High-rollers' illegal side wagers cuts stake for casinos, taxman Macau may have lost more than HK$100 billion in casino revenue and HK$40 billion in taxes in the past five years due to an illegal but widespread form of under-the-table betting. Lost or skimmed revenue due to so-called side betting could represent almost 80 per cent of the officially reported VIP gaming market or around 50 per cent of all reported casino revenues, according to estimates by industry executives. Side betting is a form of secret, unreported wagering that takes place in Macau's VIP gaming halls between high-rollers and junket agents or VIP room operators. At the estimated volumes it would represent the world's biggest known incidence of casino skimming to date. By implication, the true turnover from gaming in Macau, which last year surpassed the Las Vegas Strip as the world's largest casino market, may be 50 per cent greater than what is officially reported. 'The government is aware of this problem and has been taking measures to prevent it,' said Manuel Joaquim das Neves, director of Macau's Gaming Inspection and Co-ordination Bureau. Speaking on condition of anonymity due to the sensitive nature of the issue, five senior executives at licensed Macau casino operators responded to a South China Morning Post survey attempting to gauge the extent of side betting. Estimates ranged widely, from 20 to 200 per cent of the official VIP gaming market, with the average of the responses standing at 78 per cent. Using this average, casinos' losses would exceed HK$100 billion. Macau reported VIP gaming revenue of 46.88 billion patacas in the 12 months to September, implying side-betting volumes of between 9 billion and 90 billion patacas during the period, based on the survey estimates. The actual turnover of side bets is probably impossible to ascertain due to the secretive nature of the wagers. 'I don't have precise figures on the dimensions of side betting,' Mr Neves said. 'But I do not believe the number is as high as what you referred to since there are so many risks subjacent to this activity.' Side betting takes place when a player and junket agent agree before visiting a casino that each wager placed during a gaming session represents an extra under-the-table bet to be settled between them later. Observers say the practice, outlawed in Macau since 1996, is helped by the big role played by the more than 4,200 junket agents and sub-agents in the city's VIP gaming sector. Junket operators caught accepting side bets face a maximum three years in prison, while players face up to six months. To date no one has been convicted of such an offence, in part reflecting the difficulty of detection. 'Effectively, what is happening is a skim,' said a senior official at one US gaming regulatory agency. 'By not recording the wager, the junket agent is skimming money out of the operation. That is money that should be reported as gaming revenue and the non-reporting is tax avoidance.' Side betting may also be driven by Macau's high gaming tax rate, set at 40 per cent of gross casino winnings. 'A high tax rate will always provide an incentive for some operators to take revenue 'off the table',' said David Green, a partner at PricewaterhouseCoopers in Macau and a former gaming regulator in Australia. 'Side betting is notoriously difficult to detect; I suspect it affects all casino jurisdictions with VIP operations. It should be recognised for what it is: a financial crime.'