Macau - Gambling 2018 Q&A
Legal News & Analysis - Asia Pacific - Macau - Regulatory & Compliance
30 December, 2017
1 Relevant Authorities and Legislation
1.1 Which entities regulate what type of gambling activity in your jurisdiction?
Under Law no. 16/2001 (Macau Gaming Law), which sets the legal framework regulating casino gaming business, the operation of games of fortune and chance is reserved to the Macau Special Administrative Region, despite being effectively conducted by private entities, to which a concession shall be granted by means of execution of an administrative contract known as the concession contract.
As a result, the responsibility for the regulation of all types of gambling lies with the Macau Chief Executive.
Nonetheless, the Gaming Inspection and Coordination Bureau – DICJ by its Portuguese acronym – which is the official regulatory authority, was established to provide guidance and assistance to the Chief Executive on the definition and application of economic policies on gaming activities, as well as to monitor and supervise concessionaires’ daily operations, such as: auditing its gross gaming revenues and verifying their compliance with the gaming regulatory legal framework; authorising and certifying all gaming equipment; preventing unlawful gaming, money laundering and the financing of terrorism; and, lastly, enforcing the law and sanctioning any infringement.
In addition, it is also incumbent upon the DICJ to license, supervise and monitor the activities of gaming promoters (a.k.a. Junkets), as well their suitability and financial capacity, as per the requirements set by the applicable legislation.
1.2 Specify all legislation which impacts upon any gambling activity (including skill, prize competitions and draws, fantasy, egaming and social games), and specify in broad terms whether it permits or prohibits those activities.
The legal framework governing Macau’s gaming industry is the following (by sector and in chronological order):
1. Lotteries and Pari-mutuels
- Ordinance no. 27/86/M, dated Feb. 1, 1986 and Law no. 12/87/M, dated Aug. 17, 1987 (Instant Lottery).
- Concession Contract with Sociedade de Lotarias Wing Hing Limitada, dated Aug. 24, 1990 and extended to Dec. 31, 2017 (Chinese Lotteries).
- Ordinance no. 163/90/M, dated Aug. 27, 1990 (Horse Racing).
- Ordinance no. 138/98/M, dated Jun. 5, 1998 (Sports Lottery – Football).
- Chief Executive Order no. 62/2000, dated Apr. 27, 2000 (Sports Lottery – Basketball).
- Concession Contract with Companhia de Galgos Macau (Yat Yuen), dated Jan. 1, 2006 and extended to Jul. 20, 2018 (Greyhound Racing).
2. Games of Chance and Fortune
- Decree-Law no. 47/98/M, dated Oct. 26, 1998 (Administrative Licensing Legal Framework).
- Decree-Law no. 39/99/M, dated Aug. 3, 1999 (Article 1171 Macau Civil Code).
- Decree-Law no. 40/99, dated Aug. 3, 1999 (Commercial Code: gaming companies and commercial contracts).
- Law no. 16/2001, dated Sep. 19, 2001 (“Macau Gaming Law”: setting the general framework for the operation of games of fortune in casinos).
- Administrative Regulation no. 26/2001, dated Oct. 29, 2001 (sets the general terms of the public tender required to select the concessions to operate games of fortune in casinos, as well as the suitability and financial capacity requirements of bidders and concessionaires).
- Administrative Regulation no. 6/2002, dated Mar. 20, 2002 (sets the rules and requirements for the licensing of gaming promoters’ operations), amended by Administrative Regulation no. 27/2009, dated Aug. 10, 2009 (regarding the payment of commissions or other remunerations to be paid by gaming concessionaires to gaming promoters).
- Administrative Regulation no. 34/2003, dated Sep. 18, 2003 (setting up of the DICJ).
- Law no. 5/2004, dated Jun. 14, 2004 (Gaming Credit Law).
- Law no. 10/2012, dated Aug. 27, 2012 (establishes the terms to enter, work and gamble in casinos).
- Administrative Regulation no. 26/2012, dated Nov. 26, 2012 (sets the rules applicable to the supply of gaming machines and related gaming equipment).
3. Criminal Penalty Regime
- Law no. 8/96/M, dated Jul. 22, 1996 (Unlawful Gaming Act).
- Law no. 9/96/M, dated Jul. 22, 1996 (Criminal Offences in Animal Racing Act).
