Macau Arrests 17 In Money Laundering Crackdown As China Downturn Fears Grow

HONG KONG (Reuters) - Police in the global gambling hub of Macau have arrested 17 people this week after raiding pawn shops thought to be easing the illicit flow of money from China, whose slowing economy is prompting authorities to try and curb capital flight.

Macau, the only place in China where citizens are allowed to gamble in casinos, has long been considered a money laundering blackspot, susceptible to unchecked capital flows in and out of China.

The problem has persisted for years, but recent stock market turmoil and signs of growing strain in China's economy are pushing Chinese and Macau authorities to tackle it.

Over the past week, China's central bank and the public security ministry announced a new anti-money laundering pact and a three-month crackdown on underground banking.

Macau police said they investigated five jewelry and telecommunication shops on Monday that were allegedly involved in fraudulent bank card usage.

They seized 11 mainland card payment terminals for state-backed China UnionPay cards, records of illegal transactions and cash of 13.5 million patacas ($1.7 million), police said on their website.

The number of gambling-linked crimes in the former Portuguese colony jumped to a record 34.5 percent in the first half of 2015 on the year, up from 22.6 percent a year earlier, Macau's public security bureau told Reuters in an email on Tuesday.

Macau, which became a Chinese special administrative region in 1999, has seen revenues plunge for the last 14 months as wealthy punters stay away.

"The reduced number of big VIP gamblers and increasing difficulty in getting back gaming debt for some creditors has led to the rise in these crime rates," Macau's secretary for security, Wong Sio Chak, told the media.

Macau's casinos, which rake in monthly revenues amounting to a third of what Las Vegas does annually, have been reliant on "big whale" gamblers, who drop up to 1 million yuan at a time.

The junket system that lets companies or individuals loan credit to gamblers on behalf of Macau's casinos, has been crippled since 2014, with waits of as long as a year for VIPs to repay billions.

Hong Kong-listed casino stocks have fallen between 30 percent and 42 percent since the start of 2015, underperforming a 10 percent fall in the Hang Seng benchmark over the same period.

Macau's six licensed operators, Sands China, Wynn Macau, MGM China, Melco Crown, SJM Holdings and Galaxy Entertainment are trying to bolster growth by luring mass market customers, who spend less but visit in greater numbers.