SkyCity faces state probe after losing Austrac case

SA’s Acting Liquor and Gambling Commissioner will decide in coming days whether to restart an investigation into the suitability of SkyCity to hold the Adelaide casino licence.

The Federal Court agreed SkyCity ‘allowed high-risk customers to move millions of dollars through the casino’.

South Australia’s Acting Liquor and Gambling Commissioner will decide in the coming days whether to restart an investigation into the suitability of SkyCity to hold the Adelaide casino licence.

The then commissioner, Dino Soulio, last year announced that Brian Martin KC would conduct an independent investigation into the suitability of SkyCity ­Adelaide to continue to hold the Adelaide casino licence and of SkyCity Entertainment Group to continue to be a close associate of SkyCity Adelaide.

That investigation was put on hold while Austrac sought to ­conclude its investigation into SkyCity Adelaide, which was ­finalised on Friday with the Federal Court ratifying a $67m ­penalty against the casino operator for failing to meet its obligations on a number of fronts under anti-money laundering and counter terrorism financing (AML/CTF) laws.

Those failures, Austrac said on Friday, included allowing “high-risk customers to move millions of dollars through the casino, in ways that made the source and ownership of the funds unclear’’.

“SkyCity also provided services through high-risk channels and to high-risk customers without appropriate risk-based controls,” Austrac said.

“It failed to carry out required checks on 121 customers, including where SkyCity knew customers were the subject of law enforcement interest, or where there were indications that some posed a higher risk of money laundering.

“The casino also failed to establish an appropriate framework to ensure adequate board and senior management oversight of its AML/CTF programs.’’

The court also ordered Sky­City to pay Austrac’s costs of $3m.

Austrac acting chief executive Peter Soros said on Friday casinos, like all businesses, must take their anti-money laundering obligations seriously.

“Criminals will always seek to take advantage of the gambling sector to clean their dirty money. If casinos and other gambling entities have weak anti-money laundering systems and controls, they leave themselves vulnerable to criminal exploitation,” Mr Soros said. “Money laundering is not a victimless crime. It happens because criminals are trying to clean their dirty money obtained by lucrative illegal activities like trafficking drugs or humans, and it is often reinvested to further criminal enterprises and amplify these harms.”

SkyCity on Thursday suspended dividend payouts until 2026.

Given that the Austrac matter has now been finalised, Acting Commissioner Fraser Stroud said he would consider what next steps were appropriate.

“The admissions made by SkyCity Adelaide are serious and concerning,’’ Mr Stroud told The Australian on Friday.

“Although these proceedings relate to commonwealth laws, there is overlap with matters that fall under our jurisdiction from a South Australian perspective.

“Since the Austrac proceedings commenced, Kroll Australia has been appointed as the independent monitor to oversee a ­program of work undertaken by SkyCity Adelaide to address the issues raised by both Austrac and the Hon Brian Martin KC in his investigation before it was put on hold. That investigation remains on hold, and a decision will be made in regard to this investigation in the coming days, once I have had a chance to properly review and consider today’s outcome.’’

There is speculation that a sale of the casino might be palatable for listed New Zealand-based owner SkyCity Entertainment Group, which has had regulatory headaches on both sides of the Tasman. The company’s shares hit a 12-month low of $1.27 in recent days, closing at $1.40 on Friday, down from a high over the period of $2.20.

SkyCity on Thursday suspended dividend payouts until 2026 to ensure “headroom” to ­accommodate the Austrac fine and other debt arrangements as it warned of lower earnings this year and a bleak outlook for 2025.

The Adelaide casino, including a newly completed hotel, is estimated to be worth about $500m, with the new hotel and food and beverage offerings performing strongly, while the gaming floor is doing less well.

For the six months to December 31, SkyCity Adelaide generated $NZ117m in income but reported a $NZ30m loss on the back of $NZ33m in regulatory penalties and fees.

SkyCity’s Australian chief operating officer and the former head of the Adelaide casino, David Christian, resigned in April.

The company also kept another legal front open last week, appealing a taxation decision about the treatment of loyalty points at the Adelaide venue to the High Court. The company lost in the matter in February, with a Supreme Court ruling at likely to cost the company as much as $NZ33m in back taxes.

In this case, SkyCity is arguing that the value of rewards points should not be counted as part of its “net gambling revenue” on which the casino is taxed.

The state government, following an investigation by the Commissioner of Taxation in 2016, argued that, given that loyalty points could be converted to gaming credits and then used for further gambling, they should be assessed as gambling revenue.

SkyCity sought to have the ­Supreme Court declare that rewards credits don’t constitute gambling revenue and it should not have to pay duty on them.

SkyCity told the ASX on Thursday the High Court had granted it special leave to appeal the matter, with the Full Court to hear it later this year.

Jarden analysts Adrian Allbon and Nick Yeo said on Friday the combination of declining economic conditions, delayed cashflow improvement and the dividend suspension meant investors should consider reducing their holdings. “Key risks are adverse regulatory changes, economic conditions and sector merger and acquisition activity,” the analysts told clients. 

Originally published as SkyCity faces state probe after losing Austrac case