- Law no. 6/97/M, dated Jul. 30, 1997 (Organized Crime Act), partially revoked.
- Law no. 2/2006, dated Apr. 3, 2006 (Anti-money Laundering Act).
- Law no. 3/2006, dated Apr. 3, 2006 (Anti-terrorism Financing Act).
- Administrative Regulation no. 7/2006, dated Apr. 7, 2006 (preventive measures for the crimes of money laundering and financing of terrorism).
- Instruction no. 1/2016, dated Apr. 21 2016 (DICJ Instruction on Anti-money Laundering and Combatting of the Financing of Terrorism for the Gaming Sector).
2 Application for a Licence and Licence Restrictions
2.1 Who can apply for a licence to supply gambling facilities?
Macau follows an administrative concession system, under which the Government and private entities legally incorporated in Macau as a public limited company by shares (S.A. companies) enter into a concession contract for the operation of games of fortune, following a selection made by means of an international bidding process. Therefore, the operation of games of fortune in casinos, pari-mutuels (horse racing and greyhound), lotteries and sports betting can only be legally pursued by means of a concession agreement between Macau SAR and each concessionaire.
According to the law, licence applicants should also have a managing director who shall be a Macau permanent resident owning at least 10% of the applicant company’s share capital.
The monopoly of games of fortune and chance in casinos ceased in 2002 after an international bid issued by the local government. Since then, and pursuant to article 7 of the Macau Gaming Law, three gaming concessionaires (SJM, Galaxy and Wynn) have been granted a licence to operate those games until 2020/2022. Subsequently, after modifications in the concession contracts, the establishment of three sub-concessions has been authorised by the Government (MGM, Venetian and Melco Resort), despite being completely autonomous from the original concessions, except in what concerns their contract terms.
2.2 Who or what entity must apply for a licence or authorisations and which entities or persons, apart from an operator, need to hold a licence? Are personal and premises licences needed? Do key suppliers need authorisation?
According to the law, besides casino operators, gaming promoters are also required to apply for a licence in order to be legally allowed to carry out their business activities. Since Administrative Regulation no. 6/2002 (Gaming Promoters Act) was enacted, gaming promoters, regardless of being individuals or companies, must submit an initial application to the DICJ in which their reputation and suitability must be duly evidenced, aside from a declaration letter by which the intention of doing business between the concessionaire and the gaming promoter applicant should be unconditionally declared.
In addition to the above, manufacturers/suppliers of gaming machines and all related equipment engaged in doing business in this jurisdiction must also get proper authorisation from the DICJ, which will conduct suitability assessments under the terms set under Administrative Regulation no. 26/2012.
2.3 What restrictions are placed upon any licensee?
Firstly, suitability requirements are, beyond any doubt, important restrictions for gaming operators, not only at the initial stage of concession, but also for pursuing their activity. Pursuant to articles 14 and 15 of the Macau Gaming Law, experience, repute and probity are absolutely mandatory requirements for all concession holders, as well as financial capacity. Needless to say, the mentioned conditions must be maintained and verified for the entire period of concession (20 years).
Likewise, all directors and shareholders holding at least 5% of the gaming operator’s corporate capital, as well as key employees, will be continuously subject to suitability monitoring by the DICJ.
Moreover, according to the same piece of legislation, casino concessionaires and sub-concessionaires are not allowed to operate with a capital below 200 million Patacas.
Competitive restraints are also placed upon gambling operators, namely prohibiting anti-competitive agreements and practices among the concessionaires and sub-concessionaires or companies from the same groups, as well as the abuse of dominant position and the control of shareholdings. As a consequence of the latter, casino operators, and their main shareholders holding at least 5% of the corporate capital, cannot, directly or indirectly, hold 5% or more of the capital of other operators.
Last, but not least, the Macau Gaming Law establishes Macau as a “continuous gaming zone”, which means that only in exceptional cases, and upon Government approval, can licence holders suspend casino operations for a limited period of time. Besides, the exploitation of games of fortune and chance should only take place in a previously authorised brick-and-mortar casino, despite it being possible for the Government to authorise the said activity to be carried out on board a ship or an aircraft registered in Macau, as well as in the customs-cleared area of Macau International Airport’s international departures.
