Austrac sting exposes industrial scale of failures by Star’s board and management
The sheer scale of the challenge facing new Star Entertainment chief Robbie Cooke can be summed up by a crime boss given the alias ‘customer 83’.
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The sheer scale of the challenge facing new Star Entertainment chief Robbie Cooke can be summed up by a crime boss given the alias “customer 83”.
Financial crimes regulator Austrac’s massive Federal Court legal action filed earlier on Wednesday will be deflating reading for Cooke, on whose shoulders it falls to win back a casino licence in two states where Star operates; drive a cultural revolution among senior staff; and at least attempt to establish regulatory trust as well as form some reputation of being a good corporate citizen.
It also raises the strong question over whether Star’s recently appointed chairman, Ben Heap, can stay in the role, given he was part of a boardroom culture which, according to the Austrac allegations, utterly failed to put in place basic protections around the casino being used for organised crime.
The legal action will certainly cement Austrac’s position as the nation’s most feared financial regulator, not only for banks but for anyone else handling large sums of money.
No one comes out of the Austrac filing looking good. And while the state-based regulators in NSW and Queensland are not named, they are noticeably absent while known and dangerous crooks seemingly had free rein of the casino floor.
Unless Star can defend its position in court, any financial penalty will represent further significant pain to shareholders. Austrac has a live Federal Court case under way against Melbourne’s Crown Resorts, where it alleges billions of dollars went through the casino unchecked. Crown, now owned by private equity, is bracing for a significant penalty. Austrac has not specified its penalty in the Star case, which it has also filed as a civil legal action.
Star said it was reviewing the legal action.
Austrac’s investigation, ongoing since September 2019, initially found shortfalls during a routine compliance assessment.
In recent years, Austrac legal actions have represented the blast forcing huge cultural change programs across Westpac and Commonwealth Bank, after securing fines running to a combined $2bn for their respective money-laundering failures.
And Star’s failures seemingly run deep.
A bad apple
Customer 83 was one bad apple who was at the centre of criminal investigations, including murder, shooting someone, and arson, according to Austrac’s court filing.
‘Customer 83’
NSW Police issued an exclusion order on the customer in 2015 at Star’s Sydney casino, but customer 83 continued to bet millions of dollars at Star’s Gold Coast and Brisbane casinos for the next five years. It is likely the customer was encouraged as a big gambler and was given casino benefits, even as he was publicly alleged to have been the head of an organised crime gang.
Curiously, Star’s Queensland business knew about the NSW ban from 2015. The same customer made it on to Star’s bad actors list, but was removed as a topic to be discussed in 2019 at one of Star’s risk assessment meetings, until he was finally banned from the Queensland casinos in 2021.
Then there was “customer 84”, who was publicly named as being under investigation for money-laundering and was the subject of a NSW exclusion order, who bet more than $300m at Star’s Queensland casino over four years. It has emerged “customer 84” was likely to have been flown to Queensland by Star and given accommodation right up until January this year.
On and on it goes, across nearly 120 Star customers, each allegation exposing a repeated failure of governance and basic due diligence of risky customers.
Indeed, the allegations, centred around money laundering, show a pattern of systemic and fully inadequate oversight by Star’s board and senior management going back years. They were given repeated warnings, whether through external reports or police tip-offs, but this was simply ignored or just not taken seriously. Star’s management led by former boss Matt Bekier and board, then chaired by John O’Neill, failed to adopt controls or even invest in systems designed to prevent money laundering.
The allegations suggest Star simply was not interested or had no intellectual capability to build any of the scaffolding needed for risk compliance and governance, allowing illegal cash to wash through its gaming sites for years.
“This non-compliance exposed Star Sydney and Star Queensland to the risk of being exploited by organised crime,” the Austrac filing says.
Former Tatts and Tyro Payments boss Cooke started with the casino last month, and his first job has been to bulk up anti-money laundering and financial crimes operators. The top layer of the casino’s executives is being overhauled, and the board under former UBS banker Heap is also being rebuilt from scratch. Heap joined the Star board in 2018, which means he too has questions to answer, given it takes in the period of the monster Austrac filing.
Heap kicked off the reform process this year following the damning findings of NSW’s Bell review.
“We are transforming our culture, transforming our business. We are committed to improvement, but there is a lot still to do,” Cooke said.
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NAB’s long game
Now it’s a waiting game for National Australia Bank and Ross McEwan after the chief executive failed to secure support for a new wage deal for his staff.
McEwan has sought to modernise an agreement that provisions for bankers being placed in airports or at the nation’s ports, a need which has long gone. NAB offered 5 per cent for staff earning less than $100,000 in the first year and between 3 per cent and 4.5 per cent for higher-paid workers.
This means NAB staff will still operate under an enterprise deal struck in 2016 that offers annual pay rises between 2 per cent and 3 per cent, depending on what band they sit under.
The enterprise deal was close, with 54 per cent of staff rejecting the offer, with just a simple majority needed.
The pressure is on as NAB was already starting to see a drift up in costs during the September half result and any sweetened offer will hit the bank’s expenses line unless productivity benefits can be found. NAB is targeting $400m in savings in the coming financial year, meaning there’s little room left in the till for sweeteners.
In a tight jobs market, McEwan needs skilled staff onside, but the calculation is in whether the bank’s union is overplaying its hand early, knocking back an enterprise agreement with Commonwealth, and with ANZ yet to be negotiated.
While Australia is expected to escape a recession, the economy is forecast to slow into the new year with unemployment to drift higher. There is also rising expectation that inflation is close to peaking.
Still, happy staff are an important part of McEwan’s turnaround strategy at NAB. The CEO sees relationships core to winning net promoter scores, which in turn helps win new business. The bank is No.1 in consumer net promoter score, but sits at No.2 in the all important business market and is trending lower. Small and micro businesses need more work.
“We will commence a process of talking with our colleagues to hear from you further and better understand why we have this outcome,” McEwan said on Wednesday in a note to staff.
The NAB rejection comes after Westpac last month secured a 4 per cent pay rise for those earning less than $94,000 and 3.5 per cent for higher-paid workers. It also topped up the deal with a $1000 one-off payment.
johnstone@theaustralian.com.au
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