Macau Casino VIP Rooms Under Scrutiny for Bad Behavior

They cater to high-end players and extend gambling credit

By Christopher Freeburn, InvestorPlace Writer

Casino stocksU.S. regulators have expressed concern that casinos in Macau, China, are flouting international laws though the use of special rooms for high profile clients.

On Thursday, the chairman of the Nevada State Gaming Control Board told the U.S.-China Economic and Security Review Commission that the use of third party-run VIP rooms by American casino companies operating in Macau prevents regulators from monitoring potentially illicit activities. Macau generated $38 billion in gambling revenue in 2012, making it the world’s largest gaming center, Bloomberg notes.

Casinos allow outside vendors to operate VIP rooms, which often host high-stakes games for wealthy gamers. The VIP rooms also run gambling trips for players from the Chinese mainland and provide credit to high net worth players. The VIP rooms create a screen that prevents regulators from enforcing rules against illegal acts like money-laundering.

The Chinese government has imposed regulations that restrict the amount of money that can be transferred from Macau back to the mainland. However, the VIP rooms can allow gamblers to avoid those restrictions.

A number of U.S.-based casino operators, including MGM Resorts International (MGM), Wynn Resorts (WYNN) and Las Vegas Sands (LVS) operate casinos in Macau. Shares of all three companies dipped slightly in Friday morning trading.

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