2.4 What is the process of applying for any gambling licence or regulatory approval?
Under Administrative Regulation no. 26/2001, which was enacted to regulate all aspects regarding the awarding of a temporary gaming concession, Macau follows a concession system by which a licence to operate is granted to the successful applicants, following a public tender.
After a tender committee is set up under the Executive’s order, the interested companies/bidders, as well as their directors, key employees and shareholders holding more than 5% of the share capital will be subject to a suitability and financial capacity assessment under the supervision of the DICJ, and prior to the issuing of the authorisation.
Once the public tender is completed, on the assumption that all requirements have been met, a concession agreement must be signed between the concessionaire and the Macau Government, which will further legitimate the activity of the former.
2.5 Please give a summary of applicable time limits and potential for expiry, review revocation and nullification.
Under article 13 of the Macau Gaming Law, the maximum term of a gaming concession is 20 years, which must be clearly set under the concession contract. However, in case a concession is granted for a shorter period of time, one or two additional extensions are legally permitted, up to the said limit of 20 years. This may be the case for SJM and MGM, which concessions were initially granted for a term of 18 years.
Despite the above, concession contracts might be exceptionally and extraordinarily extended up to 25 years upon justifiable grounds and duly substantiated by the Chief Executive.
According to article 43 of the Macau Gaming Law, a previously granted concession may be unilaterally terminated by the Government in case there is a breach of the concession agreement, as well as the infringement of any other legal provision governing the underlying activity or even for reasons of public interest.
2.6 By product, what are the key limits on providing services to customers? Please include in this answer the material promotion and advertising restrictions.
Assuming that a concession has been awarded by means of a public tender, concession holders can only provide the services described by the Macau Gaming Law and stated in the concession agreement. Therefore, table games and game machines (slots) can only be offered inside land-based casinos and other authorised venues, whereas horse racing, greyhound racing and sports betting concessionaires are offered outside casinos.
As a matter of fact, both sports betting and pari-mutuels are not deemed to be games of chance and fortune. According to the Macau Gaming Law, it is not legal to offer pari-mutuels or operations offered to the public (lotteries) in a casino environment, even though the same piece of legislation provides that lotteries might be exploited by casinos after a dispatch of the Secretary for Economy and Finance and assuming that an amendment to the concession contract is made.
In summary, the concessions and sub-concessions of games of fortune and chance cover: all games mentioned in article 3 of the Macau Gaming Law (table games); other games of chance authorised and regulated by the Government after 2001; and authorised electric or mechanic machine games (slot machines). The forms of gaming not covered by casino concessions and sub-concessions are: pari-mutuels (horse racing and greyhound racing); operations offered to the public (sports betting and lotteries); and interactive casino games (understood as online games).
Regarding promotion and advertising restrictions, and according to the Advertisement Act enacted in 1989, games of fortune and chance cannot be advertised if the games are themselves the main focus of the advert. The act thus allows gaming operators to advertise games of fortune and chance whenever the games are not the essential element of the advert. Despite this restriction, the concession and sub-concession contracts executed by the Government since 2002 (when the Advertisement Act was enforced) require operators to conduct advertising and marketing campaigns both in Macau and abroad.
2.7 What are the tax and other compulsory levies?
Under article 27 of the Macau Gaming Law, gaming concessionaires and sub- concessionaires are required to pay a special gaming tax of 35% of the gross gaming revenue, payable until the 10th of each month.
In addition to the mentioned Special Gaming Tax, gaming operators are also subject to a payment of 1.6% of its gross gaming revenue for a public foundation that promotes cultural, scientific, social, economic and educational development (Macau Foundation), as well as 2.4% for funding urban development, tourism promotion and social security.
Moreover, a 5% tax is also levied on the commissions or other compensations paid to gaming promoters.
Despite the abovementioned taxation system, efforts have been made to alleviate the tax burden, provided that all concessionaires and sub-concessionaires have been exempted from the Income Complementary Tax.
Lastly, pursuant to article 20 of the Macau Gaming Law, concession and sub-concession agreements provide for the obligation of payment of an annual premium which is comprised of a fixed amount of 30 million Patacas (approx. USD3.8 million) and by a flexible amount which will mostly vary according to the number of table games and electronic gaming machines operated, including slot machines. That being said, concessionaires and sub-concessionaires are required to pay 300 thousand Patacas (approx. USD37.5 thousand) for each VIP table; 150 thousand Patacas (approx. USD18.8 thousand) for every table game allocated to the mass market, as well as 1 thousand Patacas (approx. USD125) for every gaming machine.
