According to the South China Morning Post, Liao Jinrong, Director General of the International Cooperation Department of China's Ministry of Public Security, discloses at least 1,000 billion NDT ($146.5 billion) flowing out of China, into gambling and betting activities each year, ingnning financial and economic security risks.
Mr Liao said gangs organising illegal gambling and betting use cryptocurrencies to collect and transfer money abroad. This tactic makes it difficult for Chinese security to trace dirty money and crack down on criminal behavior.
Mr. Liao did not give specifics on cash flow. However, he said, these activities would undermine China's economic security. In a country of 1.4 billion people, gambling and casino activity is illegal.
|At least 1,000 billion NDT flows out of China into gambling activities each year. Photo: Reuters.|
"There are a lot of casinos overseas. They will carefully examine the background and assets of many individuals, entrepreneurs and stakeholders in China. This is not safe for us," The Beijing News quoted Mr. Liao as quoting him.
Beijing authorities are working to stem the flow of capital out of China. However, there are still many loopholes and vulnerabilities in monitoring payment service providers, intermediaries, and e-commerce platforms.
Earlier in the week, People's Daily quoted Zhu Min, head of the National Institute of Financial Research at Tsinghua University, as saying that China needs to sharply increase fees on cross-border short-term cash flows to protect domestic financial markets.
"The volume and speed of cross-border capital flows is increasing to unprecedented levels. This not only leads to constant volatility in the world's major currencies, but also affects global financial markets," commented Zhu Min.
|Gambling and casino activities are illegal in China. Photo: Reuters.|
"Therefore, we must be prepared for potential risks," stressed an expert from the National Institute of Financial Research.
In August, the State Foreign Exchange Administration (SAFE) – China's foreign exchange regulator – vowed to increase surveillance of the foreign exchange market and pursue illegal activities such as "underground banking" and cross-border gambling.
Chinese gamblers are an important source of revenue for casinos in the region. Macau, the gambling hub under Chinese management, is heavily dependent on revenue from gambling and tourism. It is a favorite tourist destination for mainland Chinese people.
Structure to make a profit
U.S. credit rating firm Fitch estimates Macau's gambling revenue decreased by nearly 80% in the third quarter of 2020 compared to the same period in 2019. This is due to travel restrictions between mainland China and Hong Kong to control the Covid-19 epidemic. Macau is located about 37 mi from Hong Kong.
Travel restrictions between Macau and The City of Luhai (China) and Guangdong Province were relaxed in August. However, even as the restraining order was relaxed, Fitch said Macau's path to recovery remained "murky" because of the restrictions in Hong Kong. In addition, restrictions may be re-imposed by mainland China as the number of Covid-19 cases increases.
Meanwhile, the development of Internet technology has attracted Chinese people to online gambling. These activities are usually run by foreign companies, most of which transfer money illegally.
According to Mr. Liao, shortcomings in inspection and inspection of payment services in banks are a dilemma. He also pointed to inadequate monitoring of suspicious transactions, as well as risk control from payment providers.
|Online gambling flourishes thanks to Internet technology. Photo: Reuters.|
According to him, criminal organizations and payment service providers can structure to make a profit together. Some of the measures to help prevent cross-border cash flow into gambling are increasing the cost of opening payment accounts at non-financial institutions, identifying unusual transactions, and asking account owners to use their real names.
China, which once had the world's largest Bitcoin market, banned digital currency trading and raised capital with virtual currencies. The People's Bank of China is also developing and testing its own digital currency. However, the timing of the announcement has not yet been determined.