THE buyer had $50,000 stuffed into a hold-all ready to be exchanged for three kilograms of cannabis resin. He was slightly nervous. It was the first time he had attempted a buy on this scale. Thirty-five pairs of eyes were watching with more than a casual degree of interest. The pusher arrived at the downstairs eating area of McDonald's in Central. He had failed to come up with the goods which would have sold on the street for six times his asking price. But he'd said enough to be picked up on the buyer's wire tap in any case. A pre-arranged signal - a lengthy yawn - brought most of the eaters to their feet. A few moved in and made the arrest. Michael Giles Murphy realised his dreams of being Lamma Island's next big drugs dealer were shattered. He hadn't realised, but they had been shattered when he first sold half a gram of cannabis resin to the ''buyer'' in Yung Shue Wan's Corner Bar a monthbefore in April this year. Selling drugs to an undercover cop really is asking for trouble. Murphy, a British national, has now moved from Lamma Island to Lantau. He'll be in Ma Po Ping prison until early next year. His age, just 19, his former clean record and his guilty plea, persuaded the courts to deal with him relatively lightly, but on his release he faces deportation, and the rest of his life as a convicted drug trafficker. The message the police want to put across to the large expat community on Lamma is simple - you just never know who you might be dealing with. ''The feeling I get is that there are an awful lot of soft drugs on Lamma but not a lot of big players,'' said the ''buyer'', a Detective Inspector then working in the Islands Division. ''But people there should know that we aren't prepared to let it go. There are operations and surveillance there all the time. ''People might think it's just soft drugs, but even soft drugs affect you. Lamma is riddled with people who abuse substances, from the bricklayer to the professional. For a lot of people there, their life has gone to ruin.'' The only seizures of hard drugs on the island are limited and tend to be minor amounts of heroin found among the older Chinese community. But despite the changing face of Lamma with more and more professionals choosing to settle there, it still has the stigma of a sleepy, hippy-type expat retreat rife with soft drugs. However, the statistics do nor bear this out. This year, apart from the Murphy case, there have been only four convictions for cannabis possession. Last year there were nine and in 1991, again, just four. The police claim this is because they are looking for the bigger fish, and because a close-knit community is so difficult to police. Nevertheless, the Corner Bar, the most popular of four licensed premises in Yung Shue Wan, failed to get its club liquor licence renewed last month and will close on December 12. The drug dealing and open smoking of joints there, together with complaints from residents of noise, loutish behaviour and urinating in the street outside, persuaded the licensing committee it was time to act. Owner Mark Wong Shiu-wing, seemingly unaware of such activity because he is rarely there, plans to convert it into a coffee shop. But Lamma is unlikely to change, despite police operations, warnings, and surveillance of certain targeted individuals. ''You can get anything you want there, drugs, prostitutes, it can all be arranged on Lamma,'' the Inspector said. ''The drugs come either from dealers in Chung King Mansions or from China. ''The whole of the island is run by triads - the Fuk Yee Hing. I suspect every bar and shop are paying them. ''Even the Corner Bar had its 'protector' at the time I was going there undercover. I anticipated a meeting with the protector. I could see who he was and I would have thought he would have been interested in any activity he came across.'' But the smaller Chinese community among the island's 10,000 inhabitants tends to let the expats live their lives while they get on with their own. Murphy knew the Corner Bar's protector and wasn't expected to give him a cut. In return, when he got into trouble, he alone took the rap. The Inspector, a 25-year-old Canadian, said: ''I'd decided to hang round the bars in Lamma to find out what was going on. One night inside the Corner Bar it became evident that a group of people were talking about drugs and were passing round a joint.'' Posing as a Canadian journalist living on Lantau, the Inspector set up a deal with Murphy for the following night, the first of 10 meetings and four controlled buys which eventually led to the ''sting'' backed up by 35 officers posing as customers in Central's McDonald's. ''Several of the buys took place inside the Corner Bar,'' he said. ''It was hard to say whether the staff knew what was going on. ''Then I had to think, is this going to lead to anything? In the end we made the decision that this fellow could not come across with sufficient quantities. That's when we decided to set the final buy. ''It was so unreal at times. I grew a beard and played the role just like in a film. In the police car after the arrest Murphy kept saying he'd thought I'd been so good. I just thought he had been so stupid.'' It was not the first undercover operation on Lamma, and, he says, will not be the last. In 1989, an officer was set up by the force as a traveller passing through. For six months he lived on the island with a bogus identity and job, gathering information from unsuspecting expats which led to several arrests and drugs convictions. Since then the island's 23 police officers have been at pains to show they are not prepared to give way to many of the islanders' preferred way of life. Some police operations have led to complaints of racism and harassment because the expats are often singled out. But Islands Divisional Commander Chief Inspector Jerry Howard said the police would not allow Lamma to become a no-go area. While not being prepared to substantiate rumours that individual houses on the islands were being staked out, he admitted there was a steady flow of information about drug activities. ''We do have reliable intelligence over there,'' he said. ''If they deal in drugs then they must take the risk that it could be with the next undercover officer. ''We are not prepared to tolerate the kind of lawless society that exists back in the UK.''