I OVERVIEW

i Definitions

Under the current legal and regulatory framework, there are four types of permitted gaming in the Macao Special Administrative Region of the People's Republic of China (hereinafter, Macao or MSAR):

  1. games of chance, defined as those in which the result is contingent because it depends exclusively or mainly on the luck of the player;
  2. pari-mutuel (animal – horse and greyhound only – racing, and sports – football and basketball only – betting), defined as a system of betting on animal racing or a sporting event in which the winners split the total amount bet, after deduction of commissions, fees and taxes in proportion to the amount individually bet;
  3. operations offered to the public (lotteries – instant and Chinese), defined as those in which the hope of winning resides solely on luck, such as lotteries, raffles, tombola and sweepstakes; and
  4. interactive gaming, defined as games of chance in which a prize in cash or other value is offered or may be won under the respective rules. A player enters or participates in the game by means of telecommunication, namely by means of telephone, telefaxes, internet access, data networks, transmission of video signals or digital data, and to do so, either agrees to make payments in cash or any other value, and the game is also offered or approved as a game of chance or through an electronic or mechanical gaming machine in casinos in Macao.

Gaming promoters (also known as junkets) are defined as 'casino games of chance promoters who operate by providing facilities to players, in particular with regard to transportation, accommodation, food and entertainment, receiving a commission or other remuneration paid by a concessionaire' or a sub-concessionaire.

Gaming machines are defined as 'any device, including gaming programs and associated software, memory compartment, random number generator and storage media for the gaming programs operated wholly or partially by electrical, electronic or mechanical means and designed, adapted or programmed to: (1) the practice of a game, the outcome of which depends solely or mainly on luck; (2) payment, as a result of a bet placed on a gaming machine, of a cash prize, gaming chips, tickets redeemable for cash or goods convertible to gaming chips, cash or cash equivalents'.

Issuance of credit for players is defined as the transmission of the ownership of casino gaming chips from a credit provider to a third party without the immediate payment in cash or equivalent of such transmission.

ii Gambling policy

As regards gaming, Macao law departs from a principle of prohibition: if a type of gaming is not permitted, then it is prohibited.

Under Macao law, although being an activity reserved for the MSAR, the operation of gaming by an entity other than the MSAR is subject to a prior concession being granted by the MSAR (or a sub-concession being authorised by the Macao government). Currently, a public tender (or a governmental authorisation for sub-concessions) is required only for casino gaming. Exceptions made for interactive gaming (for which no concession was ever granted), pari-mutuels and operations offered to the public are granted in exclusivity to a single entity.

Pursuant to the Macao Gaming Law, the MSAR is precluded from granting more than three casino gaming concessions. Notwithstanding this, the Macao government has authorised three casino gaming sub-concessions, permitting each of the casino gaming concessionaires to enter into a sub-concession.

Gaming machines, equipment and systems to be installed in Macao casinos are subject to a technical assessment by the Gaming Inspection and Coordination Bureau (DICJ) under the requirements established by Administrative Regulation No. 26/2012. Manufacturers of gaming machines, equipment and systems must be licensed, and suppliers must obtain authorisation from the DICJ to conduct their business in Macao. Manufacturers and their qualified shareholders and directors are subject to a suitability assessment process by the DICJ. Manufacturers licensed in certain major gaming jurisdictions (Nevada, New Jersey, Mississippi, Australia, New Zealand, the United Kingdom and Singapore) may submit a formal request to waive this procedure.

The MSAR is a permanent gaming zone, thus casinos shall be open 24/7, notwithstanding the right of casino gaming operators to establish daily operation hours that shall be notified three business days in advance to the DICJ. The suspension of the operation of a casino can only occur in very exceptional circumstances and, as a general rule, is subject to prior authorisation from the Macao government.

The minimum age for entering and working in casinos is 21 years old. Restrictions to casino entry apply to the employees of casino gaming operators.

A complete ban on smoking inside casinos has been in force since 1 January 2019.

Casino gaming operators can only operate the games of chance listed in the Macao Gaming Law (baccarat, baccarat chemin de fer, blackjack or 21, boule, craps, cussec (sic bo), 12 numbers, fantan, Chinese dice game, fish-prawn-crab dice game, 13-card game, mahjong, mahjong-baccarat, mahjong-pai kao, pachinko, pai kao, pai kao of two stones, three-card poker, five-card poker, roulette, sap-i-chi or 12-card game, super pan 9, Taiwan-pai kao and three-card baccarat game), or approved by order of the Secretary for Economy and Finance (by request of one or more casino gaming operators and after an opinion from the DICJ): casino challenge, dragon/phoenix, football poker, fortune 8, makccarat, Omaha poker, Q poker, stud poker, Texas holdem poker, three-card fortune poker and wheel of fortune.

The rules of games of chance are approved by order of the Secretary for Economy and Finance following a proposal from the DICJ, and published in the Macao Official Gazette.

As to horse racing, the following pari-mutuels in relation to horse-racing results are permitted: pari-mutuel winner, pari-mutuel places, quinella, forecast, double win, double quinella, trio, trifecta, triplo vencedor, quarteto and six up.

