Crown junket ban may not last, royal commission warned

Victoria should take action to outlaw junkets, as Crown’s promise to phase them out may not be good enough, royal commission hears.

The Crown casino in Melbourne, from where footage was once leaked showing a gambler depositing bags of cash. Picture: David Crosling

Counsel assisting the Victorian royal commission into Crown Resorts has cast doubt on its decision to sever ties with junket operators, believing it could be temporary, heightening the chance of significant money laundering risks returning to its Melbourne casino.

The commission also heard on Thursday that Crown didn’t resource its anti money laundering (AML) team appropriately until around September last year, well after a NSW inquiry into the James Packer backed company began and one month before financial crimes watchdog AUSTRAC launched a formal investigation into its AML regime.

Speaking at the commission, which is examining the suitability of Crown Resorts to operate its Melbourne casino, Penny Neskovcin SC said an agreement Crown reached with the NSW gaming regulator to phase out tours organised for high-rollers in all its Australian casinos does not mean the Victorian regulator should not seek a similar agreement.

“Crown Resorts and Crown Melbourne confirms that it has ceased dealing with international junket operators and it has ceased dealings with junket tour operators,” she told Commissioner Ray Finkelstein.

“This might be read as a statement of Crown’s present intention, but nevertheless, the issues for the commission to consider are whether the junkets should be allowed at the Melbourne casino at all in the future.

“That issue requires consideration of money-laundering risks associated with junket operations … and whether any changes should be made to the legislative framework either in relation to junkets or premium players.”

Junkets – or international gambling tour organisers – arrange jaunts of foreign VIP high rollers to Australian casinos.

Commissioner Raymond Finkelstein is presiding over the Victorian royal commission into Crown. Picture: AAP

The NSW Bergin inquiry into Crown last year found junkets were linked to individuals connected with organised crime in the Asian region, and likely facilitated money-laundering through Crown’s casinos, resulting in the company being temporarily banned from opening $2.2bn Sydney casino.

The company’s group general manager for AML Nick Stokes – who joined Crown in late 2019 – told the commission he “straight away” realised his team was under resourced.

“We had two staff in Perth, two staff in Melbourne, and myself, so five people,” Mr Stokes explained.

“And it was very obvious that we were under resourced, just by the speaking to the team and in terms of working, and also the nature of what work they were doing, and the depth of that work around investigations in particular.”

Mr Stokes said he pushed for more resources and got them – but only after escalating the issue to then CEO Ken Barton to avoid a veto from former AML head and Chief legal officer Joshua Preston.

“My direct supervisor at the time, he didn’t believe we needed the amount of resources that we were after, so I felt the need to copy into a request the CEO at the time, and very quickly things started to move,” he said.

“Today, we have totally across the three properties, 20 people.”

It took the explosive events of the Bergin Inquiry – which claimed the scalp of Mr Preston, Mr Barton and many other senior Crown officers – to force a transformation in the company’s view of risk management.

“I encountered a number of people who had given me that kind of feedback when I was proposing changes, that we are not a bank – when I talked about three lines of defence, they said: ‘that only applied to banks’,” he said.

“Certainly going through the ILGA inquiry and the AUSTRAC enforcement action really kicked off in people’s minds that we do really need to change the industry, we do really need to think about risk differently and we need to be a leader in that change.”

The commission heard evidence from a director in Deloitte’s risk advisory business, Murray Lawson, who worked on a 2020 review on Crown’s risk management structure, including its due diligence process for junkets.

The report concluded that Crown’s processes were falling below industry standard.

Dr Lawson said the process suffered from a lack of documentation and the absence of any in depth, external investigations of junkets or of individual junket operators as the company “sought to limit the more costly services.”

He also said that the junket probity process was assigned to Crown’s credit team, who “were not appropriately trained in anti money laundering.”

“I think there were deficiencies within the process itself in terms of how searches were conducted, information was conducted and analysed, and ultimately decided that it needed to be fixed,” he said.

Crown has agreed to the recommendations of Deloitte’s review. The advisory firm is also preparing a review of Crown’s culture in which Dr Lawson is involved but he would not be drawn on commenting on it.

“I’ve conducted a review of some processes and decision making architectures, I don’t think that equips me to make statements about the broader culture of Crown,” he said.