2.8 What are the broad social responsibility requirements?
There is not a high degree of social responsibility and control over harm caused by the Macau gaming industry, although Law no. 10/2012 (“Conditions of Entering, Working and Gaming at Casinos”) implemented a voluntary self-exclusion, along with third-party exclusion services, in which patrons or direct family members (article 6), respectively, may apply for exclusion from all or some of the casinos in Macau SAR for a maximum period of two years.
Furthermore, the DICJ has been putting some efforts in order to further enhance public awareness of responsible gaming, although there are no legal impositions for gaming operators.
2.9 How do any AML, financial services regulations or payment restrictions restrict or impact on entities supplying gambling? Does your jurisdiction permit virtual currencies to be used for gambling and are they separately regulated?
Over the years, continuous efforts have been made to combat money laundering in Macau. Aside from the main AML framework, which consists of Law no. 2/2006 (AML Law) and Administrative Regulation no. 7/2006 (“Preventive Measures for the Crimes of Money Laundering and Financing of Terrorism”), the DICJ, since last May, has set a higher standard for AML compliance by introducing new measures aimed to implement a risk-based approach and enhance customer due diligence procedures, mainly related to the identification of patrons and the reporting of suspicious transactions (Instruction no. 1/2016).
It is widely known that money laundering is a very serious concern within the Macau gaming industry and therefore with the entry into force of new instructions intended to be implemented by casino concessionaires and sub concessionaires, an important step has been taken for a more strict compliance with the Asia Pacific Group’s guidelines.
In turn, virtual currencies are not permitted to be used for gaming activities in Macau SAR.
3 The Restrictions on Online Supply/Technology Support/Machines
3.1 Does the law restrict, permit or prohibit certain online activity and, if so, how?
There are no laws and regulations in Macau SAR that regulate all forms of remote gambling, including internet and mobile gaming. The interactive games of fortune and chance cannot be exploited by the gaming concessionaires under Law no. 16/2001; such Law, in its article 4, states that interactive gaming concessions are separate from the concessions for the operation of games of fortune and chance in casinos in Macau. Hence, all forms of online gambling in Macau are considered outlawed.
The only legal options for remote gambling in Macau are limited to horse racing, greyhound racing and sports betting, solely offered by the Macau Jockey Club, Yat Yuen Canidrome Club, and Macau SLOT, respectively.
3.2 What other restrictions have an impact on online supplies?
Considering the lack of legislation on remote gambling, as well as on access, registration and effective bets on overseas online gaming websites, players located in Macau are free to access, on a passive basis, those websites. There are no laws and regulations that prevent Internet Service Providers from blocking consumers from accessing the websites of gambling operators licensed overseas.
3.3 What terminal/machine-based gaming is permitted and where?
According to Administrative Regulation no. 26/2012, which provides the rules applicable to the supply of slot machines and related equipment in Macau SAR, only approved gaming machines as well as electronic table games from authorised manufactures can be supplied to gaming operators. The authorisation by the DICJ is subject to a strict suitability assessment of the applicant manufacturer as well as its shareholders and directors, despite the possibility of licensed manufacturers from specific jurisdictions (Nevada, New Jersey, Mississippi, Australia, New Zealand, Great Britain and Singapore) submitting a request for waiving the said procedure.
Table games and gaming machines can only be offered inside brick-and-mortar casinos and other authorised venues, although the Macau Gaming Law provides that the Macau Chief Executive may authorise, for a specified time, the operation of any games of fortune and chance on board a ship or an aircraft registered in Macau when out of Macau SAR and operating on touristic routes, as well as electronic gaming machines, playing directly into tokens or money, in the customs-cleared area of Macau International Airport’s international departures.
4 Enforcement and Liability
4.1 Who is liable for breaches of the relevant gambling legislation?
Gaming operators are subject to the regulatory control of the DICJ, which is responsible for enforcing the legal framework applicable to the gaming industry in Macau. Therefore, under Administrative Regulation no. 34/2003, the DICJ is legally entrusted with the power of monitoring, supervising and thus investigating and sanctioning any administrative infringement committed by gaming concessionaires and sub-concessionaires, gaming promoters, as well as electronic gaming machines manufactures.