Also, regarding horse-racing results, the following lotteries are permitted: cash sweep (ordinary and special), winner sweep and places sweep.

According to the respective concession contract, the rules for pari-mutuels authorised by the concession contract in relation to horse racing are approved by the Macao Chief Executive after a proposal from the operator. The rules are published in the Macao Official Gazette.

As to sports betting, only bets on football and basketball are permitted.

If an operator requests authorisation to operate new lotteries, it shall enclose with the authorisation request a draft of the rules for the DICJ's approval. The rules are published in the Macao Official Gazette.

As to Chinese lotteries, only Pacapio and Chumpapiu lotteries can be offered.

According to the respective concession contract, the rules of the Chinese lotteries authorised by the concession contract are approved by the Macao Chief Executive after a proposal from the operator. If the operator requests authorisation to operate new lotteries, it should enclose with the authorisation request a draft of the rules for the DICJ's approval. The rules are published in the Macao Official Gazette.

Casino gaming is under continuous and permanent supervision from the DICJ through a team of inspectors on site.

The DICJ's Games of Chance Inspection Unit is charged with the competence to supervise and monitor casino frequency and operations, and to ensure the performance of all legal, regulatory and contractual precepts related to games of chance.

As to pari-mutuels and operations offered to the public, the DICJ's Pari-Mutuels Inspection Unit is charged with the competence to supervise and monitor pari-mutuels and operations offered to the public, and ensure that conduct is in accordance with the technical rules, laws and regulations applicable. Moreover, these types of gaming have a government-appointed delegate to follow the operator activities.

Pursuant to Macao law, only casino gaming operators and gaming promoters may, as credit providers, issue credit to players. Issuance of credit is restricted to casino games of chance.

The transfer to a third party of the operation of the concession (or sub-concession) or, in the case of the casino gaming concessions and sub-concessions, of legal or contractual obligations impending to the casino gaming operators is null and void except if authorised by the Macao government; the transfer of shares to third parties in a gaming concessionaire or sub-concessionaire is null and void except if authorised by the MSAR.

The MSAR may:

  1. sequester a concession or sub-concession when an unjustified suspension occurs or is imminent, or grave deficiencies in the organisation of the concessionaire are verified or in the general condition of the premises or material used for the operation of the concession or sub-concession;
  2. redeem a concession or sub-concession before its term by compensating the concessionaire or sub-concessionaire;
  3. unilaterally terminate the concession or sub-concession due to the failure by the concessionaire or sub-concessionaire to comply with fundamental (legal or contractual) obligations; and
  4. unilaterally terminate the concession or sub-concession due to public interest reasons by paying the concessionaire or sub-concessionaire a fair compensation, which takes into consideration in particular the time of the concession or sub-concession left and the investments made.

All casinos and gaming equipment and utensils are to revert to the MSAR without compensation by the term of the concession or sub-concession (or on the date referred to in the concession or sub-concession contract, whichever is the earlier). The reversion is automatic and without entitlement to the payment of compensation to the casino gaming operator. The enjoyment, fruition and use of the assets reverted may be temporarily transferred to be used in gaming operations by the same or different casino gaming operators, in exchange for a renumeration as prescribed by the concession contract of those assets. As to the concessions for operating horse racing, all premises (except the electrical station, totaliser and all movable assets the horse-racing operator decides to remove within 60 days following the reversion) revert to the MSAR without compensation by the term of the concession.

Gaming machines and electronic table games can only be operated by casino gaming operators and shall comply with the Macau Technical Standards (on electronic gaming machines and electronic table games, for accumulated prizes in gaming machines and for dealer-operated electronic table games, all approved by DICJ instructions), and be certified by an authorised gaming testing laboratory. The supply of gaming machines in Macau can only be conducted by licensed manufacturers or distributors authorised by the DICJ.

Greyhound racing was operated by Macau (Yat Yuen) Canidrome Co Ltd between 1964 and 20 July 2018, the date on which the respective concession expired, due to termination. To date, the Macao government has not granted any new concession for operating greyhound racing, nor has it revoked its legal framework. Nevertheless, it seems to be public policy not to award a concession for this type of gaming anywhere in the future.

iii State control and private enterprise

Pursuant to Macau law, the commercial operation of gaming is reserved to the MSAR and can only be granted to private entities by means of a concession (or sub-concession) through an administrative contract. Thus, gaming is a highly regulated activity in Macao and the supervision of gaming activities relies primarily on the DICJ.

As to casino gaming, operators are required to be incorporated in the MSAR as limited liability companies and requirements regarding, among others, its share capital, business scope and managing director apply.

iv Offshore gambling

Offshore gambling involving sectors such as online casinos and multiplayer online gaming is not permitted in Macao.

Placing bets over the phone or online is regulated for horse racing, greyhound racing and sports lottery (football and basketball betting).

II LEGAL AND REGULATORY FRAMEWORK

i Legislation and jurisprudence

The main legal and regulatory framework for casino gaming, pari-mutuels and operations offered to the public comprises the following.

