A mix of documentation and gumshoe reporting

Chinese are using the country’s state-backed bankcards to illegally spirit billions of dollars abroad, according to a story by Reuters South China correspondent James Pomfret.

He reported that near Macau’s ritzy casino resorts, hundreds of jewelry, watch and pawn shops are doing a brisk business giving mainland Chinese customers cash by allowing them to use UnionPay cards to make fake purchases — a way of evading China’s strict currency-export controls.

He talked with Heather Carpenter of the Reuters PR staff about his reporting:

Q. What types of reporting/sourcing were involved?

A. There was a mix of documentary research, source-building and gumshoe reporting in and around Macau; observing the modus operandi of these cash-back transactions in the jewellery stores and casinos, following the money trail. Under Chinese and Macau laws, such practices are illegal and violate anti-money laundering regulations, yet have been largely tolerated. I wanted to understand why. I began tapping sources across various sectors including casino operators, bankers, card industry executives, insiders at UnionPay and other experts. I also drew upon the expertise of colleagues including Asia Gaming Correspondent Farah Master. The final piece included internal memos and classified documentation from UnionPay, China’s Central Bank and Macau’s monetary authority to back up our on-the-ground findings.

Q. What was the hardest part about reporting this story?

A. One key challenge was quantifying the scale of these illegal ‘cashback’ transactions. Authorities have long tried to downplay such activities as insubstantial. The breakthrough was getting a classified Macau Monetary Authority report from a source, warning that UnionPay transactions in jewellery and watch stores around the casinos totaled some $45 billion in 2012, a staggering figure not recorded in Macau’s official retail sales for that year. To put that figure into context, this ragtag cluster of several hundred jewellery and watch stores were racking up more revenues than Macau’s entire gambling sector. (And Macau’s gambling revenues are already 7 times larger than Las Vegas’). While Macau authorities declined to be interviewed, the classified report cited a senior central banker warning banks to crack down on the illegal practice and its attendant risks.

Read more here.