Crown Resorts in talks over size of Austrac fine

Crown Resorts is taking small steps toward reaching a hefty potential settlement with Austrac over more than 500 breaches of money-laundering and counter-terrorism financing laws.

Crown’s penalty deliberations come as the local casino and gaming industry is reeling from a string of scandals and run-ins with state regulators and Austrac. Picture: NCA NewsWire / David Crosling

Crown Resorts is taking small steps toward reaching a hefty potential settlement with Austrac, as the parties hold detailed talks over more than 500 breaches of money-laundering and counter-terrorism financing laws.

Crown – which private equity group Blackstone acquired for $8.9bn last June, ending the Packer family’s long links to the casino operator – has spent recent months at the negotiating table with the financial crimes regulator over the penalty.

It faces fines of up to $22.2m per breach. Under the terms of the takeover, Blackstone had an exit clause if the penalty was more than $750m. That made it comfortable enough to proceed with the transaction.

The quantum of the Crown fine has been subject to intense speculation since the regulator launched action against Crown in the Federal Court last March.

Over the past five years, Austrac has agreed to penalties with Westpac and the Commonwealth Bank of $1.3bn and $700m respectively. Westpac and CBA separately settled their Austrac matters ahead of the cases being fleshed out in the Federal Court.

Sources told The Australian the Crown fine was likely to amount to hundreds of millions of dollars rather than eclipsing $1bn, given the Federal Court often takes into account the financial viability of a company when determining a penalty or signing off on an agreed fine.

An Austrac spokesman declined to comment, citing the legal proceedings. “Whether a penalty is imposed and the amount of any penalty are unresolved issues before the court. It would not be appropriate for Austrac to speculate or pre-empt the resolution of those issues,” he said.

A Crown spokeswoman declined to comment on the potential Austrac settlement.

The Federal Court has scheduled a case management hearing in the matter for February 13.

Crown’s penalty deliberations come as the local casino and gaming industry is reeling from a string of scandals and run-ins with state regulators and Austrac over poor compliance and governance practices.

Austrac chief executive Nicole Rose. Picture: NCA NewsWire / Gary Ramage

SkyCity Adelaide and Star Entertainment will be closely monitoring how the Crown penalty negotiations or court action transpire, given they are both also subject to Austrac action.

The regulator is seeking penalties from Australia’s third biggest casino group, SkyCity, for 124 alleged legal breaches over the past six years, each carrying a maximum penalty of between $18m and $22.2m. The total fine could top more than $2.5bn.

Austrac has also launched civil proceedings against Star in the Federal Court, accusing the company of “innumerable” and systemic breaches of anti-money laundering and counter-terrorism financing laws.

In its independent expert report on Blackstone’s takeover of Crown, Grant Samuel said if Crown’s liabilities, including regulatory fines, totalled $680m – or $1 a share – that would bring Crown’s value to as low as $11.52 a share. This compared with the $13.10 a share Blackstone paid.

In documents circulated to shareholders ahead of the Blackstone deal, Crown noted the regulator fined Tabcorp $45m in 2017, a significantly lower amount than the penalties issued against CBA and Westpac.

Austrac chief executive Nicole Rose confirmed in November that Crown had been liaising with the regulator but said it could take years before a settlement was reached.

“We’re in the middle of mediation before we go back for a case management hearing later this month. I understand that it’s being rescheduled, so I can’t talk about how the mediation is going,” Ms Rose told a Senate inquiry hearing. “We’re certainly progressing it.

“A civil penalty, of course, for us is the most serious. It does take the longest amount of time because it is so serious and there needs to be a case that’s ready to go before the court, so that will, unfortunately, take a couple of years. But with the size of our fines and the impact that it has on the entity, I think it’s completely understandable that it needs to be a very robust process before we go before the court.”

Ms Rose said while Austrac was pursuing the fines, it was not up to the financial crimes regulator to recommend shutting down casinos in response to the money laundering and counter-terrorism financing breaches.

“We wouldn’t recommend that we close them down completely. That’s not in our legislation,” she said. “Our legislation, under the civil penalty provisions, actually looks at not having an oppressive outcome on an entity so that it would have to close – that’s part of the penalty provisions that the judge will take into account – but it does need to have specific and general deterrence. It has to be significant enough that it actually has a deterrent impact, but a civil penalty, yes, will involve fines.”

Crown has already been hit with two fines from Victoria’s new casino regulator totalling $200m over flouting its responsible gambling obligations – including providing patrons with devices to gamble non-stop for days – and disguising illegal gambling transactions on China UnionPay cards as hotel charges.

The company has another year to prove that it is suitable to operate its flagship casino in Melbourne after the Victorian royal commission into the group heard stories of financial loss, suicide attempts, forced sex work and “other hardships experienced by individuals, their families and communities”.

Crown Resorts’ tower at Barangaroo overlooking Sydney Harbour. Picture: NCA Newswire / Gaye Gerard

Crown has repeatedly acknowledged the “seriousness of these historical failures” as “genuinely remorseful”, with the company’s former chief executive Ken Barton and chair Helen Coonan departing in 2021.

In November, a Crown spokeswoman said the company had “invested heavily” in its remediation program. “This includes our responsible gaming resources, which in Melbourne has increased overall staffing levels by nearly 80 per cent in the past 18 months, and more than doubled across Crown Resorts, with more to come,” she said.

“We are committed to becoming a world leader in the delivery of safe and responsible gaming and entertainment. The recently appointed new leadership team at Crown is driving a whole-of-company transformation program, designed to uplift the culture and build a better Crown which exceeds the expectations of our stakeholders.

“While considerable work has been undertaken as part of the reform and remediation program, Crown is the first to acknowledge there is a lot more to be done. We will continue to work cooperatively and constructively with the VGCCC and the government to address this and other issues raised in the Victorian Royal Commission Report.”

Crown’s mea culpas, coupled with a near doubling of responsible gaming staff – has seen the company manage to somewhat repair its fractured relationship with gambling regulators.

Last August it finally opened its $2.2bn casino in Barangaroo after the NSW Independent Liquor & Gaming Authority granted it a licence under strict conditions, many of which remain commercial-in-confidence.

In total, the facilities will include about 160 gaming tables and 70 electronic table games, as well as premium dining options and outdoor terrace areas.

The green light came a decade after Mr Packer met with then NSW premier Barry O’Farrell over lunch at Alan Jones’s apartment to hatch plans for a new casino in Sydney.

Despite selling his 37 per cent stake in the company and pocketing about $3.3bn in the Blackstone deal ending his family’s decades-long involvement with the company, Mr Packer has confirmed that he will move into his $60m apartment at Barangaroo.

“I am coming back to Sydney, with Erica and my kids, all together, to stay at our family apartment at Crown Sydney for the first time next March. I can’t wait to see Crown Sydney, and to be in Sydney with my kids and with Eri,” Mr Packer told The Australian last year.