How Austrac’s utter failure reaped it billions of dollars in fines

Money laundering regulator Austrac has been able to turn utter incompetence and breathtaking failure into a multibillion-dollar penalty franchise.

Austrac agreed to Crown paying $450m, although a Federal Court judge seems to be unhappy with that, accusing the regulator of giving Crown a discount.

Step forward Austrac, unchallenged winner of the regulator of the year – heck, regulator of the decade, if not the century already – award.

It’s been well and truly earned for skilfully turning utter incompetence and breathtaking failure into a multi-billion dollar penalty franchise.

Austrac fails to stop or even notice – or, seemingly even expect – money laundering to take place in casinos and through banks.

Heck, you can almost visualise successive collections – or should that be, collectives – of ‘brains trusts’ inside Austrac, preparing task forces to blanket the laundries of Australia.

Why? Because to borrow from Willie, as in Sutton, that surely must be where the money is, well, laundered.

For they sure as hell, didn’t think that money laundering took place in casinos and through banks.

Why would you? That’s only places where billions of dollars flow through daily.

Aha, Austrac would probably respond: yeah, but there are no washing machines in banks.

Yet suddenly in the last few years Austrac has been imposing huge penalties on banks and our two big casino groups, Star and Crown, for money laundering failures.

It got $700m out of the CBA – and $1.3bn from Westpac, the biggest fine in any context in Australia.

It agreed to Crown paying $450m, although a Federal Court judge seems to be unhappy with that, accusing Austrac of giving Crown a discount.

A headline Tuesday had the judge giving Crown a lesson in the time value of money. Because Crown was paying the $450m over an extended period interest free, it was actually more like $406m.

But the lesson was actually directed at Austrac. The guys, non-gender specific, at Crown and its new owner Blackstone, fully appreciate that reality; it is exactly why they agreed to $450m as the nominal sum.

It is the – arithmetically challenged, non-gender specific – guys at Austrac who have difficulty with numbers.

Meanwhile, the team at competitor Star are quivering collectively in their boots; knowing they are going to get a similar penalty but don’t know the figure yet.

Yet, not one of these fines has emerged from anything Austrac itself actually did. You know, like Eliot Ness and his ‘Untouchable’ raiding prohibition-era distilleries.

The casino fines – more specifically, the bad behaviour on which they were based – all emerged from various and extended Royal Commissions around the country.

There’s been not the slightest evidence of – and Austrac has never claimed – any effective regulatory action on its part. Or indeed any evidence of any regulatory action at all, even if, obviously, ineffective.

The two big casino groups have been operating since the mid-1990s.

Over that time, quite literally trillions of dollars have flowed into them, across their tables and through their machines, and then out back to high rollers and ordinary punters.

But there’s not the slightest evidence of Austrac doing anything, ever – like, you know, active regulation. In over a quarter century.

If it now claims to have done so, why didn’t it catch anything?

Now if one was really Machiavellian, one could suggest it was a deliberate ploy by Austrac.

If it had been an effective regulator, and cut off the bad behaviour early and permanently, it wouldn’t now be reaping the big fines.

Hmm. I doubt they were quite that clever.

So, here’s a thought to the other regulators, turning green with envy at the way Austrac is pocketing all these completely unearned billons.

ASIC’s action against Star was all based on the pretty obvious allegation that “Star’s board and executives failed to give sufficient focus to the risk of money laundering and criminal associations, which are inherent in the operation of a large casino with an international customer base”

So why doesn’t ASIC also sue Austrac for exactly the same failure, spread continually over a quarter century?

And thereby share some of the penalty cream?

Originally published as How Austrac’s utter failure reaped it billions of dollars in fines