Since the pandemic, the proliferation of illicit money exchange businesses in Macau has exploded. From legal and business perspectives, we explore why authorities are finding it so difficult to eradicate Macau’s “money exchange gangs”.
The term “money exchange gang” refers to illicit groups of individuals who make a living through illegal currency exchange. They operate inside and outside of casinos, persuading gamblers to exchange currency with them at favorable rates. These gangs have existed in Macau for a long time, but since last year their tally has surged to the point where it has become a social concern and a clear focus of law enforcement.
According to the Office of the Secretary for Security, in 2023 the Macau police intercepted a total of 11,870 individuals engaging in this illegal trade, representing a rise of 239% or 8,365 individuals from 2022. Compared to the pandemic level in 2019, there was an increase of 41.3% or 4,910 individuals.
Why did the number of “money exchange gangs” suddenly increase in 2023? From a market perspective, “money exchange gangs” are a distinctive presence.
Concerning the trade between “money exchange gangs” and gamblers, this often involves gamblers first making bank transfers to these gangs in exchange for Hong Kong dollars in cash. This process is similar to the past operations in Macau VIP rooms whereby mainland gamblers would sign loan agreements with junket operators for credit and repay them later with assets in mainland China. China has strict capital controls, and mainland residents entering Macau are not allowed to carry more than RMB20,000 or more than US$5,000 in other currencies.
Although the junket sector in Macau has declined, the lifting of COVID-related travel restrictions gave rise to a pressing need in the market for money exchange, a demand that the “money exchange gangs” cater to. However, this practice effectively circumvents Beijing’s tight capital control measures.
“The ‘money exchange gangs’ circumvent China’s financial policy on foreign currency, its limits on bringing cash in and out of the borders, and bank card withdrawal limits overseas,” said Chen Shiqu, deputy director of the criminal investigation bureau at the Chinese Ministry of Public Security, in July. “They have provided mainland gamblers illegally with substantial amounts of Hong Kong dollars in cash.”
Speaking at a press conference, Chen added, “Behind-the-scenes financiers of these ‘money exchange gangs’ profiteered HK$1.5 billion per year from these activities, and these huge profits drive the rapid expansion of ‘money exchange gangs’.”
Song Wai Kit, President of the Macau Responsible Gaming Association, noted that, “In recent years, mainland China has imposed strict restrictions on capital outflows, so the ‘money exchange gangs’ sidestep the mainland government’s control over capital outflows.” He also emphasized that the number of “money exchange gangs” underwent a rapid increase last year due to sheer profitability.
“Mainland tourists are unable to carry a large amount of cash into Macau and criminals have identified this demand,” he said. “Coupled with the impact of economic slowdown, more people have chosen to take risks and engage in this illegal trade in Macau.”
From a legal perspective, illicit currency exchange does not constitute a criminal offense in Macau as it is only considered an administrative breach. According to the Financial System Act, any individual or entity engaging in exchange business without permission is committing a serious administrative violation, which can result in fines ranging from MOP$500,000 to MOP$5 million (US$62,000 to US$620,000).
Although such fines may seem substantial, this only applies to Macau residents. As the majority of “money exchange gangs’ are mainland Chinese, the Macau police can only deport them on the grounds of engaging in behaviors “inconsistent with the identity of travelers”.
With huge profits as a reward and the worst consequence being deportation, the “money exchange gangs” face minimal risk for being involved in the trade. This allows the masterminds behind these gangs to continue replacing gang members with “fresh blood” to carry out illegal currency exchange activities in Macau.
There has been an ongoing debate in the community regarding the need for the government to crack down on the problem from its core by criminalizing the activities of illegal money exchange. However, this was ultimately rejected by the Macau government, which believes any move to criminalize illegal money exchange activity still requires further discussion.
“Illegal currency exchange activities conducted by the ‘money exchange gangs’ are administrative violations under the law. If they were to be classified as criminal offenses, it would give rise to a series of problems,” a lawyer said.
“Some suggest this activity should be regarded as illicit gambling activities, but illegal currency exchange is defined as a financial crime. It is difficult to establish a clear connection between financial crimes and illicit gambling.
“The elements constituting a criminal offense and an administrative violation differ significantly in legal terms. There is a great deal of flexibility in handling administrative violations, whereas criminalization requires a detailed enumeration of all the conditions that make such a violation a criminal act.
“Criminalizing illegal currency exchange has far-reaching implications and may even affect residents’ daily lives. The legislative impact of such a decision could reach further than ‘money exchange gangs’.”
However, despite these “money exchange gangs” operating in gray areas, both the Macau police and mainland public security force are intensifying their efforts to combat their proliferation.
In June, the mainland’s public security force announced a large-scale crackdown on “money exchange gangs” in Macau and has initiated specialized task forces. By early July, the mainland police successfully probed and resolved five cases of illegal currency exchange, dismantled six underground banks, and arrested 101 suspects, with the amount involved reaching RMB1.47 billion (US$202 million), according to information provided by them.
In Macau, the police have also made significant progress in tackling “money exchange gangs”. Between January and May 2024, a total of 1,924 individuals engaging in illegal currency exchange were apprehended, representing a substantial decline from 7,851 individuals in the same period last year – suggesting some progress has already been made.
