Austrac seeks $400m penalty against Star Entertainment

Austrac is calling for a $400m fine against Star Entertainment for money laundering breaches despite warnings from the troubled casino giant the penalty could force it into liquidation.

Star in Austrac’s sights.

Financial crimes regulator Austrac is seeking a $400m fine against Star Entertainment for money laundering breaches despite warnings from the troubled casino giant the penalty could force it into liquidation.

Counsel for Austrac Simon White SC told the Federal Court on Wednesday that $400m would not be considered an oppressive penalty given the extent of breaches by Star over a number of years. Star had earlier indicated a fine as low as $100m could threaten its future.

Mr White told Justice Cameron Moore that there was a “deliberate courting” of risk by Star’s senior management in relation to money laundering breaches “where billions and billions of dollars were coming into the casino environment.”

The court earlier heard evidence of suspicious transactions from the Salon 95 private gaming room at Star Sydney run by Macau-based junket operator Suncity.

“If you want to run a casino, you’ve got to put in place very costly and significant systems, processes and controls,” said Mr White.

“There was a manifest failure on the part of Star to do that and that warrants this court imposing a very high penalty, much higher than $100 million.

“An oppressive penalty, we accept, is not appropriate but $400 million is not an oppressive penalty in this case. It’s an appropriate penalty for specific and general deterrence purposes.”

Mr White said there were “clearly many factors that have put Star in its present financial position” and that could result in its liquidation.

“Whether it be a $100m or any other figure, Star could well fall into liquidation not because of any penalty that’s imposed but for a variety of other factors that might come into play,” he said.

Star would seek to pay the fine in instalments as it expressed concerns it should not be stuck with a penalty beyond its current capacity to pay.

Austrac launched proceedings against the company in November 2022 for alleged breaches of anti-money laundering and counter-terrorism financing laws.

Since then the company’s finances have deteriorated to the point where it narrowly avoided appointing administrators earlier this year. US casino giant Bally’s Corp and pubs baron Bruce Mathieson have proposed a $300m rescue plan that still needs shareholder approval.

The Austrac trial is expected to cover five days and will hear allegations that the casino giant failed to carry out appropriate ongoing customer due diligence, which led to widespread and serious non-compliance with anti-money laundering laws.

Star in Austrac’s sights.

These failings facilitated the movement of money in non-transparent ways making the Star vulnerable to criminal exploitation.

The court went into closed session on Wednesday morning after Star’s chief financial officer Frank Krile took to the stand to discuss the troubled company’s finances and its ability to pay a fine.

Justice Moore said that while he agreed to close the court to hear Mr Krile’s testimony, some detail of the company’s finances and its ability to pay may be released in his judgment, given “capacity to pay will be at the heart of the key issue in these proceedings”.

“I just don’t yet know whether in the course of these proceedings, some detail of that might be critical to the ultimate reasoning process,” Justice Moore said.

“What I would therefore propose to do is make the order that you seek, but if it turns out that some facts that are said to be confidential becomes critical, then we might have to look at that again and whether it needs to be revealed to public scrutiny because it’s a critical component in the reasoning process. I just don’t want to bind my hands.”

The start of the Austrac trial comes a week after ASIC wrapped up its marathon case in the Federal Court against former executives and directors of Star Entertainment over alleged breaches of their duties to implement money laundering controls.

Federal Court judge Michael Lee has reserved his judgment in that case with ASIC seeking millions of dollars in pecuniary penalties against former Star chief executive Matt Bekier, company secretary Paula Martin, former chairs John O’Neill and Benjamin Heap, as well as former high-profile directors Sally-Anne Pitkin, Kathleen Lahey, Gerard Bradley, Wallace Sheppard and Zlatko Todorcevski.

Originally published as Austrac seeks $400m penalty against Star Entertainment