Star Entertainment knew of Suncity’s links to Chinese triads, while manager ‘watered down’ report into the junket operator

A report submitted to senior Star executives in June 2019 revealed Suncity’s links to Chinese organised crime and money laundering.

Alvin Chau, founder and chairman of Suncity Group, was alleged to be a member of the Macau faction of the 14K Triad Society and follower of former 14K leader Wan Kuok-Koi. Picture: David Paul Morris/Bloomberg/Getty Images

Star Entertainment renewed its agreement with Suncity to use an exclusive gaming salon at its Sydney casino, despite the Chinese high-roller junket operator repeatedly flouting money laundering controls and having known links to organised crime, an inquiry has heard.

Meanwhile, the company’s head of due diligence prepared three drafts of a “damning report” about Star’s relationship with Suncity, prompting criticism that management forced him to “water it down”.

When later asked why Suncity was still allowed at Star, chief executive Matt Bekier said: “why not?”, while the company believed it could “manage the risk” Suncity owner Alvin Chau presented, the royal commission-style inquiry heard on Wednesday.

Star issued Suncity — which has known links to organised crime and Chinese triads — with two warning letters in 2018 after it was found to be operating a “pseudo cage”, exchanging bundles of cash from black backpacks for casino chips, breaching anti-money laundering laws.

But rather than issue a third strike to Suncity, the staff of which were “unhelpful and evasive”, Star management renewed its agreement with the junket operator in June 2018.

The revelations come a day after the inquiry heard that Mr Bekier dismissed an independent review from KPMG that exposed “fundamental deficiencies” in the company’s anti-money laundering program at a “tense” audit committee meeting in May 2018.

This followed Star’s assistant treasurer and former treasurer saying the casino operator concealed more than $1bn worth of highly suspicious banking transactions from NAB, contrary to anti-money laundering laws.

Counsel assisting the inquiry Naomi Sharp SC asked Star group manager due diligence and intelligence, Angus Buchanan, if renewing Suncity’s agreement was “a completely inappropriate step to take, in view of the very high risk that money laundering was taking place in the VIP salon”.

Mr Buchanan, who started with Star in May 2019, said: “surprising, I agree”.

Inquiry head Adam Bell SC — who said the evidence suggested an organisation linked to Chinese triads were “running a casino within a casino” asked Mr Buchanan if he believed the “people of NSW deserved better”, given the suspected money laundering that was happening at Star’s Pyrmont complex.

“Quite possibly, yes,” Mr Buchanan said.

It wasn’t until August 2019, in an email circulated among senior management, that Star said it had reached a “mutual decision” to terminate its agreement with Suncity regarding the exclusive use of gaming salon 95.

“What in fact happened is Suncity simply moved its operations to salon 82,” Ms Sharp said.

“When asked last week why the Star was still using Suncity (Star chief executive) Matt Bekier replied ‘Why not?’”

Concerns about Suncity flouting casino protocols were raised in May 2018, when Star senior investigator Andrew McGregor wrote to management that “we have an entity within our four walls, which is totally non compliant to reasonable requests for basic information”.

“I‘m going to call it out early. Suncity is operating a business model under our noses, which is problematic for Star Entertainment Group with regard to AML CTF (anti-money laundering, counter terrorism financing) laws.”

The inquiry was shown CCTV footage of a man taking a backpack full of cash and exchanging it for casino chips at salon 95’s Suncity service desk, using it as a “pseudo cage”, breaching strict casino protocols.

This presented three risks: Suncity was performing a service without Austrac registration, someone other than the casino operator was running casino services, and the facilitation of money laundering.

In June 2019, weeks after Mr Buchanan began his employment at Star he emailed a report that he had compiled while working at the Hong Kong Jockey Club, which revealed Mr Chau and Suncity co-owner Chen Tin Kong’s links to Chinese triads.

The email came a month before Australian media reports exposed Mr Chau and Suncity’s links to organised crime and money laundering in Australian casinos, triggering the NSW Bergin Inquiry and Star, Crown Resorts and others to subsequently ban junkets.

Junkets were programs that lured mainly cashed up Chinese high-roller gamblers to Star and other Australian casinos.

Mr Buchanan completed the report about Suncity while working at the Hong Kong Jockey Club and emailed a copy to senior Star executives — including chief legal and risk officer Paula Martin and general counsel Oliver White — to show them what a “mature due diligence” function could produce, while also acknowledging he was aware of Star’s relationship with Suncity.

But Mr Buchanan said he had “limited” conversations with Ms Martin and none with Mr White about the content of the report. He said he had a discussion of a “general nature” with Star’s general manager financial crime and investigations Kevin Houlihan, ahead of the pair visiting the Hong Kong Jockey Club a month later in July 2019.

“Do you agree that this report contains significant information casting doubt on the integrity and probity of Mr Chau?” counsel assisting the inquiry Naomi Sharp SC asked Mr Buchanan.

“To an extent, yes,” he replied.

The report revealed Mr Chau was an alleged member of the Macau faction of the 14K Triad Society and follower of former 14K leader Wan Kuok-Koi, also known as Broken Tooth Koi.

Mr Buchanan had detailed knowledge of Suncity, having met Australian law enforcement authorities in May 2017, who told them they suspected the junket operator performing “large scale money laundering activities in Australia” to the tune of $2m a day between 2013 and 2015.

“Is it also correct that at that meeting you were advised by law enforcement that money is laundered by a myriad of methods from Australia, both to Hong Kong and Guangdong province in China? And is it also correct that you were advised at that meeting by law enforcement that one of Chen’s Hong Kong based associates … orchestrated this activity in Sydney?” Ms Sharp asked Mr Buchanan, who said it was correct.

Ms Sharp asked Mr Buchanan if Mr Houlihan was aware of the suspicion of Suncity from Australian law enforcement agencies.

“Media articles had already reported on that,” he said.

Ms Sharp replied: “We’re talking in June of 2019. There were a series of major articles published about Crown in July 2019. You want to reflect on your answer?”

“We discussed it prior to going to (Hong Kong) Jockey Club, which was in July,” Mr Buchanan said.

“We had no reason to discuss it prior to that. Once we were in Hong Kong and ready to meet them, we discussed it.”

In October 2020, Mr Buchanan wrote in a report to management: “the business undertakes a review as to the appropriateness of continuing to maintain a business relationship with Mr Chau and Suncity”.

“There is some concern that should Star continued to engage with Mr Chau, it may be construed that the business is willing to turn a blind eye to his triad and … links to organised crime,” Mr Buchanan wrote in a draft report.

That statement was deleted in a second draft delivered a month later, prompting Ms Sharp to suggest he had “watered it down”. Mr Buchanan said that wasn’t his intention. He later amended the report again after receiving written annotations from Star’s general counsel.

Among those annotations, including deleted Mr Buchanan’s suggestion that “future non compliance (from Suncity) would not be tolerated and may lead to the voiding of the agreement”.

Ms Sharp said: “Are you sure that no pressure was applied to you to change your draft?”.

“Yes,” Mr Buchanan replied.

In August last year, he made a recommendation that the risk Mr Chau presented could be “managed”.

“I suggest the only appropriate course based on the information available to you was to cease dealing with Mr Chau,” Ms Sharp said.

Mr Buchanan replied: “With respect to Suncity, I agree entirely, with respect to Mr Chau we could have managed the risk”.

The inquiry continues on Thursday.