China Striving to Erase Gambling

China represents a market that most I-gaming companies lust for, but the government would rather gambling be unavailable to its citizens. Government officials initiated a massive crackdown on gambling at the beginning of 2005 under the pretenses that in the previous year over US$94 billion in both public and private funds had been spent on foreign gambling services. Consequently, 2005 became a year filled with gambling-related raids and arrests, and restrictions that were already tight became even tighter.

At the beginning of December, the state-run Xinhua News Agency reported the official statistics on China's attempt to eradicate gambling for the months January 2005 through September 2005. Over the time period police arrested 1.16 million people for suspected illegal betting offenses, seized 2.3 billion yuan (US$288 million), and investigated 163,000 cases. Authorities had also closed 30 gambling agencies linked to overseas casinos and 19 underground banks. Of the 1.2 million arrests, 8,740 were of members of the ruling Communist party who were convicted and received punishment.

The government was installing more severe penalties for gambling operators as the year came to a close. In early December a draft bill that would amend the criminal law by increasing the maximum prison term for casino operators from three years to 10 years was submitted to the National People's Congress Standing Committee for a first hearing. And thanks to new interpretations of the law that took effect in May, anyone involved in an Internet gambling operation will be treated just as someone involved in a casino or traditional sort of operation would be treated.

Government agencies undertook other actions throughout the year to combat gambling over the Internet as well. In February, China's Banking Regulatory Commission called upon China's banks and financial institutions to monitor accounts more closely to crack down on gambling. Two months later the National Coordinating Office to Strike at Illegal Gambling stated that the Ministry of Public Security was to unite telecom departments, banks and other departments to assist the crackdown effort. The creation of a judicial expertise center specializing in appraising electronic data to solve the problem of gathering evidence of online gambling is underway.

Other Internet activities found to be undesirable by the Chinese government were clamped down upon as well in 2005. Pornography, video games and news all faced stricter regulatory control at some point in 2005. Restrictions are set to get even tighter in 2006. At the end of December 2005 China's Ministry of Public Security announced that on March 1, the country will implement new Internet regulations in an attempt to limit pornography, spam, viruses, gambling fraud and other undesirable activities. Under the new regulations, Internet service providers will become liable for Internet security, and police will have the power to supervise all providers.

The same day it announced its new Internet policy, the Ministry of Public Security also revealed the results of the latest crackdown it had initiated in September 2005. In all, 598 pornographic Web sites and 35 domain names had been closed. A Ministry spokesperson said this represented the last of the China-based pornography sites.

Timeline of Noteworthy Gambling and Internet-related Policy Events in China in 2005

January

Gambling restriction becomes a high priority after it is widely reported that a senior government official lost over US$30,000 in public funds during more than 15 trips to a North Korean casino. Official government reports estimate that about US$94 billion in both public and private funds were gambled with overseas providers in 2004.

The Chinese government tries to prevent money intended for casino gambling from leaving the country by blocking the channels through which many Chinese citizens go abroad for gambling. Online gambling and illegal lotteries are also targeted, and the country's minister of public security states that the campaign would shut down offices and Web sites set up by foreign companies.

Chinese police arrest close to 600 people in relation to online gambling with a Taiwanese company called Baoying. The cases involve over US$60.5 million in gambling funds, US$2.8 of which is seized. According to China's Ministry of Public Security, Baoying had been cooperating with individuals in mainland China since March 2004 to organize online gambling. Of those arrested, 395 are organizers and 202 are gamblers, some of whom are government officials.

Police in East China's Fujian province discover two illegal Internet gambling operations, one of which has a turnover of more than US$1.6 billion per month. Authorities detain 70 suspects, some of whom are government officials. On Dec. 20, 2004 the Fujian Provincial Public Security Bureau had begun a province-wide sting operation involving 880 policemen to shut down 104 known Internet gambling dens. Police say the entire network was operated by two Taiwan-based gambling Web sites that were involved with mainland syndicates in several coastal cities. The sites offered online football lotteries.

Beijing police arrest two suspects and seize more than US$28.4 million in a case that involves the use of an overseas gambling Web site.

February

Forty-six employees of the Jilin Construction Bank are charged with embezzling US$65.3 million and gambling US$40.2 million of it away with illegal bookmakers or at casinos in Macau. The thefts occurred in 1999 and were discovered in 2001, but charges were not brought against the culprits until now. It is also revealed that the government is investigating the theft of over US$120.6 million from Bank of China accounts.

China's Banking Regulatory Commission asks the country's banks and financial institutions to monitor accounts and fund exchanges more closely to crack down on gambling. The commission plans to set up special mechanisms to monitor abnormal transactions and blacklist accounts suspected to have funded gambling activity. Police in Beijing discover 22 accounts at five different banks involved in eight Internet gambling cases.

March

A deputy in China's National People's Congress, the country's top legislature, presents a stand-alone bill that would explicitly prohibit government officials and executives of state-owned enterprises from gambling and would impose heavier penalties for violators. The Ministry of Public Security, however, opposes the bill, preferring instead to revise the existing criminal code to make it more effective. An amendment to the code would provide more serious punishments for offenders and also expand its reach to include gambling done via Internet or outside the mainland.

The Sunshine Companion Center in Beijing becomes China's first center to treat children and teens who suffer from Internet Addiction Disorder, a problem that is believed to affect an estimated five million of the country's youth. The establishment of the center is part of the government's plan to eliminate what it believes to be social evils, like gambling and pornography.

