Junket dealings and money laundering disqualify Crown from running Sydney casino: inquiry told

Links to gaming promoters under a ‘profit first’ culture driven by James Packer and a lax approach to money laundering make Crown unsuitable to run a Sydney casino, inquiry told.

The inquiry is examining Crown’s suitability to run the Barangaroo casino. Picture: Steven Saphore

Crown Resorts’ dealings with controversial gambling promoters – or “junkets” – driven by its major shareholder James Packer and its lax approach to money laundering highlighted a “culture of denial and arrogant indifference to regulator compliance” at the gaming company that should make it unsuitable to operate the Barangaroo Casino in Sydney, a NSW inquiry has heard.

Addressing the commissioner of the NSW Independent Liquor and Gaming Authority, counsel assisting Naomi Sharp SC said Crown’s failures to conduct proper due diligence on the identities behind so-called “junkets” with alleged links to organised crime represented a failure of its obligations under Australia’s gambling regulatory regimes.

“It’s our submission that Crown Resorts’ dealing with junket operators have rendered it and the licensee unsuitable, and that the limited suite of proposals that Crown Resorts has to date put forward to address the junket problems do not convert it into a position of suitability,” Ms Sharp said.

“We say the failure of Crown Resorts to meaningfully act on these longstanding allegations about the junket operators (It deals with) speaks to a culture of denial and of arrogant indifference to regulatory compliance. This culture permeated the organisation.”

Junket operators arrange tours of VIP gamblers, usually from Asia, to casinos in exchange for commissions on the large amounts wagered.

Ms Sharp said Crown’s largest shareholder and former director James Packer pushed to adopt the junket model, common in Macau, and set a “dubious tone from the top” in dealing with operators with alleged links to crime.

“We submit that Mr Packer set a dubious tone from the top in relation to junkets. It should be found that he monitored the VIP international business closely, understood the role of junkets in that process but drove a culture that put the pursuit of profits above all else,” she said.

Crown Resorts earlier this year suspended dealings with junkets pending numerous reviews until at least June next year, and is developing a new financial crimes department.

But Ms Sharp said that this did not address more “fundamental problems” within Crown.

“We submit that it follows from the submissions that Crown Resorts’ conduct has allowed or facilitated individuals of questionable repute with probable links to organised crime entering into business relationships with it, and we say this has heightened the risk of Crown Resorts being drawn into money-laundering,” Ms Sharp said.

“This means that Crown Resorts has breached a core obligation under the regulatory regime.”

Commissioner Patrcia Bergin indicated that Crown had a regulatory obligation not to deal with certain individuals.

“If you can’t access it comfortably, as a licensee you have a very big obligation not to deal with them,” she remarked.

Crown’s Barangaroo casino and hotel complex.

Ms Sharp said a culture of “denial and arrogant indifference” permeated the organisation from management to the board, and said any changes made so far had been “a case of too little, too late”.

“The causes of the specific failings … are failures in risk management, failures in governance and failures in culture, and these are not areas where there can be a quick fix.

“It’s really only since August of this year that there has been explicit recognition by Crown Resorts that there have been shortcomings in their junket relationships.

“The evidence has not disclosed that Crown Resorts has remediated these specific problems.”

Ms Sharp said: “The gestures are largely tokenistic and cannot be expected to address the more fundamental problems of governance, risk management and culture,” adding that one external study by Deloitte on junkets did not address root causes of problems arising from dealing with the operators.

She also said that Crown had not said when it would implement the recommendations of that review, or a similar one by the Berkeley Research Group, showing that there was “no certainty about Crown Resorts’ future intention in relation to junkets”.

Ms Sharp said that the issue of junkets “are but one case study” which highlight these failures, the others being Crown‘s anti-money-laundering regime and the 2016 arrest of staff in China. “Common themes emerge from these specific case studies.”

Recklessly indifferent

Later in the day Counsel Assisting Scott Aspinall began laying out his submission that Crown’s lax approach to money laundering risks made it unsuitable.

“What we will see shows a culture within Crown, during a period we look at, which either facilitates money laundering or is recklessly indifferent to whether or not it occurs,” Mr Aspinall said.

“And that in my submission is wholly unsuitable for a person who holds the privileged position of a licensee.”

After giving numerous examples of Crown failing to appreciate the risk of money laundering - and playing the famous blue freezer bag footage of an individual depositing hundreds of thousands of dollars in cash at the Sun City junket room - Mr Aspinall said that Austrac’s recent announcement it would investigate Crown should be cause for alarm.

“What I do say it indicates is there is an extant indication form the money laundering regulator that it proposes to pursue an enforcement action, and that cannot give the NSW regulator any confidence that Crown Resorts has the ability to operate suitably.”

Silver lining on visas

In a positive for Crown Resorts, Ms Sharp said there was no evidence to support allegations that Crown Resorts helped bring criminals into the country by sponsoring their visa applications, only that on a few occasions individuals with minor criminal charges - like insider trading - were sponsored.

She did say there was truth to the allegation that Crown lobbied government officials to expedite visa approvals, but this occurred within the bounds the company had with the department of immigration between 2003 and 2016.

“However, it does not appear that there is anything improper with the special arrangement Crown negotiated with the department of immigration,” she said.

“I cannot see anything in this allegation,” Ms Bergin remarked, noting that Crown overhauled its processes after being pulled up by the department in 2012.

“We don’t make any submissions as to suitability arising from these reports,” Ms Sharp said.