Games of chance

  1. Law No. 8/96/M of 22 July 1996 (illegal gambling).
  2. Law No. 16/2001 of 24 July 2001 (Macao Gaming Law).
  3. Administrative Regulation No. 26/2001 of 29 October 2001 (public tender regulation).
  4. Administrative Regulation No. 6/2002 of 1 April 2002 (gaming promotion activity), amended by Administrative Regulation No. 27/2009 of 10 August 2009, which established a new set of requirements for the payment of commission or another type of remuneration due to gaming promoters.
  5. Law No. 5/2004 of 14 June 2004 (extension of credit).
  6. Law No. 10/2012 of 27 August 2012 (entry, work and gaming restrictions in casinos).
  7. Administrative Regulation No. 26/2012 of 26 November 2012 (gaming machines regulation).
  8. DICJ Guidelines – occasionally, the DICJ releases instructions on certain specific issues related to casino operations. The DICJ has released guidelines on topics such as anti-money laundering, responsible gaming, gaming promoters' commission cap and accounting requirements, technical specifications of gaming machines and casino internal control rules. These instructions and guidelines are mandatory and applicable to all gaming operators in Macao and, despite the fact that they do not carry the same weight as applicable laws, penalties may be enforced if they are infringed.
  9. Casino gaming concession contracts (signed with Sociedade de Jogos de Macau, SA, Wynn Resorts (Macau), SA and Galaxy Casino, SA), and casino gaming sub-concession contracts (authorised by the Macao government and entered into by and between Galaxy Casino, SA and Venetian Macau, SA, Sociedade de Jogos de Macau, SA and MGM Grand Paradise, SA, and Wynn Resorts (Macau), SA and Melco Resorts (Macau), SA), currently due to expire on 26 June 2022, which detail the rights and obligations of the casino gaming operators in accordance with the applicable legal and regulatory framework. One of the most relevant clauses established in the contracts is that all legal disputes arising from the contracts shall be exclusively governed and resolved under Macao law and in Macao courts; the Macao legal system cannot be bypassed by the laws and courts of other jurisdictions.

Pursuant to the Macao Gaming Law, the Chief Executive of the MSAR, by means of an Administrative Regulation, determines the rules and specific conditions under which the operation of games of chance is permitted outside casinos (aboard vessels and aircrafts and, restricted to gaming machines, in Macao International Airport). However, no Administrative Regulation has been enacted, nor has the MSAR authorised any operation of games of chance outside casinos.

Pari-mutuels

Horse racing
  1. Executive Order No. 163/90/M of 27 August 1990 (horse racing and pari-mutuels), as amended.
  2. Law No. 9/96/M of 22 July 1996 (criminal offences related to animal racing).
  3. Decree Order No. 12/98/M of 9 February 1998 (triple-winner, double-quinela, double-trio and six-up betting).
  4. Executive Order No. 22/2000 of 3 April 2000 (classified quinela betting).
  5. Executive Order No. 47/2001 of 30 October 2001 (triple trio betting).
  6. Order of the Secretary for Economy and Finance No. 63/2003 of 15 August 2003 (horse racing betting via the internet).
  7. Concession contract signed with Macau Horse Race Company Limited, dated 4 August 1995, as amended from time to time, currently extended to 31 August 2042.
Greyhound racing
  1. Decree Order No. 7611 of 26 August 1964 (regulation for greyhound racing, the totaliser and Cash Sweep lotteries), as amended from time to time.
  2. Decree Order No. 151/91/M of 12 August 1991 (double-trifecta betting).
  3. Decree Order No. 132/94/M of 24 May 1994 (all-up quinella betting).
  4. Decree Order No. 93/97/M of 5 May 1997 (triple-trio betting).
  5. Executive Order No. 53/2000 of 17 August 2000 (classified quinela betting).
  6. Order of the Secretary for Economy and Finance No. 64/2003 of 15 August 2003 (greyhound racing betting via the internet).
  7. Order of the Secretary for Economy and Finance No. 75/2009 of 14 July 2009 (odd or even number betting).

Although a concession to operate greyhound racing is not currently awarded (the last expired on 20 July 2018), the above-referred legislation continues in force.

Sports betting
  1. Executive Order No. 20/2005 of 27 May 2005 (sports lottery – basketball betting).
  2. Executive Order No. 67/2018 of 20 April 2018 (sports lottery – football betting).
  3. Concession contract signed with SLOT – Sociedade de Lotarias e Apostas Mútuas Limitada, dated 21 February 1989, as amended from time to time, currently extended to 5 June 2021.

Operations offered to the public

Chinese lotteries (Chimpupio and Pacapio)
  1. Executive Order No. 8/2004 of 3 March 2004 (official Pacapio lottery regulation).
  2. Concession contract signed with Wing Hing Lottery Company Limited, dated 24 August 1990, as amended from time to time, currently extended to 31 December 2020.
Instant lottery
  1. Executive Order No. 27/86/M of 1 February 1986 (instant lottery regulation).
  2. Law No. 12/87/M of 17 August 1987 (instant lottery operation).
  3. Concession contract signed with SLOT – Sociedade de Lotarias e Apostas Mútuas Limitada, dated 21 February 1989, as amended from time to time, currently extended to 5 June 2021.

