Marina Bay Sands caught in net of whales and murky waters of third-party transfers

Singapore

WHEN Chinese businessman Wang Xi first gambled at the Marina Bay Sands (MBS) casino in Singapore, he hit the jackpot, winning US$3.7 million.

After more wins in later trips, his luck turned sour and he racked up millions in losses.

After one particularly tough day in the high-roller room, he threw a water glass at a staff member, and brought his father in to review his accounts, according to documents seen by Bloomberg.

The family probe yielded a windfall of a different sort. In a 2019 lawsuit, Mr Wang claimed that Marina Bay Sands had transferred S$9.1 million of his money to third parties in 22 separate transactions without his authorisation.

The forms for wiring his money were not signed by him and appear to have been forged, the originals destroyed, according to the lawsuit. The casino settled the case in June and repaid Mr Wang, without admitting wrongdoing.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

His lawsuit and similar ones shined a light on the murky world of third-party transfers that casinos and gamblers use to settle accounts.

Since gambling is illegal on the mainland, so-called junket operators have stepped in to facilitate it, especially in Macau, a favourite for Chinese gamblers.

It is not easy for Chinese citizens to wire money abroad, so in addition to booking five-star hotels and private jets, junket operators often act as an informal bank, providing gamblers with credit, stashing winnings, and settling losses with casinos and other bettors.

In Singapore, MBS - the integrated resort that is owned by American billionaire Sheldon Adelson's Las Vegas Sands - prohibits the use of these junkets, concerned that the untraceable flow of money opens the door to money laundering.

Instead, the casino allows patrons to transfer money to other gamblers they know, covering losses or sharing winnings. Think of it as an informal lending club among millionaires.

For the casino, the so-called "letters of authorisation" seemed like a way to avoid the junkets while still facilitating gambling by the "whales" who generate so much profit for its business.

Third-party transfers, which are legal, have been used by the casino for years, according to people familiar with the operations.

An internal investigation showed 3,419 transfers worth S$1.64 billion were shuffled among gamblers by casino employees from October 2010 to December 2018.

A problem for MBS is that several employees appear to have highjacked the process from about 2013 to 2018.

They would get the patrons to sign a blank authorisation form to get things started, then fill in the amount of the transfer and other details for subsequent wires.

At times, they would use photocopies of the same document on multiple occasions to expedite the moves, copy signatures if needed, and destroy the originals after the funds were sent, the people said.

MBS management was largely unaware of the transfer problem until 2018, according to a former compliance executive who was interviewed as part of an internal investigation.

When the executive brought up the issue and tried to tackle it, the operations and legal teams urged him to back off. Later, his contract was not renewed, the official told the law firm conducting the investigation.

MBS says it has cut back on third-party transfers and tightened security over their usage. Documents seen by Bloomberg show the amount of transfers dropped to just six in 2018 from a peak of 1,011 in 2014.

In a June letter to Singapore's casino regulator, MBS said it took steps in 2018 to increase its scrutiny of all transfers, and further beefed up the measures this year.

These steps included ensuring that all transfer letters had fresh "wet ink" signatures and that staff received a verbal confirmation from the patron before moving any funds.

Third-party transfers "are subject to enhanced due diligence checks, which will include screening of the patron and third-party for junket affiliation and declaration of the relationship between the patrons and the reasons for the patron making the third-party payment," the casino wrote.

"MBS remains focused on having highest-level best practices of governance, compliance and internal controls that are continuously improved."

Unauthorised transfers weren't the casino's only problem before they were dealt with starting in 2018.

While MBS' policy is not to deal with junkets, some rogue employees were working with these operators to attract Chinese gamblers, according to documents reviewed by Bloomberg.

There have been cases in which Chinese clients said they settled their gambling accounts through the junkets, which did not pass along the money to the casino, resulting in uncollected debts and subsequent legal action.

For example, in 2018, MBS sued a customer named Luo Shandong, seeking repayment of S$3.5 million in gambling debts and interest, according to court documents.

Mr Luo says he paid the money through Tian Du Gaming Promotion, a junket company that operated in the casino's VIP lounge.

He says Tian Du provided him with credit and collected repayments on behalf of MBS. The casino denied the connection.

A collections executive from MBS says it was common for patrons to inform the casino that they had paid a third party.

The executive would then be obliged to inform them that they had paid the wrong party, according to the internal investigation.

The whales are the big moneymakers for casinos, and some employees say they needed to work with junkets to attract them.

One former marketing executive says that when MBS opened, they needed to call in the junkets because of a lack of local contacts.

While it's not clear how much money the unauthorised transfers and unpaid debts cost MBS, from 2013 to March 2020, the casino wrote off US$717 million from 928 accounts, according to an internal document seen by Bloomberg.

A former Sands executive says typical losses for a casino that size are US$20-30 million a year.

The peak write-offs were in 2015 to 2017, the years immediately following the biggest transfers, while 67 per cent of the dollar value was tied to Chinese clients, the document showed.

The casino denies the transfers contributed to the write-downs.

"Third-party transfers are part of the ordinary course of business within our industry.

"We remain confident that the processes we have in place relating to such transfers are secure, with appropriate levels of authorisation and controls," the casino said in a statement to Bloomberg.

"By the same token, because patrons sometimes finance their play at our property by borrowing funds which they then fail to repay, write-downs are not uncommon in our business," the casino added.

"Any suggestion that write-downs are commonly the result of third-party transfers, or that write-downs at our property exceed industry norms, is inaccurate."

MBS remains under scrutiny. The US Department of Justice (DOJ) is reviewing whether the casino breached money laundering controls in its treatment of high rollers and retaliated against whistleblowers who are current or former employees, according to a January subpoena issued to a former chief compliance officer at the casino.

The US attorney's office in Las Vegas declined to comment about the Justice Department probe.

"Marina Bay Sands is committed to running a best-in-class compliance programme and has dedicated significant resources to developing the robust programme currently in place," the casino said in the statement to Bloomberg.

"As part of that programme, we evaluate our internal policies on a regular basis and make changes where our compliance and business goals are not being achieved or our business values are not being met."

Singapore's police force is also probing the transfers in the wake of the Wang case, and the casino has hired another law firm - Davinder Singh Chambers - to conduct an investigation into the employee wires.

The Casino Regulatory Authority has completed its investigations, and there are no ongoing reviews, a spokesperson for the agency says.

Singapore had early reservations about casinos. Prime Minister Lee Hsien Loong was worried that gambling would bring "undesirable activities" - money laundering and organised crime.

Mr Adelson, the 23rd-richest person in the US, accentuated the positive after Singapore ended its casino ban: thousands of jobs, billions of dollars in tourism revenue, and a chance for Singapore to shed its reputation as one of the sleepier places in Asia.

A decade later, it appears both sides may have been right.

MBS is a runaway success. Covid-19 notwithstanding, it's one of the most profitable casinos in the world based on margins, accounting for a third of earnings at Mr Adelson's Las Vegas Sands Corp.

Mr Adelson is showing no signs of pulling back. In fact, he is doubling down in Asia while exploring a sale of his Las Vegas properties.

He has already committed to a US$3.3 billion expansion of MBS, which will include a fourth hotel tower, a 15,000-seat arena, and a convention centre.

"History has shown us that these businesses are to an extent too big to fail," says Ben Lee, the Macau-based managing partner at IGamiX.

Las Vegas Sands "already had a couple of run-ins with the DOJ, which resulted in minor fines, a slap on the wrist, and then business as usual". BLOOMBERG