Moreover, according to article 43 of the Macau Gaming Law, shareholders with more than 10% of the share capital of any gaming concessionaire or sub-concessionaire will be jointly liable for the payment of any imposed fines, even if the said operator has been dissolved or has ceased activity for any reason.
4.2 What is the approach of authorities to unregulated supplies?
Illegal gaming activities will be subject to Law no. 8/96/M on unlawful gaming, which sanctions all forms of operation, promotion or assistance to gaming outside the authorised areas, as well as any fraudulent or illicit gaming in authorised areas, or any unlicensed granting of loans or gaming credits to patrons.
Hence, any infringement of the provisions regarding the offering of unlawful games of chance and fortune in unauthorised venues will be punished with up to three years of imprisonment or with the imposition of a fine. In turn, participation may be subject to a fine of up to a maximum of 180 days, whereas any individual found in an illegal gaming site may be liable for the payment of a fine of up to 90 days. Fraudulent games are punished with up to five years of imprisonment. On the other hand, the illegal operation of games of fortunes and chance in authorised venues shall be punishable by a maximum imprisonment of three years or a fine. In turn, participation shall be punished with imprisonment up to six months or a fine. Lastly, game usury is subject to a maximum imprisonment of three years.
4.3 Do other non-national laws impact upon liability and enforcement?
No, there are no international laws with an impact upon liability and enforcement.
4.4 Are gambling debts enforceable in your jurisdiction?
According to article 1171 of the Macau Civil Code, gaming and betting may be: a source of standard enforceable civil obligations; a source of natural obligations; or void. Therefore, and in the terms of the said provision, the enforcement of gambling debts is only possible when specific laws so provide, which means whatever the gaming activity is legally regulated, authorised and taxed.
5 Anticipated Reforms
5.1 What (if any) intended changes to the gambling legislation/regulations are being discussed currently?
The Macau legal framework has been subject to some recent changes. Despite the fact that some of these law amendments are strictly and exclusively related with gaming, considering the importance that the gaming industry has in the local economy, such amendments will definitely have some impact in Macau as a whole.
On May 2017, Macau’s government imposed facial recognition and identification card checks at ATMs (including devices located within casinos) before Chinese UnionPay cardholders can withdraw cash. This is seen a stepped-up measure to curb money laundering in the jurisdiction and, according to a local authorities report, by the end of July the great majority of local ATMs will have been installed with the relevant technical devices.
By the end of July 2017, the Macau Legislative Assembly (AL) passed the government-initiated Tobacco Prevention and Control Law’s amendment bill, which allows casinos to set up smoking lounges in gaming areas in line with the standards set by the Government. The bill is slated to take effect on January 1 2018. The major amendments refer to the obligation of setting up smoking lounges to the officially required standards within a year of the law coming into force.
Existing smoking lounges and smoking areas (VIP rooms only) can remain during the one-year interim period before the new smoking lounges are fully operational. The new law bans the sale of e-cigarettes in Macau.
It is likely that in the near future the Macau Government may amend Administrative Regulation no. 6/2002, which sets the rules and requirements for the licensing of gaming promoters’ operations, with the objective of imposing requirements for casinos and junket operators to assume more due diligence and operational obligations, and to adopt more pre-emptive measures. It is true that the local regulator, DICJ, has implemented, since 2016, some relevant measures concerning the auditing of gaming promoters’ operations which culminated in a significant reduction of valid operating licenses, but it is likely that the Macau authorities will continue its quest to introduce worldwide standards for this activity.
In perhaps a not so near future, some changes on the current gaming activity taxation may occur, as some of the gaming operators’ representatives have already publically admitted that, according to regional and worldwide standards, Macau’s gaming taxes are considerably high. However, it is not expected that such changes (reductions) on the current gaming tax may occur before the term of the existing gaming concessions.
Another area in which one may anticipate legal changes is the Corporate Social Responsibility of local concessionaires, but, again, such changes shall not occur before the term of the existing concessions.
This article was first written for Global Legal Group.
Pedro Cortés, Partner, Rato, Ling, Lei & Cortes - Advogados