Westpac and Crown not alone as stakes raised in dirty-money war
It’s not only Westpac and Crown that have been put on notice about the importance of taking a tough line on money-laundering.
This week goes down in history as the week that Australian companies were put on notice at the highest level about the importance of taking a tough line on money-laundering.
While Austrac chief executive Nicole Rose was announcing her organisation’s record $1.3bn settlement with Westpac, former NSW Supreme Court judge Patricia Bergin was continuing her inquiry into the suitability of Crown to have a casino licence in Sydney.
In her press conference at Parliament House, Rose indicated that there were other potentially major investigations under way into activities around the 15,000 entities Austrac oversees.
The events of this week have also made it clear that Austrac regards itself as an enforcement agency and not a regulator — an important difference that companies ignore at their peril.
Like the police, enforcement agencies may not lay out all their cards before they take action.
Like a call from the police, as Rose has made it patently clear this week, a call from Austrac should be taken seriously at the highest levels of the company.
But it is also clear from the events of this week that internal control systems within companies around money-laundering, including IT systems, need to be operating so as to ensure the highest levels of compliance with the anti-money-laundering and counter-terrorism legislation.
The inquiry into the suitability of Crown to hold a licence in NSW, established by the NSW Independent Liquor and Gaming Authority, which has been going on since January, will not only give a comment on its view of Crown but looks like making some serious recommendations on the regulation of casinos in NSW, including around the potential for money-laundering in casinos.
It will come back into the spotlight next week with the video appearance by former Crown chair and major investor James Packer.
Its months of painstaking hearings have included extensive discussions around the potential for money-laundering in the casino business and with discussions about some shady characters.
Crown’s argument to the inquiry, whose outcome could affect the potential operations of its new casino at Sydney’s Barangaroo that is scheduled to open in December, is that while there have been shortcomings in its anti-money-laundering operations in the past, it has been tightening its operation in recent years.
Chief executive Ken Barton told the inquiry Crown had engaged a consulting company to conduct a review across all aspects of its anti-money-laundering program. He said the company had plans for more improved policies to come into force later this year that would cover all three of its casinos — in Melbourne, Perth and Sydney.
Crown, he said, had also created a new role of head of compliance and financial crimes that would include oversight for anti-money-laundering and would report directly to the board.
Barton told the inquiry Crown was recruiting for the role, which it expected to fill by November, before the opening of Barangaroo planned for December 14.
“I’m looking to get a view, not just around anti-money-laundering and compliance, but more broadly around financial crimes and thinking about how we are proactively looking to address criminal risks in our financial transactions,” Barton told the inquiry. “Once that role is done, the function will have a reporting line through to the board.”
The new role recognises shortcomings within the Crown organisation in the past where it seems that some key grassroots information has somehow not managed to make its way to the board.
In its hearing on Friday, Crown director Michael Johnston confirmed he had not passed on information sent to him about the situation affecting its staff in China in 2015 to the board which, in retrospect, could have signalled a worsening of risk for the staff.
The following year, in October 2016, Crown executive Jason O’Connor and other employees were arrested with most jailed for almost a year.
The inquiry has thrown a spotlight on the role of junket operators — middlemen who deliver groups of VIP highrollers to casinos.
As has become obvious in the inquiry, it is the potential use of these third-party junket operators where the risk of money-laundering is higher.
Crown also announced to the ASX on Friday that it had suspended all its activities with junket operators until June 30 next year.
Barton told the inquiry on Thursday that it had not yet communicated this policy to its junket operators. He said it was a bit of a moot point, seeing as overseas tourists were not allowed into Australia anyway.
But the Crown announcement was still significant, given the Bergin inquiry’s fierce spotlight on junkets.
At the least, it appears Bergin is set to recommend strict controls on the approval of junket operators in NSW casinos.
Counsel assisting the inquiry have been direct in their questioning of Crown executives.
“Do you agree ... that over the years, until this year, Crown has failed to engender a culture of compliance within its organisation as far as anti-money-laundering is concerned?” Naomi Sharp SC asked Barton on Thursday.
“I certainly think we have more work to do,” he replied.
“We’ve done more work over the years. We have more work to do around compliance, particularly anti-money-laundering compliance.
“I don’t think we have achieved nothing, but I definitely think we have more work to do.”
Sharp then followed up with another pointed question: “Do you agree that it is a significant problem that Crown have failed to adequately engender a culture of compliance within the organisation, as far as anti-money-laundering is concerned?”
“It’s quite confined to one part of the business — the VIP business,” Barton replied. “That’s where most of the issues we have identified have come from.
“That’s the area where there’s been the biggest shortcoming between getting the balance between revenue and compliance right.”
Sharp: “Just so we understand, do you agree that the VIP international area is where the biggest anti-money-laundering risk lies?”
Barton: “Yes, I agree with that.”
After more questioning from Bergin, Barton confirmed that junket operators were only focused on the VIP business, which contributed only 25 per cent of revenues from Crown’s existing operations in Melbourne and Perth and only 7 per cent of its earnings over the past five years.
Bergin then followed up with the direct question to Barton: “One option you could look at, is to just stop it — stop dealing with junkets altogether. Wouldn’t that fix all these problems?”
Not dealing with junket operators, Barton replied, would mean a smaller business for Crown but one with “much lower risk”.
“It would be a much simpler and probably higher-margin business,” he added.
Bergin followed up: “If Crown operates its own structure without the intervention of what can only be described as shady characters, then you don’t have these problems, surely?”
Barton rejected suggestions during the inquiry that Crown had turned a blind eye to some activities that could have involved money-laundering in the past. “From our perspective, we haven’t necessarily had the best programs around money-laundering, but we have improved them over a long period of time,” he said.
“Our intention is to keep on improving them and we’ve always done our best to meet the obligations of our reporting.
“I wouldn’t agree that Crown facilitates or turns a blind eye to money-laundering.”
It was just coincidence that this exchange was happening on the same day as the Austrac announcement of its settlement with Westpac. But as Bergin prepares her report due early next year, she will be aware of heightened community concerns over money-laundering in general, and in casinos in particular.
It is clear that the directors at Westpac, at least until last year, also thought they had their internal control systems around money-laundering under control.
Given her comments, at the least Bergin could be expected to recommend tighter controls over junket operators in NSW casinos, and could well recommend banning them altogether.
By announcing the suspension of using junket operators until June 30 next year, Crown has removed this as being a short-term regulatory concern for its operations at Barangaroo.
Bergin’s report could well recommend more controls around the issue of money laundering beyond junket operators.
Given the bar has been raised on companies and their anti-money-laundering controls, Bergin’s report will make important reading for Crown and potentially for broader corporate Australia.
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