Macau shares plunge as China launches major crackdown on flow of illicit funds

Macau casino stocks dropped on Wednesday, with some falling by more than 7 per cent, after the South China Morning Post reported Beijing is set to launch a major crackdown on the multi-billion-dollar flow of illicit funds into the gaming hub.

The coordinated security drive by Beijing will see the country's powerful Ministry of Public Security play a leading role.

The unprecedented move - confirmed by documents seen by the Post that were sent to Macau's banks late yesterday by the city's monetary authority - turns up the heat on controversial VIP junket operators who generate the bulk of Macau gaming revenues as they come under increasing law enforcement scrutiny amid the "tigers and flies" anti-corruption drive by President Xi Jinping.

See also: Macau casino shares drop on report of crackdown on illicit money transfers

It also piles more pressure on the Macau government to come up with a plan to diversify its casino-reliant economy as it prepares for a visit by Xi on Friday to mark the 15th anniversary of the former Portuguese enclave's return to Chinese sovereignty.

Macau casinos are going through one of the most significant slumps since the market was liberalised in 2002 and the drop in revenues - linked directly to the anti-corruption drive - has prompted a series of warnings from senior mainland figures that the situation poses a danger not only to the city's economic future but to the interests of the nation "as a whole".

According to sources with knowledge of the situation, the new security drive will give the ministry's Economic Crimes Investigation Bureau electronic access to all transfers through the state-backed China UnionPay bank payment card to identify suspicious transactions.

The bureau is spearheading the "Fox Hunt" operation aimed at securing the return of corrupt party officials who have fled overseas and funnelled millions of dollars worth of illicit funds out of the country in contravention of currency controls.