HONG KONG -- Suncity Group, the Macao-based gambling company, has pulled out of the running for rights to run a casino resort in Japan.

The group is the biggest junket agency in Macao, bringing in high rollers from China and other countries to wager millions in VIP rooms it operates inside other companies' casinos in the world's largest betting hub and elsewhere.

Through listed arm Suncity Group Holdings, it also runs its own casino resorts near Hoi An, Vietnam and Vladivostok, Russia and is building another in Manila's Entertainment City gambling zone.

Suncity hoped to add Japan to its portfolio, targeting Wakayama Prefecture near Osaka, though the region has not been seen as a top contender to host one of Japan's first three legal casino gaming venues, to be known as integrated resorts.

To raise its profile in the country, Suncity has sponsored a professional sailing team and is developing holiday resorts in the skiing center of Niseko and on Okinawa's subtropical Miyako Island.

In a May 12 statement about its retreat on the group's Japanese website, Suncity Chairman Alvin Chau highlighted the uncertain outlook for the gaming sector.

"We have decided to make a strict decision after careful consideration, considering the enormous impact of the COVID-19 pandemic on the industry," he said. "The fact that many matters are still unclear in Japan's IR (integrated resort) zone certification process, which is expected to take much longer than originally planned, has also added extra risk."

Suncity had seemed an unlikely candidate for Tokyo's nod. This was in part because the Japanese government has modeled its careful approach to legalizing casinos on that of Singapore, where junkets have been allowed little role, in contrast to Macao, where they generated most of the city's gambling revenue until recently.

"We also never expected Suncity Group to be able to get a license and winning bid in Japan due to its ties to the junket business," Bernstein analyst Vitaly Umansky wrote in a note to clients this week.

Suncity's retreat follows the publication in February of an inquiry report assembled by retired judge Patricia Bergin for the state gaming regulator in New South Wales, Australia.

Though media attention has focused on Bergin's findings that Australian casino operator Crown Resorts failed to prevent money laundering at its properties, she concluded that Suncity was more directly involved in the activity.

"Money had been laundered through the Suncity VIP Room at Crown Melbourne and conditions were not imposed until 2018 to prevent very large cash transactions outside Crown's control from occurring in the Suncity Room," she wrote.

"The evidence establishes that it is probable that Alvin Chau had a former association with the 14K triad group and continued his associations with the members of triad groups," the former judge said. "There were clearly links between Mr. Chau, the Suncity junket and organized crime groups."

Suncity said in August 2019 that it would close its two Australian VIP rooms, with an industry publication quoting a spokesperson who cited a "lack of demand and high operation costs."

The move came a few days after New South Wales' commissioned Bergin's inquiry, which in turn followed investigative reports by local media into allegations of money laundering and organized crime-linked activity at Crown's properties. One television report included footage of loose bags of cash changing hands in Suncity's VIP room in Melbourne.

Suncity was one of Crown's largest junket partners, according to the Bergin report, with ties to Chau dating from 2009 that "generated billions (of dollars) in gaming turnover and hundreds of millions in gross winnings for Crown."

New South Wales regulators have extended temporary liquor licenses for the Crown Sydney, but have yet to approve gaming at the $1.7 billion hotel.

Suncity did not respond to repeated requests for comment on Bergin's findings. But in the annual report of its listed arm published last month, it said, "Suncity complies with all relevant laws and regulations relating to anti-competition, bribery, extortion, fraud and money laundering."

It added that a risk management committee had been set up to "monitor the anti-money laundering compliance and business affairs on casino operations and other gambling-related business units of the company, its subsidiaries and affiliates." It said that in 2020, "No noted cases of noncompliance nor illegal practices regarding corrupt practices had been identified in any of Suncity's operations."

Money laundering has been a persistent regulatory concern with junkets as most deal with Chinese high rollers who, as individuals, can legally bring only $50,000 in cash out of the mainland a year, which leads to murky arrangements for settling debts which cannot be legally collected there.

In a report this month, the Asian Racing Federation Council on Anti-illegal Betting & Related Financial Crime said simply, "Macao casino junket operators continue to have strong triad society links."

In the wake of Bergin's report, Crown pledged to have no further dealings with junkets until they are locally licensed. Rival Star Entertainment last week said it would also halt dealings with junkets at its flagship casino in Sydney.

SkyCity Entertainment Group, which runs all of New Zealand's casinos as well as one in Adelaide, said last month it would permanently cut all junket links. The gaming regulator for the U.S. Pacific island of Saipan in turn said it would halt the renewal or issuance of junket licenses; the island's sole casino is run by an affiliate of another Macao junket group.

Crown last month was fined 1 million Australian dollars ($776,000) by the gaming regulator in Melbourne for failing to properly oversee junkets. Its New South Wales counterpart has blocked the company from offering gaming at its new AU$2.2 billion Sydney skyscraper hotel and pressured Crown to replace its chief executive and most of its board of directors. The company's licenses for its Melbourne and Perth casinos are now under review.

In contrast, regulators in Macao and markets where Suncity is acting as a casino operator or where it has listed affiliates did not respond to repeated queries about whether they are following up on the findings of the New South Wales inquiry.

China, meanwhile, has also been exerting pressure on Suncity and other junkets, in part to shore up its currency controls.

A Chinese law that came into force in March created a new crime of organizing or soliciting citizens to gamble outside the country. Beijing officials last month said they would continue expanding an unpublished list of overseas destinations to which travel is restricted due to targeting of Chinese for gambling.

In 2017, 19 Crown staff were convicted in Shanghai on charges of illegally promoting gambling in the country.

"The PRC (People's Republic of China) government is most likely to crack down hard on junkets -- especially those operating across Southeast Asia but who in fact are using Macao as a sort of de facto clearing house," said Steve Vickers, chief executive of political and corporate risk consultancy SVA in Hong Kong.

Additional reporting by Eri Sugiura in Tokyo