Interactive gaming

No legal framework has ever been enacted.

ii The regulator

The oversight of gaming is, prima facie, the responsibility of the DICJ, the regulatory and supervisory authority of all types of permitted gaming, a department within the Macao government structure and under the Secretariat for Economy and Finance, entrusted with the responsibility of assisting and supporting the Macao Chief Executive in the definition and execution of the economic policies for the operation of all permitted types of gaming.

The DICJ's main powers (as established by Administrative Regulation No. 34/2003, of 3 November 2003), include:

  1. overseeing, supervising and monitoring the activities of gaming operators and gaming promoters, especially regarding their compliance with legal, statutory and contractual obligations;
  2. overseeing, supervising and monitoring the suitability and financial capacity of gaming operators or any other entity defined under applicable laws;
  3. overseeing, supervising and monitoring the suitability of gaming promoters (individuals or companies), as well as their collaborators and key employees;
  4. collaborating with the government in the process of authorising and classifying locations and premises as casinos;
  5. authorising and certifying all gaming equipment and utensils used by gaming operators;
  6. issuing licences and guidelines for gaming promoters;
  7. investigating and sanctioning in accordance with the applicable legislation any administrative infraction by gaming operators, gaming promoters or any other relevant entity or individual;
  8. ensuring that the relationships between the government and gaming operators, and between gaming operators and the public, are rendered in a regulatory matter most suited to the interests of Macao; and
  9. executing any other guidelines and duties of a similar nature to those outlined above according to the Macao Chief Executive's orders or legal provisions.

The Macao Gaming Commission is a consultative body of, and presided over by, the Macao Chief Executive with the responsibility of formulating policies and facilitating the development of Macao's casino gaming and relevant regulatory framework.

The Financial Services Bureau, under the Secretariat for Economy and Finance, is also vested with regulatory powers concerning, in particular, the accounting of gaming operators and gaming promoters.

Finally, the Financial Intelligence Office, under the Secretariat for Security, is responsible for receiving and processing cash transactions and suspicious transactions reports filed by gaming operators and gaming promoters.

iii Remote and land-based gambling

To date, no concession for the operation of interactive gaming has been granted by the MSAR. Gambling in Macao is restricted to land-based venues (casinos in the case of the operation of casino games of chance), although some exceptions apply (aboard vessels and aircrafts and, restricted to gaming machines, in Macao International Airport).

iv Land-based gambling

The operation of games of chance is, as a general rule, restricted to land-based casinos, i.e., the locations and premises authorised and classified as casinos by the Macao government. However, the Macao Chief Executive may authorise the operation and practice of games of chance outside casinos, aboard vessels or aircraft registered in Macao, when outside of the MSAR and operating on touristic routes and, restricted to gaming machines, paying directly in gaming chips or coins, in the customs cleared area for international departures of Macau International Airport.

There are three casino gaming concessions awarded (to Sociedade de Jogos de Macau, SA, Galaxy Casino, SA and Wynn Resorts (Macau), SA) and three casino gaming sub-concessions authorised (to MGM Grand Paradise, SA, Venetian Macau, SA and Melco Resorts (Macau), SA), all due to expire in June 2022.

Sports betting and lotteries are operated outside casinos, and horse racing is restricted to the Macau Jockey Club. In fact, pari-mutuel betting is strictly forbidden to be offered inside casinos, and operations offered to the public may only be operated inside casinos pursuant to a special authorisation from the Secretary for Economy and Finance. It was the case of the tombola game (operated by SJM until 1 November 2016), also called lotto, a game that has many of the same characteristics as European bingo, being based on 90 numbers, from 1 to 90, in which the numbers are marked on small balls and are held in a manually rotated drum, from which they are randomly drawn one ball at a time and in which the players match the numbers to their playing cards, while the numbers are being drawn from the drum.

Granted in exclusivity, one concession for operating horse racing (to Macau Horse Race Company Limited), one for operating sports betting and instant lottery (to Sociedade de Lotarias e Apostas Mútuas Limitada) and one for operating a Chinese lottery (to Wing Hing Lottery Company Limited) have been awarded.

v Remote gambling

Interactive gaming may be granted to private entities by means of a prior concession. Casino gaming operators cannot operate any interactive games and the interactive gaming concessions are by law autonomous and separated from the casino gaming concessions.

As yet, no regulation on interactive gaming has been enacted, and public policy tends not to encourage this type of gaming.

The restrictions mentioned above do not prevent Macao residents registering on online gaming platforms or websites located overseas. There are no current plans to implement measures to block residents' access to such platforms or websites.

vi Financial payment mechanisms

No legislation regarding financial payment mechanisms in the gaming sector has been enacted. Moreover, the use of cryptocurrencies, and bitcoin in particular, have been strongly and expressly discouraged by the local authorities.

III THE LICENSING PROCESS

i Application and renewal

According to the legal and regulatory framework in force, casino gaming concessions are awarded by means of a mandatory public tender, being granted throughout an administrative concession contract.

