By James Pomfret and Farah Master
MACAU (Reuters) - Macau authorities have urged banks to restrict the use of a Chinese state-backed bank card which racked up $22.5 billion in transactions last year, a person with direct knowledge of the matter told Reuters, in a bid to curb the increasingly large amounts of money being illegally taken out of China.
Macau is the world's largest gambling market, and a popular destination for Chinese gamers who bet up to millions of yuan at a time. The crackdown follows a Reuters investigative report in March that highlighted the illegal use of UnionPay cards to evade China's strict currency-export controls.
The person, who declined to be identified given the confidentiality of the matter, attended a high-level meeting organized by the Monetary Authority of Macau, or central bank, last Friday during which it laid out guidelines to restrict the use of UnionPay cards at shops selling jewellery and other luxury items located on casino gaming floors.
Banks were also urged to restrict loans or funding to retailers identified by UnionPay as engaging in illegal transactions, the source said.
"We don't know yet whether all the existing stores will be closed, or whether only the newer ones will be closed ... We will only know for sure when they send us their formal guidelines," the source added.
Chinese nationals, who are only allowed to take up to 20,000 yuan, or $3,200, out of China in cash a day, often get around this limit by pretending to purchase expensive items from such stores using their UnionPay cards.
Instead of actually receiving the items, the punters are given hard cash.
The source said the monetary authority didn't specify the exact scope of the restrictions or say whether the guidelines were binding or carried any penalties. Any measures would take effect on July 1, the source added.
UnionPay has already identified about 70 retailers it suspects of fraudulent transactions in Macau, Hong Kong and Japan, according to a company list obtained by Reuters. An updated blacklist of merchants was expected to be published along with the new Macau rules, the source said.
The Monetary Authority of Macau, in a statement emailed to Reuters, declined to comment about the guidelines. There was no immediate comment from Shanghai-based China UnionPay.
Any measures that would reduce the amount of Chinese money coming into Macau would impact the territory's economic growth because of it's overwhelming dependence on mainland Chinese gamblers. Macau's gambling revenues grew by almost 20 percent in 2013 to $45 billion. This year, Fitch analysts expect growth of 12 percent.
The one-hour meeting with representatives of banks in Macau and other UnionPay clients was hosted by Wilson Wong, deputy director of the banking supervision department at monetary authority, the source said.
Wong told the meeting the bulk of the 180 billion patacas ($22.5 billion) of UnionPay transactions in Macau last year came from shops inside or near the casinos, according to the source.
That figure is equivalent to around half of Macau's total gambling revenues last year of $45 billion.
Wong was not immediately available to comment.
Macau's authorities have come under pressure to crack down on illicit money flows and accelerate the gambling hub's transition to a more family-friendly leisure destination since Chinese President Xi Jinping started implementing a broad anti-corruption campaign.
Shanghai-based UnionPay told Reuters last week it had stepped up controls in the former Portuguese colony, including targeting cross-border point-of-sale machines (POS) rigged to banking networks in mainland China that are used by touts on Macau casino floors to help gamblers access additional cash from UnionPay cards for gambling.
Such China-linked POS terminals have proliferated in Macau as a means to escape the scrutiny of authorities, and accounted for some $6 billion in transactions according to Karen Tang, a gaming analyst at Deutsche Bank.
Some industry experts, however, doubted the Macau authorities would be too stringent with their restrictions.
"It (the Macau government) doesn't have real determination to stop these irregularities," said a senior Macau banker who declined to be named due to the sensitivity of the issue.
"It's just a superficial attempt to try to show Beijing that Macau is doing something, but in fact they're not doing anything substantial."
Local media reports say Macau police have been sweeping more casinos for illegal POS machines.
A shop at one out of three casinos visited by Reuters this week, however, was using them openly and six jewellery and pawn stores clustered near casinos still offered illegal cash-back services.
"You can just go there to get money with your card," said a uniformed security guard, pointing to a jewellery store on the gambling floor of the Grand Lisboa casino. He declined to be named as he was not authorized to speak to the media.
"It's their business. They can do what they want ... we won't stop them."
($1 = HK$7.7519)
(Additional reporting by Clare Baldwin; Editing by Anne Marie Roantree and Miral Fahmy)