Draft legislation for the new Sri Lanka gaming industry does not address the licensing, taxation and regulation of casino junkets.
Melco Resorts & Entertainment will open the casino at City of Dreams Sri Lanka this summer. As the new industry plans to launch, lawmakers have compiled a draft regulatory bill that is noticably free of regulations covering VIP junkets.
The 48-page Sri Lanka Gambling Authority Act, published on 23 May, refers to the licensing, taxation and oversight of junkets, but it does not specify any regulations. In a hearing last week, the Parliamentary Committee on Public Finance questioned the omission. A Financial Intelligence Unit officer said the casino itself will operate under Inland Revenue collection structures. Whether the junket operators will be included in that mechanism remains to be seen.
The Sri Lanka Sunday Times railed at the drab regulatory regime [filled] with loopholes. Editors accused lawmakers of leaving the door open to money laundering and junket operators, some with underworld links in casino centres such as Macau and Australia.
Junkets serve VIPs by arranging luxury transportation and accommodation and issuing lines of credit for gamblers who may drop tens of thousands of dollars on a single hand. These so-called whales, mostly from mainland China, once dominated the Macau gaming landscape, providing up to 60% of gaming revenue.
The sector began to falter in 2021, with Beijings crackdown on capital flight and cross-border gambling. It took another hit in 2023 when industry kingpins Alvin Chau and Levo Chan were convicted of illegal gambling, organised crime and fraud.
Chau, former head of the Suncity Group, is serving 18 years in prison and was also ordered to pay $1 billion in damages for illegally diverting casino revenue. Chan, head of the Tak Chun Group, was ordered to serve 14 years and pay $25 million.
Today, fewer than 20 junkets do business in Macau, down from 245 in 2014.
In February, the Sri Lanka cabinet first okayed the formation of a Gambling Regularisation Authority.
It will function as the sole independent regulator with a broad and overarching scope on operations in the gambling industry in Sri Lanka, the legislation stated. That covers online and offshore gambling, consisting of sports betting, ship-based gambling and land-based operations in Colombo Port City.
That includes Melcos City of Dreams property, the first full-scale integrated resort in Sri Lanka. It staged a soft opening in October, with almost 700 hotel rooms as well as restaurants, entertainment venues and conference facilities. Phase 2 will add the casino and a 113-key Nuwa Hotel. In March, the Sri Lanka government granted Melco a 20-year gaming licence, effective 1 April.
The $1 billion project is a partnership between Melco, one of Macaus Big Six casino operators, and John Keells Holdings, a Sri Lanka real estate developer.
Now the jurisdiction needs a regulatory scheme to monitor junkets. In testimony last week, the Financial Intelligence Unit officer said, At the moment, there is no mechanism to monitor.
But once the regulatory authority is established, it is very much within their purview to issue regulations and necessary directives.