Applicants must be incorporated in Macao law, have a minimum share capital of 200 million patacas, the operation of casino gaming as sole business scope and a Macao permanent resident holding at least 10 per cent of the applicant's share capital as managing director. Applicants (as well as their qualified shareholders (holding 5 per cent or more of the applicant's share capital), directors and key casino employees) need to be found suitable to be granted a casino gaming concession (through the assessment suitability by the DICJ), and have to demonstrate adequate financial capacity to operate the casino gaming concession (through proper guarantees provided either by financial institutions or the applicant's main shareholders). The suitability assessment is based on specific forms that closely follow the Multi-Jurisdictional Personal History Disclosure Form of the International Association of Gaming Regulators. Suitability and financial capacity must be maintained throughout the casino gaming concession period, being the casino gaming operators subject to a permanent and continuous monitoring from the DICJ.

The Macao Gaming Law only allows for up to three casino gaming concessions to be awarded. Notwithstanding, there are currently three casino gaming concessions (awarded in 2001) and three casino gaming sub-concessions (one for each casino gaming concession) authorised. Unless the Macao Gaming Law is amended, it is not currently possible to call for a tender to award additional casino gaming concessions.

The public tender may be simple or restricted with prior qualification and include one or more consecutive consultation stages with the applicant, which are essentially intended for the submission of award proposals and their consideration. As the tender is restricted with prior qualification, it is a multi-stage process inasmuch as the consultation phase(s) is preceded by a pre-qualification phase intended exclusively for the selection of candidates for the consultation phase for the award of the concession, according to general criteria of experience, reputation, technical qualification, financial or economic situation or other criteria to be defined in the tender programme and not provided for in the award submission.

To conduct the public tender, a tender commission is appointed by the Macao Chief Executive.

The tender programme shall specify, inter alia, the minimum requirements for admission of applicants and of the award proposals. It shall also contain the criteria for awarding the casino gaming concessions. Pursuant to Macao law, the awards can only be made to bidders that, in addition to being deemed suitable and with financial capacity, present the most advantageous conditions for the MSAR in the proper operation of casino games of chance. For the effects of determining the most advantageous conditions, the legislator laid down the following main criteria:

  1. the value of the overall premium proposed;
  2. the value of the special contributions proposed (intended for a public foundation for the promotion, development and study of cultural, social, economic, educational, scientific, academic and philanthropic activities, and intended for urban development, the promotion of tourism and social security);
  3. experience in running and operating games of chance in casinos, in activities connected with the operation of games of chance, or in running casinos or other types of games of chance; and
  4. the existence and nature of investment proposals of relevant interest to the MSAR, especially when effected from scratch.

In order to be admitted to the tender, bidders shall provide a guarantee deposit for admission to tender, in the amount determined by Order of the Chief Executive (set at 1 million patacas in the public tender opened in 2001).

Concessions are granted by means of an Order of the Chief Executive based on a substantiated report by the tender commission through an administrative concession contract, and for a period not exceeding 20 years. If a concession is awarded for a period shorter than the maximum allowed by law (20 years), the Macao government may, at any time and up to six months before the end of the concession, authorise one or more extensions provided that the total period does not exceed the maximum term of 20 years. Moreover, once the maximum term has been reached, the Macao Chief Executive, may, exceptionally, extend the duration of the concession, one or more times, provided that does not exceed in total five years.

As for pari-mutuels and operations offered to the public, in the absence of regulations on the granting of concessions for operating these types of gaming, the incumbent concessionaire is chosen by direct negotiations with the Macao government over the discussion and negotiation of the terms and conditions under which the operation is to be conducted and any extension of its term.

ii Sanctions for non-compliance

The Macao government authorities that enforce prohibitions on gaming activities are the DICJ, as the primarily regulator of all types of gaming, and the Judiciary Police, a criminal police body vested with exclusive powers to investigate crimes related to gaming committed in casinos or other gaming venues or their surroundings.

Sanctions of a criminal nature

The Macao Basic Law and the Macao Criminal Code establish the 'principle of legality' by which a criminal offence must be previously declared in the law. Gaming-related crimes are not an exception, and the laws and regulations setting out criminal offences strictly related to or arising from gaming activities comprise:

  1. Law No. 8/96/M of 22 July 1996 (illegal gambling), which sets the sanctions applicable to a significant number of unlawful gaming-related activities;
  2. Law No. 9/96/M of 22 July 1996 (criminal offences related to animal racing), which sets the sanctions applicable to unlawful animal race-related activities;
  3. Law No. 6/97/M of 30 July 1996 (organised crime), which defines what shall be considered as criminal association and sets the sanctions applicable to activities carried out by individuals who are part of criminal organisations;
  4. Law No. 2/2006 of 3 April 2006 (AML), which sets the sanctions applicable to money-laundering activities;
  5. Law No. 3/2006 of 3 April 2006 (terrorism financing), which sets the legal framework and the sanctions applicable to individuals involved in financing of terrorism financial operations;
  6. Administrative Regulation No. 7/2006 of 15 May 2006, which sets the preventive measures for the crimes of money laundering and terrorism financing;
  7. Law No. 6/2016 of 29 August 2016 (enforcement of freezing of assets), which sets the legal framework to enforce UN Security Council sanctions involving the freezing of assets and funds of identified terrorists; and
  8. DICJ Instruction 1/2016 of 21 April 2016 (anti-money laundering and terrorism financing for the gaming sector), as amended by DICJ Instruction No. 1/2019 of 29 January 2019, which sets the procedures to be applied under casino-related financial operations and the procedures to be followed by casino cages and gaming promoters.

