Austrac investigating Crown Resorts’ anti-money laundering compliance

Already under fire in NSW, Crown reveals it’s the subject of a probe of issues including management of high risk and ‘politically exposed’ customers.

The entrance to the Crown Casinoin Melbourne. Picture; AFP

Crown Resorts is being formally investigated by the financial crimes regulator for potentially failing to comply with money laundering regulations following a routine check on the company’s management of customers identified as high risk and “politically exposed.”

On Monday morning the $6bn gaming giant said in a statement that AUSTRAC’s regulatory operations branch had “has identified potential non-compliance by Crown Melbourne Limited,” the entity that holds Crown Melbourne’s gaming licence.

These potential breaches relate to the with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and the AntiMoney Laundering and Counter-Terrorism Financing Rules 2007.

Crown’s shares fell as much as 7.7 per cent to a six-month low of $8.30 in early trading on Monday following the revelation.

Crown said the potential non-compliance included “concerns in relation to ongoing customer due diligence, and adopting, maintaining and complying with an anti-money laundering / counter-terrorism financing program,” and were identified during a compliance assesment that started in September 2019 - over one year ago.

The compliance assessment focused on “Crown Melbourne’s management of customers identified as high risk and politically exposed persons,” with the matter now in the hands of Austrac’s enforcement team, which will conduct the formal enforcement investigation.

The Australian understands that although Austrac has been making inquiries of Crown since last September, the regulator’s enforcement team commenced a formal investigation on Friday, which required Crown to make its disclosure to the ASX.

The revelation comes as Crown is nearing the end of a grueling inquiry into its businesses practices by the NSW Independent Liquor and Gaming Authority, with the fate of its Barangaroo Casino licence hanging in the balance.

Much of the inquiry has focused on Crown’s compliance with money laundering regulations and has resulted in mea culpas from the board members and management figures tapped to give evidence, who say there have been deficiencies in their anti-money-laundering practices.

Crown’s chief legal officer and top anti-money laundering official Joshua Preston told the inquiry that a recent review of its transaction monitoring systems found staff at Crown Perth had “aggregated” transactions by patrons in their reporting practices.

This could have assisted so-called “structuring” or “smurfing” by those seeking to launder money through the casino, and in particular two Crown subsidiaries: Southbank and Riverbank investments pty ltd.

It has been revealed at the inquiry that major banks shut down accounts linked to the companies used by offshore VIP patrons to deposit and withdraw gambling money because of apparent large-scale money laundering.

ASB Bank, ANZ Bank and Commonwealth Bank refused to operate the Southbank and Riverbank accounts in 2018 and 2019 because of money laundering concerns.

Despite this, Southbank and Riverbank aren’t considered reporting entities under anti-money-laundering legislation as they are not considered to provide gambling services.

Mr Preston told the inquiry that Crown monitored the accounts and “report on anything they deem appropriate to report on”.

Crown revealed last month it was reviewing all of the accounts at its Melbourne and Perth casinos after discovering its staff engaged in practices that potentially compromised the company’s ability to monitor and report potential money laundering.

Also of particular interest to the inquiry has been Crown’s association with Macau-based “junkets” - gambling promoters who organise international jaunts for high rollers in Asia to Crown’s Australian casinos.

Several of the identities running these junkets have well-established links to organised crime and criminal activity - so the inquiry is attempting to establish the extent to which Crown management was aware of the risk of exposure to organised crime.

Some junkets had a physical presence in Crown casinos through private gaming rooms and were also not compelled to report to Austrac under money-laundering rules.

Crown chairman Helen Coonan told the inquiry that she had mandated each director of the company complete anti-money-laundering training after it emerged through the inquiry that a majority of the independent directors had no background knowledge in gaming and underwent no induction training.

But current board member Harold Mitchell told the inquiry the training takes just half an hour to an hour to complete.

The inquiry will resume on Tuesday with Ms Coonan returning for her second day of questioning, following a sensational showing on Friday where she announced longstanding executive Barry Felstead was on his way out while conversations about an “orderly exit” with some directors were underway.

On Thursday Crown will host its annual general meeting, where three directors are up for re-election: Jane Halton, Professor John Horvath and CEO of James Packer’s private company, Guy Jalland.

If Mr Packer does not throw his 36.8 per cent stake in Crown behind the incumbent directors, it is possible that they could be rolled as opposition to the trio grows amongst proxy advisors and majority and minority shareholders alike.

Austrac confirmed to The Australian that it had commenced an enforcement investigation into Crown.

“Austrac can confirm it has commenced an enforcement investigation into Crown Melbourne,” a spokeswoman said.

“The enforcement investigation is a result of an Austrac compliance assessment that commenced in September 2019. Austrac won’t comment further as the investigation is ongoing.”

Austrac has also been separately conducting an industry-wide risk assessment in the junket space, which included reviewing the Star Entertainment Group. A draft report was produced in April. Star’s Group manager AML/CTF and Financial Crime Skye Arnott told the NSW inquiry in August that she was yet to see the final report.

With Damon Kitney.