Taiwan probes fund transfers at Crown Casino's Macau venture
According to reports, Taiwanese authorities are investigating fund transfers over three years by Melco Crown subsidiary, MCE International, on behalf of 100 Taiwanese gamblers suspected of breaching the country's banking laws.
Taiwanese prosecutors are reportedly applying to freeze about $US100 million in company funds in local bank accounts.
Crown chief executive, Rowen Craigie, is listed as a non-executive director of the Hong Kong-based company.
Only registered banks are allowed to engage in international currency exchange and transfer services in Taiwan, with penalties reported to include up to 10 years in jail.
Two employees of MCE International's Taiwan office have been questioned by authorities.
"None of Melco Crown Entertainment's corporate entities has been charged at the current time, and we believe our corporate activities are consistent with general market practice," said Melco Crown spokeswoman, Maggie Ma. "The company will fully co-operate with the Taiwan authority on any present and future investigations that they may conduct."
Regional gaming analysts contacted by BusinessDay said it was hard to say, at this stage, if there were any probity concerns for Crown and its Macau joint venture, but, one Macau-based consultant said, the implications were serious.
Macau has been a notorious hot spot for money laundering from mainland China.
"If a casino's subsidiary was to be found guilty of money laundering, that creates a big black mark in terms of their credibility and their probity in terms of holding any casino licence."
Macau's importance to Crown is growing with the casino enclave providing a rising share of the company's earnings.
According to research from Citi, Melco Crown is expected to account for 39 per cent of Crown's earnings this year, up from 6 per cent in the 2011 financial year.
"Despite the 25 per cent share price rally since October 2012, we continue to view significant share price upside given the earnings momentum at [Melco Crown]," said Citi analyst Michael Goltsman.
He has a $13 price target on Crown shares, which closed at $11.68 on Wednesday.
Crown is undergoing a probity check by the New South Wales Independent Liquor and Gaming Authority with the aim of increasing its stake in rival casino operator, Echo Entertainment.
Mr Packer is wooing the state government for permission to build a second casino at Sydney harbour development Barangaroo as part of a luxury hotel he is planning.
Crown is also undergoing a review of its casino licence in Victoria, which expires in 2033.
The Victorian Commission for Gambling and Liquor Regulation is required to conduct a review every five years to ascertain whether Crown is "a suitable person to continue to hold the casino licence".
In its submission to the commission in October, Crown said it "has an excellent probity record and is not aware of any issues or investigations that could jeopardise its suitability to hold a casino licence".
The commission is due to complete the review and report its findings to the Minister for Gaming by June 30.
Frequently Asked Questions about this Article…
Taiwanese authorities are investigating alleged channelling of about US$180 million in illicit gambling funds from Taiwan to Melco Crown Entertainment's casinos in Macau. The probe focuses on fund transfers over three years by Melco Crown subsidiary MCE International on behalf of around 100 Taiwanese gamblers.
Reports say Taiwanese prosecutors are applying to freeze roughly US$100 million held in local bank accounts linked to the company as part of the investigation.
Two employees from MCE International's Taiwan office have been questioned by authorities. Melco Crown spokeswoman Maggie Ma has said no corporate entities have been charged and the company will fully cooperate with investigations.
Yes. Analysts warn that if a casino subsidiary is found guilty of money laundering it could damage credibility and probity — potentially jeopardising casino licences. Crown is already subject to probity checks in New South Wales and regular licence reviews in Victoria.
According to Citi research cited in the article, Melco Crown is expected to account for about 39% of Crown's earnings this year, up from 6% in the 2011 financial year — showing Macau is an increasingly significant part of Crown's profits.
Investors should monitor outcomes of the Taiwan investigation (including any asset freezes or charges), local probity checks such as the New South Wales Independent Liquor and Gaming Authority review, and the Victorian Commission for Gambling and Liquor Regulation’s licence review due to report by June 30. Adverse findings could affect licences, operations and share sentiment.
Citi analyst Michael Goltsman noted significant upside given Melco Crown’s earnings momentum and had a A$13 price target on Crown shares; the stock had closed at A$11.68 with a 25% rally since October 2012. However, analysts also flagged the seriousness of any probity issues if proven.
Yes. The article notes that in Taiwan only registered banks are allowed to conduct international currency exchange and transfer services, and penalties for breaching banking laws can reportedly include up to 10 years in jail — a regulatory risk that underpins the seriousness of the probe.
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