Sanctions of an administrative nature

The framework of infractions for the breach or non-fulfilment, attributable to casino gaming concessionaires or to its management companies, of the provisions of the Macao Gaming Law, complementary regulations or casino gaming concession contracts shall be determined by Administrative Regulation.

Notwithstanding, an Administrative Regulation on administrative offences has not yet been enacted, despite for many years now the Macao government announcing such an enactment, in particular in the annual government policy address.

The scarce administrative offences provisions provided in the law can be found in Law No. 8/96/M of 22 July 1996 (illegal gambling), Law No. 10/2012 of 27 August 2012 (entry, work and gaming restrictions in casinos) and Administrative Regulation No. 6/2002 of 1 April 2002 (gaming promotion activity), as amended.

Other legislation related to the operation of casino gaming providing for administrative offences applicable to the gaming sector include Law No. 7/89/M of 4 September 1989 (advertising activity), Decree Law No. 47/98/M of 26 October 1998 (administrative licensing of certain economic activities), Law No. 2/2006 of 3 April 2006 (AML) and Law No. 5/2011 of 3 May 2011 (ban on smoking).

Sanctions of a contractual nature

The casino gaming concession and sub-concession contracts foresee sanctions, with the nature of penalty clauses, in case of assignment, transfer, disposal or encumbrance of the operation of a casino or gaming area.

Moreover, termination of concessions (and sub-concessions) may occur due to breach, in the event of non-compliance with fundamental obligations that are legally or contractually binding on the casino gaming concessionaires (and sub-concessionaires).

IV WRONGDOING

Over the years, continuous efforts have been made to combat money laundering in Macao, especially after the enactment of the most recent anti-money-laundering framework (Law No. 2/2006 and Administrative Regulation No. 7/2006).

Since 2015, the DICJ has been setting higher standards for anti-money-laundering compliance by introducing new accounting requirements to be observed by gaming promoters and updating guidelines (Instruction No. 1/2016 was amended by Instruction No. 1/2019) applicable to gaming operators and gaming promoters, as well as a risk-based approach that enhances customer due diligence procedures, requiring, among other things, a stricter identification of patrons and reporting of suspicious cash transactions (equal to or greater than 500,000 patacas).

The Asia-Pacific Group on Money Laundering has acknowledged the efforts and progress made by the Macao government. In the 2017 Mutual Evaluation Report, the MSAR obtained 37 compliant out of the 40 Financial Action Task Force (FATF) recommendations on technical compliance assessment (the remaining three recommendations only required further improvements), and in the 2019 Mutual Evaluation Report, the MSAR successfully upgraded the remaining three FATF recommendations to largely compliant ratings, becoming the first member to pass all 40 FATF recommendations on technical compliance assessment among all globally evaluated members.

V TAXATION

i Casino gaming

Casino gaming operators have to pay an annual premium, a special gaming tax and two special contributions.

Annual premium

As a consideration for the exploitation of casino games of chance, an annual premium comprising a fixed and a variable portion is due.

The fixed portion is 30 million patacas as per the Dispatch of the Chief Executive No. 215/2001 of 30 October 2001 (and as per the sub-concession contracts in relation to the sub-concessionaires), and the variable portion is based on the number and type of gaming tables and gaming machines operated: 300,000 patacas per VIP gaming table; 150,000 patacas per mass market gaming table; and 1,000 patacas per gaming machine.

Special gaming tax

Games of chance are subject to a special gaming tax of 35 per cent levied on the gross gaming revenue, applicable to all games, including gaming machines. No offset of uncollectable gaming debts is allowed.

Special contributions

Casino gaming concessionaires are required to propose, during the public tender, the percentage they would be bound to pay during the term of the concession for two different contributions, one of an annual amount not exceeding 2 per cent of gross gaming revenues to a public foundation for the promotion, development and study of cultural, social and economic, educational, scientific, academic and philanthropic activities, and another in an annual amount not exceeding 3 per cent of gross gaming revenues for urban development, tourism promotion and social security of the MSAR.

As per the casino gaming concession and sub-concession contracts, the casino gaming operators are bound to pay 1.6 per cent of gross gaming revenue as a contribution to a public foundation in Macao and 2.4 per cent of gross gaming revenue as a contribution for urban development, tourism promotion and social security of the MSAR, with an exception made for SJM, which is only bound to 1.4 per cent due to the dredging obligation that it is jointly liable with the dredging provider company.

ii Pari-mutuels

Horse racing

The horse-racing operator is subject to pay an annual rent of 15 million patacas and a tax on the total annual amount of the bets registered in the totaliser, as follows:

  1. on the difference between 2.5 billion and 3 billion patacas, 0.5 per cent;
  2. on the difference between 3 billion and 3.5 billion patacas, 1 per cent;
  3. on the difference between 3.5 billion and 4 billion patacas, 1.5 per cent;
  4. on the difference between 4 billion and 4.5 billion patacas, 2 per cent; and
  5. above 4.5 billion patacas, 2.5 per cent.

