Have cash, can wash: the failure at Australia’s casinos
Cracks started showing almost immediately at The Star after a $300K party to relaunch the once-seedy casino. What went wrong with it and rival Crown?
It was just 11 years ago that champagne was flowing in a special VVIP area of the freshly reopened The Star casino in Sydney. Stevie Wonder held court in a leather booth, and Leonardo DiCaprio and Sacha Baron Cohen looked down upon the next tier of 800 special guests invited to celebrate the reimaging of The Star.
Earlier that night Wonder had belted out “Don’t You Worry ’bout a Thing” to the adoring crowds. Now it’s clear the state government, regulators and board members in attendance that night at The Star took Wonder’s message to heart. Rules and regulations were openly flouted at Star Entertainment – and indeed at rival Crown Resorts – with some $1.5bn of illegal cash flowing through, much of it laundered, almost certainly involving triad crime gangs in Hong Kong.
Cracks started showing almost immediately at The Star following its $300,000 party to relaunch the once-seedy casino as something glamorous where everyone would want to be seen. It was only a few months later that the first head, that of managing director Sid Vaikunta, rolled. Many more would follow.
Now we know Star went on to become significantly more seedy after its rebrand. This week it was found unsuitable to hold a casino licence in NSW, just as Melbourne-based rival Crown had in the preceding year in NSW and Victoria.
While many wonder how it all went so horribly wrong at these seemingly glamorous venues that boasted top restaurants and stars aplenty, others say it was bleedingly obvious that they were attractive to criminals. “Casinos are always exposed to crime,” says John Langdale, honorary research fellow at the Department of Security Studies and Criminology at Macquarie University. “Casinos are particularly exposed to criminal influences in the Chinese VIP gambling market, since they have utilised junket operators and underground banks, many of whom are closely linked to Chinese criminal groups from Hong Kong and Macau.”
The problem is the large sums of cash that pour through the doors. Punters – and criminals – can walk into the high rollers’ room, exchange dollars for chips, win some and lose some, then walk out the door with clean money. “Casinos are associated with significant crime threats because they are cash-intensive businesses, which exposes them to money-laundering dangers,” says Langdale. “They are used to facilitate theft, fraud, money laundering and other crimes.”
It shouldn’t be this easy. But at inquiries into both Crown and Star, the state governments and federal regulator Austrac have also been found lacking in their efforts to keep casinos clean. “Austrac was asleep at the wheel,” says Langdale. “They’ve been given a jolt, but for how long?”
So far no one from either casino has been charged with money laundering or anything else for that matter. No bonuses paid to now-disgraced executives have been clawed back and class actions by shareholders to date have failed.
For its part, Austrac denies being slow or ineffective in its investigations, despite them being triggered by media reporting in 2019 rather than its own findings. “Austrac refutes any suggestion that it has failed or been slow to act,” said a spokesman for the financial intelligence watchdog. “Austrac has been engaging regularly with state gambling regulators and casino inquiries. We welcome the increasing focus on money laundering risks of all agencies in this area.”
Austrac pointed to an enforcement investigation into Crown Melbourne that began in August 2020 and subsequent commencement of civil penalty proceedings in the Federal Court against Crown Melbourne and Crown Perth.
The watchdog also pointed to an enforcement investigation into The Star Sydney and SkyCity Adelaide, which began in 2021.
At the root of many of the problems at Crown and Star is the fact they are regulated by state governments that have a vested interest in them making money.
And one way to make money over the decade before Covid-19 struck was the massively growing Chinese junket market, despite its known links to organised crime syndicates known as triads. Instead of being concerned about criminal links, state governments and the two casino operators competed hard for junket operators, who brought in highrolling gamblers from China and arranged flights, accommodation and lines of credit.
Investors Mutual founder Anton Tagliaferro is among those who believe governments, regulators and casino directors must have put their heads in the sand when it came to the “nebulous” junket operators, because they were competing for their business. “There weren’t sufficient regulations in place,” says Tagliaferro. “State governments were keen to expand and get the junket operators into their states, so they lowered junket tax rates to compete.”
