By Amelia McGuire
Star Entertainment will front the Federal Court to face fines totalling hundreds of millions of dollars after the financial watchdog launched civil penalty proceedings against the casino operator for alleged systemic non-compliance with Australia’s anti-money laundering and counter-terrorism financing laws.
AUSTRAC launched an industry-wide compliance campaign in 2019 and opened an enforcement investigation into The Star in June 2021, following an investigation by this masthead that uncovered extensive criminal activity.
AUSTRAC has commenced civil penalty proceedings against The Star. Credit: Oscar Colman
Two independent inquiries in NSW and QLD found The Star unfit to hold its casino licences earlier this year as well as determining the group had a deep-rooted cultural problem that developed due to poor governance.
AUSTRAC alleges the casino group recorded a combined turnover exceeding $125 billion from junkets between November 2016 and October 2020 in its statement of claim lodged with the Federal Court on Wednesday.
Over the same period, Star Sydney and Star Queensland recorded that junket programs had combined losses exceeding $1.5 billion. The infamous Suncity junkets recorded turnover of more than $15.5 billion from December 2016 and September 2020, with the players suffering a total loss of more than $150 million.
AUSTRAC did not comment on whether a fine order will be made as the matter is now before the court but said the penalty would be determined by factors including the nature and extent of the contraventions, the circumstances, and whether the conduct arose at the level of senior management or below. Each contravention of the Anti-Money Laundering, Counter Terrorism Financing Act has a maximum penalty of $22.2 million.
“It is a holistic exercise and not a mathematical or mechanical one,” a spokesperson said.
Rival casino group Crown Resorts has budgeted more than $600 million to pay for similar penalties. AUSTRAC has previously announced a similar investigation into its Perth and Melbourne casino.
The biggest fine in corporate history was issued by AUSTRAC to Westpac in 2019, following similar anti-money laundering breaches that saw the bank pay $1.3 billion. The Commonwealth Bank of Australia was fined $700 million after a similar suit in 2017.
The only other gambling outfit to face financial penalties from AUSTRAC is wagering giant Tabcorp. The gambling group was fined $45 million by the watchdog in 2017 but faced up to $702 million in penalties.
AUSTRAC alleges The Star permitted customers to move money through non-transparent payment channels, did not understand or assess the sources of money moving through these channels and failed to consider whether it was appropriate that they continued an ongoing business relationship with high-risk customers.
The statement of claim highlights 43 customers associated with the now-outlawed junkets as well as 38 international customers and 34 domestic customers.
One customer is described in the claim to be a “violent” man who damaged casino property multiple times. Despite being reported to management and banned more than once, the bans were always overturned. He is alleged to have assaulted others on the gaming floor and gambled close to $7 billion over a five-year period.
Another customer is accused of murder and arson, according to the claim. Although NSW Police excluded them in 2015 from Star Sydney, the customer continued to punt at Star’s two Queensland casinos until 2020. He was listed on the group’s bad actors list but was not formally banned from the Queensland premises’ until 2021.
AUSTRAC said it had worked closely with the state and federal regulatory bodies to commence its civil penalty proceedings.
AUSTRAC CEO Nicole Rose. Credit: Alex Ellinghausen
The watchdog’s chief executive Nicole Rose said their investigation had identified a number of issues including poor governance, failures to manage financial risk, as well as poor anti-money laundering and counterterrorism financing compliance.
“Criminals will always seek to exploit the financial system to launder their money and harm the community. Businesses, as the front line of defence of our financial system and our communities, are often the first to be alerted to criminal activity,” Rose said.
AUSTRAC added The Star’s casinos were “vulnerable to criminal exploitation” and the group’s failure to manage the risks had exposed Australia and the global financial system to the potential of systemic money laundering and terrorism over many years.
The watchdog has alleged extensive mismanagement took place at The Star’s entities including failing to establish an appropriate board framework, failing to conduct due diligence on a range of high-risk customers, and failing to establish a fitting transaction monitoring program to keep track of transactions and identify suspicious activity.
Rose said it was clear a lack of appropriate controls had prevented the casino group from appropriately managing high risk customers and had facilitated the movement of money in non-transparent ways.
The Star’s chief executive Robbie Cooke said the new management was working to transform the company’s culture and business practices.
“We are committed to improvement but there’s a lot still to do,” he said.
“Our goal is to earn back the trust and confidence of AUSTRAC and all our regulators,” Cooke continued, adding the group is reviewing the watchdog’s statement of claim.
The casino group was savaged by shareholders at its annual general meeting last week, with almost 30 per cent voting down its proposed remuneration report after a “disastrous” year.
Chairman Ben Heap issued a mea culpa to shareholders last month, pleading for a chance to demonstrate the casino giant could turn over a new leaf and implement a complete cultural overhaul.
The Star Entertainment CEO Robbie Cooke at the Darling Hotel.Credit: Louie Douvis
Since the findings, The Star has replaced its chairman and chief executive as well as a number of board members. About 20 executives have left the group since former chief executive Matt Bekier resigned in March.
Cooke formally took the reins last month, on the same day the NSW regulator stripped the group’s Sydney casino licence, implemented independent manager Nicholas Weeks and imposed a record $100 million fine.
The group expects the cost of remediation to range from $35 million to $45 million this financial year, with roughly half to continue after the 2024 financial year.
The revenue of Star’s flagship Sydney casino has collapsed 11 per cent since July.
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