Crown Resorts in the spotlight as Austrac investigates

Agencies have been stepping up investigations into money-laundering through casinos.

Crown recently announced that it would be suspending the use of junket operators until June next year, which would be after the NSW inquiry reports.

Austrac’s investigation into money-laundering at Crown Resorts’ Melbourne casino comes as both the anti-money-laundering agency as well as domestic law enforcement agencies have been stepping up their investigation into money-laundering through casinos.

The agency has already sent shockwaves through corporate Australia over the need to comply with anti-money-laundering laws with its record $1.3bn fine against Westpac.

Austrac chief executive Nicole Rose said in August last year that her agency was working with other law enforcement agencies at the potential for “gaps” in regulations over the potential for money laundering through the use of junket operators — third-party groups that bring in highroller VIP gamblers from overseas.

At the time, she said leading casino operators Crown, which has casinos in Melbourne and Perth, with plans to open in Sydney in December, and Star, with casinos in Sydney, Brisbane and the Gold Coast, were “very good” at complying with existing anti-money-laundering requirements.

The issue was the difficulty of Australian money-laundering laws to operators who brought people in to gamble in Australian casinos from overseas.

But things changed a month later, in September last year, when Austrac began an investigation into activities at Crown’s Melbourne casino focusing on the potential for money laundering involving “high-risk and potentially exposed persons”, which has led to the enforcement action announced by Crown and confirmed by Austrac on Monday.

Austrac was tight-lipped on Monday about the enforcement action against Crown, which appears to be separate from its more general investigation into whether there were regulatory gaps in the oversight of junkets that began earlier last year.

Star casino executive Skye ­Arnott told the NSW inquiry in August this year that Star has had extensive discussions with Austrac as part of its review of the risk assessment of junket operators operating in casinos.

She said Austrac had shown Star a copy of its draft report in April this year but it had not yet seen a final version.

While Austrac has taken high-profile action against Westpac and Commonwealth Bank, resulting in total fines of $2bn, the seriousness of the investigations against Crown has prompted the involvement of its enforcement arm, and the length of time the questionable actions have been occurring at Crown is not clear.

In the case of Westpac, which was hit in September with a record fine of $1.3bn, Austrac’s ­action resulted from the bank self-reporting problem transactions in 2018, leading to Austrac’s statement of claim against it in the Federal Court last November.

The investigation into Crown’s operations in Melbourne is focusing around issues of ongoing customer due diligence, whether it has adopted a proper anti-money-laundering and counter-terrorism oversight, and whether it has complied with the program.

Austrac’s enforcement arm has a range of actions it could take against Crown, including issuing infringement notices (which are usually only for low-level breaches of the law), issuing remedial directions that would set out specific areas where it needed to tighten controls on money laundering, and the more serious step of accepting an “enforceable undertaking” that Crown would agree to specific actions to comply with the law, or the major step of applying to the Federal Court with a statement of claim for ­orders for civil penalties.

The first major civil penalty in recent times was in 2017, when the Federal Court issued a then record penalty of $45m against Tabcorp, after a finding that it had contravened the anti-money-laundering laws on 108 occasions over five years.

The court found that Tabcorp had also failed to identify a customer who collected more than $100,000 in winnings.

This followed a statement of claim lodged by Austrac with the court in July 2015.

Announcing the penalty at the time, then Austrac chief executive Paul Jevtovic said there had been a “culture of indifference to anti-money-laundering compliance and mitigation” of risk around money laundering at Tabcorp until Austrac had intervened.

“Such a culture puts the community at risk by creating opportunities for terrorists to fund attacks against Australian citizens and interests, and for serious and organised crime to divert wealth to the black market and fund other illegal activity such as drug trafficking,” he said. “The ­financial and gambling sectors are the first line of defence in preventing this from happening.”

Having sent a signal to the gambling industry, Austrac then turned its attention to the banking sector.

In August 2017 Austrac lodged a statement of claim in the Federal Court against CBA that resulted in a penalty of $700m, announced in June 2018.

It then followed up with the action against Westpac that resulted in the record fine of $1.3bn.

Announcing that record penalty last month, Nicole Rose said the fine was as a result of a large number of breaches (19.5 million international fund transfers amounting to more than $11bn, and others) over several years.

The large number of breaches over several years was “unacceptable” and “could have been avoided with better assurance and oversight processes to identify ongoing reporting failures”.

The news of the Austrac enforcement investigation comes as issues of potential money laundering, particularly around two Crown bank accounts called Riverbank and Southbank, have been discussed at length in evidence given to the NSW casino inquiry over several months this year.

Evidence given by Crown directors showed limited training around money-laundering issues and a lack of bad news filtering up to the company’s board.

Commissioner Patricia Bergin, a former NSW Supreme Court judge, has made it clear she sees junket operators as being an area open to potential money laundering. She has asked witnesses several times whether money-laundering risks involving the use of junket operators was worth the reputation and regulatory risks involved.

Crown recently announced that it would be suspending the use of junket operators until June next year, which would be after the NSW inquiry reports.

From her comments to date, Bergin is likely to recommend tighter regulation around the approval and operation of junket operators in NSW casinos, if not an outright ban.

Bergin has also expressed concern during the inquiry at the lack of information that can be passed on by casino operators to gaming regulators about money-laundering issues and investigations by Austrac.

If Austrac finds major problems around money laundering at Crown, the next step could be an investigation by securities regulator ASIC against the role of directors in any breaches.

If the Westpac case is any guide, ASIC will await the completion of any Austrac action.