China UnionPay says tightening checks on Macau card use

BEIJING, March 13 Thu Mar 13, 2014 12:33pm EDT

BEIJING, March 13 (Reuters) - China's UnionPay bankcard payment network has tightened checks on suspicious transactions in Macau to combat money laundering, Xinhua cited the company as saying on Thursday.

The move follows reports about the illegal use of UnionPay's cards to obtain cash through fake sales.

"Unionpay has always paid a high degree of attention to risk control in UnionPay cards and participated in joint efforts to crack down on illegal activities, such as money laundering, to safeguard overseas payments," China's state news agency Xinhua quoted an unnamed senior UnionPay official as saying.

Despite this, the official acknowledged that "all major bankcard brands faced the problem" of being conduits for torrents of capital being funnelled into Macau's casinos, given the importance of the gambling sector to Macau's economy, from which 80 percent of the government's revenues are drawn.

Reuters published an in-depth report this week on growing numbers of Chinese using state-backed UnionPay bankcards to illegally spirit billions of dollars into the world's top gambling market of Macau.

Clusters of jewellery and watch shops around Macau's casinos have been allowing Chinese customers to swipe their UnionPay cards for fake purchases in order to obtain hard cash - a way of evading China's strict currency-export controls.

The illicit 'cashback' business has boomed alongside Macau's gambling sector, now seven times the size of Las Vegas, bringing with it the risk of money laundering.

The total value of UnionPay transactions in Macau jewellery and watch stores in 2012 was roughly $45 billion, according to a classified Macau central bank report obtained by Reuters, a figure exceeding even Macau's total gambling revenues that year.

UnionPay was cited as saying in the Xinhua report that it had set up a mechanism to monitor high-risk merchants and large-sum card transactions, while suspending the business of 20 merchants with 'hidden perils' in recent years.

Despite this, the "cashback" business is still rampant in hundreds of stores in and around the casinos, with authorities having yet to take stronger enforcement action to crack down.

Working with commercial banks, UnionPay has imposed a limit on card transactions in Macau and has set up a system to monitor large, abnormal transactions, the official told Xinhua.

But the report acknowledged the growing problem of Macau merchants routing UnionPay transactions electronically across the border to China to escape the scrutiny of Macau authorities.

Since 2013, UnionPay had cracked down on 49 such merchants using 55 UnionPay card-swiping machines, that had racked up sales of 1.86 billion yuan ($302.7 million), Xinhua said.

The Chinese government has also stepped up its anti-corruption campaign to help curb money laundering activities and capital flight, the official was quoted as saying. (Reporting by Kevin Yao and James Pomfret; Editing by Catherine Evans)

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