Austrac probe, fines potential hit Crown Resorts

The James Packer-backed Crown Resorts faces the prospect of multi-million-dollar fines.

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

The James Packer-backed Crown Resorts faces the prospect of multi-million-dollar fines being levied by Austrac after the financial intelligence regulator launched a formal investigation into the casino company, less than a week before its most anticipated annual general meeting in years.

The investigation followed a routine check initiated in September last year on the casino giant’s management of customers identified as high risk and “politically exposed”, which Crown revealed on Monday had identified “potential non-compliance” at its Melbourne casino.

Crown said this included “concerns in relation to ongoing customer due diligence, and adopting, maintaining and complying with an anti-money-laundering/counter-terrorism financing program”.

The Australian understands that after months of dialogue with Crown, the regulator’s enforcement team began a formal investigation on Friday afternoon, which triggered Crown making its disclosure to the Australian Securities Exchange.

The news sent Crown shares 8.2 per cent lower to $8.25 on Monday, their lowest level since late April, ahead of the company’s AGM on Thursday when the re-election of three directors hangs in the balance.

The Australian understands that Mr Packer’s Consolidated Press Holdings, which holds a 36.8 per cent stake in Crown, has voted to support the re-election of CPH chief executive Guy Jalland, former public servant Jane Halton and one-time doctor to Kerry Packer, John Horvath, at the meeting.

Mr Packer’s votes last year helped directors Harold Mitchell and now chair Helen Coonan retain their board seats, despite large protest votes.

But Mr Jalland’s position could still be under threat after influential proxy adviser ISS last week opposed his re-election and supported the two other directors. Crown’s biggest institutional shareholder, Perpetual, and other minority investors have voted against all three directors.

US fund Blackstone, which owns 10 per cent of Crown and has applied to the NSW gaming regulator for approval to increase its interest, could yet abstain from voting in the same way Lawrence Ho’s Melco Resorts group did at last year’s meeting.

Another Crown shareholder, Investors Mutual — which owns 1.65 per cent of Crown — would not reveal its voting intentions on Monday but indicated it did not support the board’s current composition.

“We’re not content to support the current board, but pending the fact there’s a major report to come out of the NSW board on the 1st of February, I think shareholders will eagerly await the outcome of that,’’ said the firm’s founder, Anton Tagliaferro.

“In terms of this whole NSW review, and the Austrac announcement, it’s clear that some changes are going to have to be made both at board level and in terms of processes and procedures.”

Austrac confirmed on Monday that it had begun an enforcement investigation into Crown Melbourne following a compliance assessment, but declined to comment further.

It comes after the Victorian Commission for Gambling and Liquor Regulation last week ­issued a show cause notice to Crown relating to junket activities at its Melbourne property that could also result in fines being levied against the company.

Austrac chief executive Nicole Rose last month revealed it was considering enforcement against a major non-banking institution this financial year after imposing a $1.3bn fine on Westpac for breaches of anti-money-laundering laws.

The fine was almost double the $700m paid by CBA to settle its Austrac case in 2018.

In additional to launching court action resulting in fines, Austrac can also seek enforceable undertakings and issue infringement notices.

Austrac has also been conducting an industry-wide risk ­assessment of junkets that bring international highrollers to casinos. That included reviewing Crown rival Star Entertainment.

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.

She also revealed Star had been recently visited by an Austrac risk assessment team.

The regulator’s enforcement action against Crown will draw on revelations at the public inquiry into the company by the NSW Independent Liquor and Gaming Authority, which is considering whether Crown should retain the licence for its Sydney casino due to open in December.

Ms Coonan will resume giving evidence at the inquiry on Tuesday.

Crown revealed last month it was reviewing all 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.

Crown’s chief legal officer and top anti-money-laundering official, Joshua Preston, told the inquiry a recent review of its transaction monitoring systems found staff 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 casinos, where individual deposits are kept below the anti-money-laundering reporting threshold of $10,000.

The focus of the inquiry has been on two Crown shelf companies, Southbank and Riverbank investments, which the inquiry found were not reporting entities under anti-money-laundering legislation.

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

ASB Bank, ANZ and Commonwealth Bank refused to operate the Southbank and Riverbank accounts in 2018 and 2019 because of money-laundering concerns and the accounts have now been closed. Crown director Andrew Demetriou told the inquiry last week that 600 cash transactions through the accounts appeared “to be a process of aggregation and structuring that we should not be party to”.