed to fears of a significant inhibition of the market, especially given that a very high number of employees from the group lost their jobs with immediate effect.
Several gaming analysts and legal experts have shared their opinions with the Times on the case and its potential aftereffects.
Macau-based gaming expert Ben Lee told the Times that, in his opinion, the Suncity case will prompt a full restructure of junket licensing, as well as for gaming concessions.
“[These licensing restructures will] reflect this latest development, perhaps something along the lines of expressly prohibiting any form of promoting gaming amongst, or eliciting gamblers from, the mainland, or any other jurisdiction where such activities are forbidden,” the managing partner of IGamiX Management & Consulting has said.
Asked how this would affect the other junkets still operating, Lee said that “given the charges against Suncity, it is difficult to see how the junket operators will survive. [And] not only them, but the casinos’ direct marketing teams, who essentially perform a truncated version of the junket scope of activities.”
A similar opinion was expressed by Carlos Lobo, a gaming law expert who believes that because Suncity’s gaming promoter license is held in a sole proprietorship of which Chau is a partner and director, it will be difficult to keep any operation running.
“How can an entity operate gaming activities when its CEO is in preventive custody? I find it almost impossible to find a solution for this problem,” Lobo said. He added that the case might be slightly different for other companies in the group that conduct other economic activities.
“Assuming that the junket license was the one that supported all the other activities, I don’t see any other solution, except for the closure of all junket activity by Suncity,” he stated.
For the gaming law expert, repercussions of this case on other junkets are also inevitable.
“We are at an extremely complex moment, [and] we will have to wait a while to understand the scale of the impact – but to me, this foreshadows the end of the junket system in Macau.”
Lobo also recalled that Suncity group’s junket license was set to expire at the end of this year, and that it would not be renewed by the government taking into account the latest developments.
While acknowledging the potentially negative ramifications of the case, Steve Vickers, specialist in Political and Corporate Risk Consultancy and CEO of Steve Vickers and Associates (SVA) thinks that the case might help to “cleanse the market” of reckless activities – allowing it to function in a more regulated and just manner.
“I think it is important now to consider Macau through a different lens – not the ‘everything goes-gaming hell’ of previous years, but rather positioning it as an integrated part of the wider GBA [Greater Bay Area] vision,” Vickers said. “This will [nonetheless] be a painful process given that 80% of Macau’s gross domestic product is derived from the gaming business.”
For the market analyst, the message from the Chief Executive Ho Iat Seng in the latest Policy Address, which emphasized this new era of “healthy development” for Macau, indicates that this “healthy development” comes from wider political changes on the mainland.
“The Macau government, under direction from Beijing, seems determined to diversify away from total reliance on gaming: the imminent end of the current concessions affords the government great leverage to make whatever changes they consider necessary, [and] consistent with current party policy,” Vickers said.
“The junket sector has been simultaneously squeezed by Covid-19, new regulations and severe pressure on capital controls – an almost fatal combination. The days of wholesale capital control abuse and movement of funds under unlawful circumstances are ending.”
For Vickers, these forthcoming regulatory shifts signaled an end to some or all of the junket business, which has “led to an escalation of efforts by certain junket operators to raise gaming revenues directly on the mainland and to engage in unlawful gaming: both on the mainland and via proxy gaming operations in South East Asia.”
Vickers said that other contributing factors to these schemes were “the Macau unofficial clearance system and some underground banks. All of these activities are, in the final analysis, detrimental to the mainland and Macau.”
The analyst notes, while that the cooperation with junkets among casinos is “technically legal, the harsh reality is that they have been very dependent on junkets.”
Refusing to comment specifically on the Suncity case, Vickers did say that “clearly this is a watershed moment”, but that he believes “there will be a new future” that will take advantage of it.
This future will likely rise to meet the new gaming regulations that the government is preparing, which enforce changes to shareholding regulations for foreign operators, and regulations regarding the repatriation of dividends by foreign firms.
“The game has certainly changed, [but] this is not doomsday – as long as Macau is the only place in China where you can place a bet, and as long as Chinese people love to bet, then Macau will always do well. It just won’t be the only game in town.”

Actions of police questionable
The detention of Chau has also been the basis of several opinions from the legal community.
Local lawyer Jorge Menezes expressed to the Times his disapproval of both the actions and the statements made by the police on the case.
“The police’s actions and declarations were illegal and another show of clumsy incompetence,” Menezes said.
“First, since there is no fugitive surrender agreement with China, Macau police could not have detained Alvin Chau based on a Mainland arrest warrant. Second, China did not request his extradition – [what they did was] ask Chau to surrender himself. Third, it is shocking to see Macau authorities’ unbelievably ill-informed statement [proposing] that Macau citizens must also obey Chinese laws. This is a blatant violation of the principles of autonomy of the MSAR [Macau Special Administrative Region] and of ‘one country, two systems’, the Basic Law, the People’s Republic of China Constitution, and the [Sino-Portuguese] Joint Declaration.”
For Menezes, the case began badly and attempts to correct it have further complicated the process.
“Faced with these embarrassing mistakes, the Macau authorities then contradicted themselves, rushing to say that he was detained based on a local investigation for crimes allegedly committed in Macau (not China), and that they did not know the content of the Wenzhou investigation […] This is another blunder because cross-border criminal activities call for judiciary cooperation with China, which is legal and expected in a case of this nature,” Menezes explained.
For the lawyer, there is a lot of explaining to do by the local authorities. These authorities include the Gaming Inspection and Coordination Bureau (DICJ) because, from the information provided by the Judiciary Police (PJ), the crimes now attributed to Chau and his team go as far back as 2007.
“How can DICJ and the Macau authorities explain that the largest gaming promoter has been acting unlawfully for [the past] 15 years under their [nose]? What does it have to say about the (sub)concessionaires’ alarming lack of internal compliance? Did no one ever notice anything wrong until a Mainland arrest warrant arrived on Macau’s lap? This may ring some alarm bells, including regulatory and Foreign Corrupt Practices Act bells in the US.”
By contrast, the Secretary for Security Wong Sio Chak came to the defense of the actions taken by local authorities, justifying the swift arrest of Chau and another 10 people allegedly involved in the case with the need to “protect the evidence.”
“After the mainland authorities made the announcement [that Chau was wanted in the mainland for suspicions of criminal activities], local police had to take quick action to prevent some of the evidence from disappearing,” Wong outlined in statements to the press at the Legislative Assembly on Monday.
The Secretary also noted that local authorities were investigating this case for over a year before detaining Chau and other suspects for questioning. He claimed that the police decided to act at “the right time” and took into account the necessity of preserving all available evidence.
The case was initially made public last Friday (November 26), when news broke that the People’s prosecution office in Wenzhou, Zhejiang, had issued a warrant for the arrest of Chau under allegations of illegal gaming activities in the mainland.