MACAU With little fanfare, China is sending an official with a 'tough cop' reputation to be its top man in Macau, the world's biggest gambling hub, as Beijing puts tackling corruption center stage.
Li Gang, a veteran of handling contentious issues in Hong Kong, is slated to this year take control of China's liaison office in the former Portuguese colony - which like Hong Kong is a special administrative region under China's 'one country, two systems' principle.
The office, China's representative in Macau, has deepened its ties with casino and junket operators, who helped bring in over two-thirds of Macau's $38 billion in revenues last year.
The low-key but significant moves signal a deliberate attempt by China to be more directly involved in the oversight of Macau, which has drawn unwanted attention with reports of mainland officials laundering state funds and betting millions in the casinos' high-roller VIP rooms.
Rather than signaling a crackdown on Macau's lucrative gambling industry, casino executives say the target is those Chinese officials using public money or pledging state assets to gamble - money that could otherwise be invested in businesses.
For example, Yang Kun, a vice president at Agricultural Bank of China, owed Macau casinos 3 billion yuan ($490 million) in gambling debts, while local media have reported former high-flying politician Bo Xilai laundered money through Macau. There has been no official ruling on either case.
"They are taking a much more proactive role. The Chinese government is more concerned about assets being wasted," said a senior executive at a Macau casino, who didn't want to be named due to the sensitivity of the situation. "For them, it's not about the funds being gambled, but about businesses or factories being squandered."
China has revamped its anti-money laundering rules, Reuters reported this month, and Macau is overhauling its laws to set more explicit requirements to detect suspicious transactions. Francis Tam, Secretary for Economy and Finance, has said there will be stricter oversight of the gaming industry, with the government paying closer attention to abnormal capital flows.
Suspicious transaction reports in Macau rose by almost a fifth last year to 1,840, and more than 70 percent of those were related to the gaming industry, according to Macau's Financial Intelligence Office.
Li, who sits on the Chinese Communist Party's Central Commission for Discipline Inspection, was appointed deputy director of the Macau liaison office in December, and political analysts expect him to be China's main representative later this year when the current chief is due to retire.
Having won plaudits for his firm handling of elections and electoral reform in Hong Kong as deputy director, Li has been quoted by local media as saying anti-corruption efforts are in line with a broader effort - and one of new Chinese President Xi Jinping's priorities - to tackle graft and the illicit outflow of funds, rather than a crackdown on Macau's gaming industry.
Located on the tip of China's southern coast, Macau is the only place in China where casinos are legal, and more than two-thirds of its visitors come from the mainland. Each month, gaming rakes in more than half of Las Vegas' annual revenue of $6.2 billion.
"China's government is always focusing and concentrating on Macau's development," said a representative of the liaison office - which works from a recently renovated building that towers above the gaudy casinos and ubiquitous pawn shops - in response to a question on whether the government was increasing its attention on Macau.
After the release of notorious mobster Wan "Broken Tooth" Kuok-koi in December, representatives from the liaison office informed casino operators that if they faced any trouble they should go directly to them. Under Portuguese control, VIP junket operators like Wan tended to take matters into their own hands, resulting in frequent and bloody violence in the 1990s.
Macau junkets are companies or individuals authorized to issue credit to gamblers and settle any subsequent debts. The biggest junket firms run multi-billion dollar operations. Alvin Chau, founder of one of the leading operators Suncity Group, was this year selected as a member of China's CPPCC Guangdong provincial committee, elevating his political credentials.
Macau's first Junket Association was created on the eve of Broken Tooth's release, with operators, liaison office representatives and local regulators attending a lavish dinner at Las Vegas Sands Corp's new resort. Photos and videos of the dinner posted online show junket operators taking oaths, raising their right hand and reading from a small piece of white paper in the other.
"The association will strive to work together to keep society stable and the economy flourishing and transform Macau into an international city," the Apple Daily quoted the association's president Guo Zhizhong as saying.
Deborah Ng, director of Macau's Financial Intelligence Office, has said that casino operators have adequate controls in place to detect if government officials or high-ranking politicians are gambling.
"I think there's improvement. I can't say what we have done now will totally prevent the risk, but actually we can see that things are improving," Ng said.
(Editing by Ian Geoghegan)