Moreover, in consideration for the (last) renewal of the concession (until 31 August 2042), the concessionaire agreed to be bound to gradually increase its share capital until 2023, up to a minimum of 1,500 million patacas.

Sports betting (football and basketball)

The sports betting operator is subject to pay an annual rent, with a minimum of 6 million patacas, calculated in accordance with the following:

Gross revenue
(patacas)
Rate Rent due
(patacas)
Rent due, accumulated
(patacas)
Average
rate
0 to 30,000,000 20.00% 6,000,000 6,000,000 20.00%
30,000,001 to 40,000,000 22.00% 2,200,000 8,200,000 20.50%
40,000,001 to 50,000,000 24.00% 2,400,000 10,600,000 21.20%
50,000,001 to 60,000,000 26.00% 2,600,000 13,200,000 22.00%
60,000,001 to 70,000,000 28.00% 2,800,000 16,000,000 22.86%
70,000,001 to 100,000,000 30.00% 9,000,000 25,000,000 25.00%
100,000,001 and above 25.00%

Gross revenue is defined as the difference between the total amount of sales and the amount that, under the concession contract, shall not be retained by the operator.

iii Operations offered to the public

Instant lottery

The instant lotteries operator is subject to pay an annual rent of a minimum 1 million patacas, calculated in accordance with the following:

  1. sales of 0 to 10,000,000 patacas, rent of 1 million is due;
  2. sales of 10,000,001 to 30,000,000 patacas, rent of 12 per cent of the excess is due;
  3. sales of 30,000,001 to 45,000,000 patacas, rent of 13 per cent of the excess is due;
  4. sales of 45,000,001 to 60,000,000 patacas, rent of 14 per cent of the excess is due;
  5. sales of 60,000,001 to 80,000,000 patacas, rent of 16 per cent of the excess is due;
  6. sales of 80,000,001 to 100,000,000 patacas, rent of 18 per cent of the excess is due; and
  7. sales of 100,000,001 patacas and above, rent of 20 per cent of the excess is due.

Chinese lotteries

The Chinese lotteries operator is subject to pay an annual premium of 500,000 patacas, an annual rent of 23 per cent of the gross gaming revenue (defined as the difference between the ticket sales and the premiums paid), and an additional 5 per cent for the Macao Foundation and 1 per cent for the Montepio Oficial de Macau.

iv Gaming promoters

Gaming promoters are also subject to pay a special tax based on the gross revenue originated by the player. The tax rate on commissions or other remuneration paid to gaming promoters is 5 per cent and is discharging in nature.

VI ADVERTISING AND MARKETING

The Macao authorities have a very conservative approach in relation to advertising of games of chance. Under Law No. 7/89/M of 4 September 1989 (advertising activity), restrictions apply to games of chance: games of chance, as the primary focus of the advertising message, may not be advertised, although the activity associated with them can be subject to dissemination in classified ad listings, commercial yearbooks and other similar publications. In practice, the Macao authorities strongly discourage all gaming operators and gaming promoters from launching advertising and promotional campaigns outside the development where the casino is located.

The restrictions were complemented with the 'Instructions on the recognition of illegal advertising on games of chance', issued by the Economic Services Bureau in June 2015, which is limited to games of chance and details the kind of advertising activities considered illegal. The illegal advertising of games of chance constitutes an administrative offence punishable with a fine of 2,000 to 12,000 patacas for natural persons and of 5,000 to 28,000 patacas for legal persons.

In July 2019, the DICJ required casino gaming operators and gaming promoters to request approval to advertise or promote inside the casinos 'any commercial activities that are not related to gaming business . . . including through verbal communication, different means of media or equipment, such as display counter, electronic equipment or hard copies of promotional materials'.

Nevertheless, the casino gaming concession and sub-concession contracts require casino gaming operators to conduct advertising and marketing campaigns both in Macao and abroad.

VII THE YEAR IN REVIEW

On 1 January 2019, the provision that bans tableside tobacco use in VIP rooms came into force, ending the one-year grace period to set up non-gaming smoking lounges for VIP players. The total smoking ban in casinos makes Macao the only major gaming jurisdiction in the world where smoking in casinos is completely forbidden.

In January 2019, the DICJ issued Instruction No. 1/2019, which amends Instruction No. 1/2016 on anti-money laundering and terrorism financing for the gaming sector, setting the procedures to be applied under casino-related financial operations and the procedures to be followed by casino cages and gaming promoters.

On 15 March 2019, the Macao government extended the term of SJM's casino gaming concession (and, consequently, authorised the extension of the term of MGM's casino gaming sub-concession) until 26 June 2022. This decision aimed to uniformise the existing terms of the casino gaming concession and sub-concessions, making them all lapse at the same time. This would allow the call for a (single) public tender, as all concessions could be awarded altogether once again. As consideration for the extension, SJM and MGM paid a lump sum of 200 million patacas each. Other obligations included their mandatory inclusion in the social security regime and the provision of a bank guarantee to secure the payment of labour debts.

In June 2019, it was reported by the international media that some gaming operators in Macau 'were deploying hidden cameras, facial recognition technology, digitally enabled poker chips and baccarat tables to track which of their millions of customers are likely to lose the most money'.2 Under the casino gaming concession and sub-concession contracts, the installation of electronic surveillance and control equipment is subject to prior authorisation from the DICJ.

