SkyCity says it is likely to cop a ‘material’ fine and admit breaches of money laundering rules

SkyCity says a resolution of its civil prosecution under anti-money laundering laws is likely to involve it admitting “serious breaches’’ and incurring a “material fine’’.

SkyCity is facing regulatory headwinds on a number of fronts.

SkyCity says a resolution of its civil prosecution under anti-money laundering laws for conduct at its Adelaide casino is likely to involve it admitting “serious breaches’’ and incurring a “material fine’’.

The financial crimes regulator, Austrac, has alleged in a lengthy claim filed with the Federal Court late last year, that more than $4bn was gambled through the Adelaide casino

by 59 suspicious customers over six years.

Austrac has alleged that casino staff knew some of these customers were facing money laundering and drug trafficking charges, including one customer who gambled $4.8m over three and a half years, but was not banned from the casino until 10 months after he was jailed for more than eight years for money laundering and heroin trafficking.

Austrac is alleging SkyCity Entertainment Group engaged in “serious and systemic noncompliance” with Australia’s anti-money laundering and counter-terrorism financing laws. In its statement of claim, which runs to 800 pages, it alleges that a widespread failure to monitor big-spending customers enabled a range of criminals to launder ill-gotten funds through the casino.

SkyCity has so far set aside a $45m provision against any future penalty and legal costs, however chairman Julian Cook told the company’s annual general meeting on Friday that the quantum of any potential penalty could be significantly different.

“I would note that considerable uncertainty remains regarding the amount of any civil penalty SkyCity Adelaide may be required to pay and any eventual civil penalty may differ materially from the amount provisioned,’’ he said.

“It is likely that any resolution with Austrac would involve SkyCity Adelaide admitting serious breaches of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act and a material fine.

“As these proceedings remain underway, there is limited further information I can provide but we are hopeful of achieving a resolution to the proceedings.’’

Austrac is seeking penalties for 124 alleged breaches over six years, each carrying a maximum penalty between $18m and $22.2m.

The Austrac matter also triggered an independent review into SkyCity’s suitability to continue to hold the Adelaide casino licence, with that process put on hold in February pending the outcome of the Austrac case.

SkyCity has, at the direction of the South Australian gaming regulator Consumer and Business Services, appointed an independent expert to review and monitor its anti-money laundering programs.

“We are acutely aware and very disappointed that in Adelaide we have not met the standard to which we need to hold ourselves,’’ Mr Cook told the meeting.

“Since late 2021, we have had in place a large scale enhancement program in Adelaide to uplift our AML/CFT program and capabilities.

“This has involved significant resources and financial investment. Work has progressed well but there is still more to do.’’

SkyCity’s New Zealand operations also came under scrutiny recently, with the NZ Department of Internal Affairs last month lodging an application seeking a 10-day suspension of SkyCity’s licence to operate its three casinos in NZ after a customer claimed the company breached its responsible gambling obligations at the Auckland casino.

Mr Cook said a decision on the suspension “may be months away’’.

“In responding to the department, we identified an issue with regards to one component of a system that monitors long periods of play which was disappointing,’’ he said.

“We have rectified this issue.

“You will note that the large part of my address thus far has been taken up with regulatory issues and our programs of work to address our compliance systems and correct historical shortcomings.

“This reflects the focus of the board and management team, and indeed will be the focus for the business over the coming years.’’

Mr Cook said there was a “multi-year period of work ahead’’ to address the issues, which would be a key deliverable for the incoming chief executive, to replace the outgoing boss Michael Ahearne, who announced earlier this month he would leave the business next March.

SkyCity said it had started the current financial year with a good performance in July and August particularly in Auckland, driven by the positive impact of the FIFA Women’s World Cup.

“Without the benefit of any significant events, Adelaide was impacted by the broader economic conditions as persistent inflation and cost of living pressures impacted consumer sentiment and spending,’’ the company said.

SkyCity said it expected a “modest year on year increase in normalised EBITDA for FY24 ... noting this assumes the integration of the Auckland car park earnings for the second half of the year but does not include any potential impact from the ... application to temporarily suspend our New Zealand casino operator’s licence.’’

During FY24 SkyCity expects to open the new Horizon hotel in Auckland and reintegrate its car park operations.

SkyCity shares were 1c lower at $1.74 in early trade on Friday.