The stakes were high for the state governments.Crown has paid $3.2bn in state taxes over the past five years and spent $4.5bn on development costs including $2.2bn at Barangaroo over the past decade. It currently employs 20,000 people. Meanwhile, Star has paid $1.38bn in taxes in NSW over the past five years and $589m in Queensland. It spent $2.5bn on development costs over the past decade and usually employs 8000-9000 people.
On top of that, they’ve undertaken additional construction projects that have had massive flow-on benefits for the states. “They created more employment, paid more tax, attracted more tourists,” says Tagliaferro.
“Then they were told to self-regulate and to please make sure it’s clean money.”
Investors Mutual had been a shareholder in Crown but not Star. Shareholders did not fare well from the fallout from the Bergin, Finkelstein and Bell inquiries, nor the likely findings from the Gotterson inquiry into Star in Queensland. The James Packer-controlled Crown was sold to Blackstone this year at a takeover price of $13.10 per share. Crown shares traded at $9 a decade before the takeover, but had risen above $17 before the company’s troubles in China came to the fore when several staff were arrested.
Crown owns casinos in Melbourne, Perth and the newly opened Barangaroo VIP casino in Sydney. Star shares were trading at $3.83 10 years ago and rose as high as $6.38 in 2018, but on Friday closed at $2.90. It owns casinos in Sydney, Brisbane and the Gold Coast. This past week has been brutal for Star, which acknowledged its failings after the NSW independent casino commissioner Philip Crawford said it allegedly allowed criminals to gamble in its casino and money laundering.
NSW Premier Dominic Perrottet said the casino risked closure. “We have fallen short of expectations,” wrote Star interim chairman Ben Heap. “The people of NSW placed their trust in us as the holder of a casino licence, and we have not lived up to that trust. For that we offer a sincere and unreserved apology.”
Heap’s statement also alluded to an issue that many have raised: that both Crown and Star had seemingly acted with a sense of entitlement over their casino licences rather than understanding that these came with legal obligations and could be taken from them. “We need to … have open and honest dialogue with our regulators and Independent Monitor, and where our leadership is both vigilant and listens when concerns are raised,” wrote Heap. “We need to ask not only ‘Can we?’, but ‘Should we?’ and act swiftly where there is an issue. I accept that there have been times we’ve been arrogant and closed off to criticism.”
While Heap didn’t spell it out, Langdale believes one of Star’s biggest misjudgments was trying to lure junket operators from Crown when the Packer-controlled group was busy trying to get its staff out of jail in China and preparing to open a VIP casino in Sydney.
“They went hell for leather trying to tie up the junket operators and pick up new business when Crown’s people were arrested,” says Langdale. The fact that Crown fell first in the money laundering and licensing mess means that it’s now further along its remediation plans with state governments and the public.
The casino operator on Thursday announced a new chief executive of Crown Sydney, Mark McWhinnie – who previously held senior executive roles at Sands China, a subsidiary of Las Vegas Sands Corp, for 13 years – to oversee its freshly opened Barangaroo development.
Owner Blackstone has been leaning heavily on Las Vegas for new talent after cleaning out the executives associated with its money laundering failures.
McWhinnie is the third executive linked to Las Vegas, with former Wynn and Sands executive Ciaran Carruthers replacing Steve McCann as chief executive and former Las Vegas Cosmopolitan chief executive Bill McBeath installed as chairman.
Crown has also been apologetic about its woes.
For a while at least, the casinos will have to be on their toes – and it’s unlikely that directors will be able to argue they didn’t know what to ask.
It’s been pointed out that the money-laundering issues in Australia are similar to those uncovered, again by the media, in Canada’s British Columbia.
There the Cullen Commission found vast sums of money were making their way from China into casinos, and flagged the need for a specialised anti-money laundering commissioner and dedicated provincial money laundering intelligence and investigation unit.
“This inquiry explored the myriad ways in which the greedy and the devious seek to make their crime-stained money appear legitimate,” commissioner Austin Cullen wrote in his June 2022 findings. “It is important to maintain the will to combat this social ill.”
Langdale thinks i authorities here and in Canada must grow up and understand the threat of organised criminals using casinos to wash money.
“British Columbia and Australia have a naivety about the transnational crime associated with casinos and money laundering,” Langdale says.
“It was clear that the junket operators were infiltrated by criminal groups, triads essentially. It was widely discussed. They should be on to them in a flash.”
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