On 31 July 2019, the DICJ prohibited gaming promoters (by means of a letter addressed to the casino gaming operators and gaming promoters) from 'conducting any financial activities that are not related to their Macao junket business' and 'using it as a platform for settlement of their overseas business', considering that 'any cross-border deposit, withdrawal and transfer of money or gaming chips for gaming activities not conducted in Macao violates the main objective of the junket operation'.

On 23 September 2019, the DICJ issued Instruction No. 3/2019 on the transfer of gaming data, restricting to prior authorisation by the DICJ the transfer to third parties (either domestic or foreign), by the casino gaming operators and gaming promoters, of information on their patrons' gaming activities, including the player's personal data, place of origin or nationality and profession, as well as the gambling player's activity and other information on their gaming activity (representatives names, time of entry into and out of the casino or gaming table, number of bets, winnings, extension of credit for gaming, amount of bets placed, purchase and redeem of gaming chips, etc.).

On 1 October 2019, according to the 2019 Mutual Evaluation Report of the Asia-Pacific Group on Money Laundering, the MSAR become the first of its members, among all globally evaluated members, to pass all 40 FATF recommendations on technical compliance assessment.

On 27 December 2019, the amendment to Law No. 10/2012 of 27 August 2012 (entry, work and gaming restrictions in casinos), operated by Law No. 17/2018 of 27 December 2018, came into force, restricting the workers of gaming operators who work at gaming tables, gaming machines, cash registers, public relations areas, restaurants, cleaning, casino security and surveillance, together with the workers of gaming promoters who work at casinos, from entering into casinos except when on duty, on the first three days of the Lunar New Year and in circumstances with legitimate grounds provided for in the law.

In February 2020, due to the covid-19 pandemic, the Macao government determined the suspension of casino operations for a period of 15 days (from 5 to 20 February 2020). The majority of casinos opened their doors after the suspension period, although some applied for the 30-day grace period to resume operations granted by the Macao government.

On 23 March 2020, SJM's concession contract and MGM's sub-concession contract were amended in order to postpone the reversal to the MSAR of casinos and gaming equipment and utensils. Initially to revert on 31 March 2020, the reversion will now take place on 26 June 2022, the expiry date of the referred contracts.

viii OUTLOOK

The covid-19 pandemic may lead to a new approach to the need to diversify Macao's economy. It has been suggested that the losses associated with the big decline in the number of visitors and consequently on gaming gross revenues may lead to the Chief Executive considering extending all casino gaming concessions (and authorising the extension of all casino gaming sub-concessions) to the maximum allowed by law, in other words, up to five years (until 26 June 2027).

The revision of the regulations on gaming promoters (namely on suitability and financial capacity requirements) and gaming machines (namely on the improvement of the licensing of gaming machines manufacturers), announced by the Macao government in the past, might take place during 2020.

Additionally, it is also expected that legislation long due on administrative offences in the gaming sector and on gaming chips and tokens be enacted. In fact, the Macau Gaming Law stipulates that complementary legislation shall be enacted by the Macao government covering, in particular, the public tender process, concession contracts, the use and frequency of casinos, the operation of the premises used for the exploitation of casino gaming concessions, the monitoring of gross gaming revenues, the casino gaming operators' employees, the practice of casino games of chance and administrative infractions. As yet, only legislation on the public tender process and concession contracts (Administrative Regulation No. 26/2001), the frequency of casinos (Law No. 10/2012, as amended) and administrative infractions restricted to the piece of legislation where they are included (Administrative Regulation No. 6/2002 and Law No. 10/2012, as amended) has been enacted.

Although the Macao Chief Executive may decide to further extend the term of the concessions (and authorise an extension of the term of the sub-concession in conformity), one or more times and up to five years, the Macao government has announced several times that a public tender to award casino gaming concessions will be opened in 2022. If that is the case, 2020 might be the year to launch preparatory works to that effect.

It is expected that social responsibility will be a topic of paramount importance in the public tender to be opened in 2022. Notwithstanding the Macao laws not foreseeing any at the moment, casino gaming operators have been putting in place mild measures in this regard, especially because Macao legislators from time to time voice such a need and the Macao government has been advising its implementation, particularly in relation to casino employees; the Chinese lotteries operator has a contractual obligation to deposit (in a bank account opened in its name specifically to the effect) the amount of all unclaimed premiums and donate them to charitable institutions chosen by the operator directly and accepted by the MSAR; the instant lotteries and sports betting operator has a contractual obligation to deposit 1 million patacas every year to a denominated health fund, created with an initial capital of 2.5 million patacas pursuant to a contractual obligation; SJM and MGM agreed, as consideration for the extension of the contractual term of their casino gaming contracts, to be included in the mandatory social security regime and to provide the Macao government with a bank guarantee to secure the payment of labour debts.


Footnotes

1 António Lobo Vilela is a legal adviser to the MSAR government and Pedro Cortés is senior partner at Rato, Ling, Lei & Cortés – Advogados e Notários.

2 See Bloomberg news item of 25 June 2019.