Crown, Star risk steep fines as Austrac swoops over AML breaches

Australia’s casinos are potentially facing hundreds of millions of dollars in fines after the financial crimes watchdog revealed investigations it began in 2019.

AUSTRAC CEO Nicole Rose says all casinos are on notice. Picture: Gary Ramage

Australian casino groups are potentially facing hundreds of millions of dollars in fines after the country’s chief financial crime fighter launched three separate money laundering and terrorism financing investigations.

Austrac revealed on Monday that it is targeting Crown Resorts, Star Entertainment and SkyCity Entertainment over potential breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act. The maximum penalty is $22.2m per breach.

Austrac‘s latest action prompted an admission from Crown – which is fronting two separate royal commissions in Victoria and Western Australia – that it had breached the casino control act.

The entry of the anti-money laundering agency marks a significant escalation of the monitoring of the nation’s casino industry by a national regulator.

In a statement, the James Packer-backed Crown admitted to illegally transferring more than $160m from international guests from their Melbourne Crown Towers Hotel cards for use on gaming.

“The Crown board has recently received legal advice that a practice that existed at Crown Melbourne between 2012 and 2016 contravened section 68 of the Casino Control Act,” the company said.

“This practice involved Crown receiving payment from debit or credit cards of international guests at Crown Melbourne‘s Crown Towers Hotel, with the funds then available to the patron for gaming at the Casino.

“Section 68 of the Casino Control Act prohibits a casino operator from, in connection with any gaming or betting in the casino, providing money or chips as a part of a transaction involving a credit or a debit card. Crown transacted over $160m through the hotel card process, which ceased in November 2016.”

The three Austrac investigations triggered share price falls across all companies, with SkyCity – operator of the Adelaide casino – the worst hit with its shares diving as low as 9.7 per cent to $3.06 on Monday.

Austrac has form in extracting significant penalties from companies, with Westpac forced to pay $1.3bn last October for breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act.

“We know that the Australian casino sector is at risk of criminal misuse due to the products and services they offer,” Austrac chief executive Nicole Rose wrote in The Australian earlier Monday.

“Tackling serious and organised crime requires a multi-pronged attack at all levels of government and across the financial services sector,” Ms Rose said.

“We know that proactive reporting and support from industry, continued investment in people and technologies, proactive compliance and financial intelligence can be critical in combating crime when combined with law enforcement investigations,” she said.

Crown also revealed on Monday – as part of the Victorian royal commission into its suitability to retain its licence for its flagship Melbourne casino – that it has potentially failed to pay up to $200m in gambling taxes.

Crown, helmed by former Howard government minister Helen Coonan, said it would “fully cooperate with the Austrac investigation, and has launched its own separate inquiry as it scrambles to assure regulators in NSW, Victoria and WA that it is a suitable company to operate a casino licence.

“Crown is continuing its investigations into these matters, including whether it may have breached other laws by reason of the hotel card process.”

Crown shares dropped 1.5 per cent to $12.50. Its shares have soared 26.8 per cent since mid March after it became the target of a takeover, with US Private equity firm and significant shareholder Blackstone, and smaller rival Star Entertainment emerging as suitors.

Star Entertainment – which has launched an ambitious plan to merge with Crown in what it dubs as becoming the “BHP of gaming” – first attracted scrutiny from Austrac over a potential breach of anti-money laundering law in September 2019.

“The potential non-compliance includes concerns regarding ongoing customer due diligence, adopting and maintaining an AML/CTF (anti-money laundering, counter terrorism financing) program and compliance with part A of that program,” chief executive Matt Bekier said on Monday.

“These concerns have been identified in the course of a compliance assessment commenced by Austrac in September 2019, which focussed on The Star Sydney’s management of customers identified as high risk and politically exposed persons over the periods July 1, 2015 – June 30, 2016, and July 1, 2018 – June 30, 2019.

But Mr Bekier said Austrac has advised that it has “not made a decision regarding the appropriate regulatory response that it may apply to The Star Sydney, including whether or not enforcement action will be taken”.

“The Star takes its anti-money laundering obligations very seriously and will fully co-operate with Austrac in relation to its requests for information and documents and the investigation.”

Star’s shares plunged 2 per cent to $3.89 on Monday.

SkyCity, which operates Adelaide’s casino, also has attracted Austrac’s attention over its customer due diligence process, with the company releasing a statement to the ASX that closely mirrored Star Entertainment’s. Except the Auckland-headquartered SkyCity adopted a more defensive position.

“SkyCity has processes and practices in place in its business to detect and prevent money laundering and continually reviews these to ensure it meets all anti-money laundering requirements,” Sky City said in a statement.

After falling as low as $3.06, SkyCity shares regained some ground to close 6.5 lower at $3.18.