April

Police in Shanghai arrest 24 suspects who are allegedly linked to a Taiwanese online football betting organization that offered services in 22 mainland Chinese provinces. Police confiscate US$120,000 from the individuals and estimate that the gang might have collected up to US$10.8 million during one year of operation.

The Chinese government initiates an online games censorship policy that is supposed to last until September. The policy prohibits games that include elements of pornography, gambling, violence and subversive ideas that threaten state security. Games developers are also required to amend games that can cause addiction.

Records show that 1,800 Internet pornography sites have been shut down since the introduction of China's online reporting center last June. Chinese citizens are encouraged to report pornographic and other undesirable Internet sites (including gambling sites) to the center, and some members of the public have received cash incentives for their duties.

May

China's Supreme People's Court and Supreme People's Procuratorate declare that new interpretations of China's gambling law (Article 303 China's Criminal Law) that taking effect this month will provide the ability to prosecute Internet gambling operations. Article 303 states that "whoever, for the purpose of reaping profits, assembles a crowd to engage in gambling, opens a gambling house or makes an occupation of gambling is to be sentenced to not more than three years of fixed-term imprisonment, criminal detention or control, in addition to a fine." With the introduction of the new interpretations, anyone who sets up an Internet gambling site will now be treated as one who opens a gambling house. Furthermore, anyone who "knowingly offers capital or Internet services and telecommunications facilities to gambling participants or organizer" will be regarded as an accomplice to the gambling operation. Especially severe punishments will be delivered to gamblers or operators who are civil servants, who organize civil servants to gamble overseas or who organize juveniles to gamble.

The National Coordinating Office to Strike at Illegal Gambling (the agency charged with eradicating gambling) states that the Ministry of Public Security will unite telecom departments, the China Banking Regulatory Commission and other departments in an effort to crack down even harder on online gambling operations. The agency reveals plans to create a judicial expertise center that will specialize in appraising electronic data to solve the problem of gathering admissible evidence of online gambling.

More than 1,000 police officers in Shanghai participate in a massive citywide sting that results in the detainment of 13,000 individuals suspected of a number of crimes, including illegal gambling. Among those detained, two are on a national wanted list for allegedly organizing gambling over the Internet.

June

The Chinese province of Guangdong's public security department declares that any travel agency that takes tourists to visit overseas casinos will have its operating license revoked.

August

The Chinese government introduces new regulations that limit online games and foreign satellite broadcasts containing objectionable content. Under the new regulations, only online games with import authorization from the Ministry of Culture may be brought into the country, and game content may not be revised without authorization. Further, China will no longer approve the broadcast of any new foreign satellite TV channels, and there are no immediate plans to appoint any new institutions to serve as import agents for media products such as books and magazines, video and audio products and movies and TV programs. Unlicensed broadcasting of foreign signals is prohibited, but a small number of overseas channels, such as InfoNews, CNN, Bloomberg, HBO and BBC World, have obtained approval to broadcast in hotels, residences and offices that are used exclusively by foreigners.

September

China's Ministry of Public Security urges local police in border areas to stop Chinese citizens from gambling in neighboring countries. Some casinos in neighboring countries have reportedly re-opened specifically to entertain Chinese gamblers. Many of them closed earlier this year after China initiated its campaign to stop citizens from gambling with them. Public security departments are now ordered not to issue tourist exit permits to Chinese citizens who are destined for neighboring countries with casinos.

The Chinese government introduces a new set of regulations to control the operations of online news organizations. According to the new rules, "Online news service units should… serve the people, uphold the correct leadership of public opinion, and protect the interests of the nation and public…. The state encourages online news service units to transmit healthy and civilized news that will help to raise the quality of the nationality, push forward economic development and promote social development." News organizations must have experienced staff and registered premises and capital, and an internal system that makes clear who is responsible for what is published. They may not publish news that is deemed seditious, harmful to social order, superstitious, or forbidden by other laws.

December

The official statistics for China's gambling crackdown for the months January through September, as reported by the Xinhua News Agency, is that police have arrested 1.16 million people for suspected illegal betting offences, seized 2.3 billion yuan (US$288 million), and investigated 163,000 cases. Authorities also closed 30 gambling agencies that are linked to overseas casinos and 19 underground banks. Of the 1.2 million arrests, 8,740 are members of the ruling Communist party who are convicted and received punishment.

A draft law aiming to crack down even further on gambling in China is submitted to the country's top legislature, the National People's Congress Standing Committee for its first hearing. The proposal would amend criminal law by increasing the maximum prison term for casino operators from three years to 10 years.

China's Ministry of Public Security announces that a crackdown on pornography that began in September 2005 has resulted in the closure of 598 pornographic Web sites and 35 domain names. The ministry also reveals that on March 1 China will implement new Internet regulations in an attempt to limit pornography, spam, viruses, gambling, fraud and other undesirable activities. Under the new regulations, Internet service providers will become liable for Internet security and police will have the power to supervise all providers.

*Author's note - The information regarding the events described in this article comes from translated versions of reports from the Xinhua News Agency. Therefore: 1) that details sometimes distort across the translation between languages, and 2) The Xinhua News Agency is an arm of the government, which likely disseminates its information in the light that is best suitable to its needs. At any rate, one thing is certain from this mountain of evidence: The Chinese government is very serious about eliminating unauthorized gambling.