How Sydney’s dirty money moved from casinos into suburban clubs

The financial crime watchdog has warned that illicit activity is shifting from the casinos to pubs and clubs, while launching civil proceedings against the most profitable club group in NSW for “serious and systemic” non-compliance with anti-money laundering laws.

AUSTRAC, the regulator of currency exchange services, announced on Wednesday civil penalty proceedings would be commenced against Mount Pritchard District and Community Club, also known as Mounties, over allegations the club failed to appropriately manage the risk of money laundering through its venues.

AUSTRAC identified specific instances where Mounties allegedly failed to monitor individuals who presented a money-laundering risk.Credit: Brook Mitchell

The proceedings against Mounties, one of the largest club groups in Australia, represent the first salvo in the regulator’s promised crackdown on the criminal exploitation of gambling in pubs and clubs.

AUSTRAC chief executive Brendan Thomas said there was growing evidence that the regulatory crackdown on casinos had displaced illicit activities into pubs and club groups, some of which rivalled the casinos in terms of the number of poker machines they operated.

“We know in certain parts of Australia that when casinos have tightened up their controls, their clientele has dropped and there’s been a corresponding increase in clients in pubs and clubs,” Thomas said.

“That could be just general punters, but some of it might be illicit activity. We are worried that there’s displacement activity happening from casinos into pubs and clubs in Australia.”

Mounties is one of the largest club groups in Australia, with 10 venues across NSW, including eight that operate about 1400 poker machines, resulting in hundreds of millions of dollars in gambling revenue.

Thomas said the risk of money laundering increased when businesses were exposed to cash, especially in circumstances where money laundering risks were not being managed.

“This is a big company with an even bigger responsibility to ensure its clubs are managing the risks that criminals can run dirty money through its gaming machines,” Thomas said.

“A business operating at this scale, in a cash-intensive sector, is exposed to a high degree of money laundering risk.”

The NSW Crime Commission reported in 2023 that a significant proportion of the $95 billion that flowed through the state’s 87,000 poker machines in pubs and clubs the previous financial year was the proceeds of crime.

Its revelation prompted the then-premier Dominic Perrottet to announce the rollout of mandatory cashless gambling, but he lost power before he could fulfil the commitment.

His successor, Chris Minns, opted instead to test cashless technology before committing to a statewide rollout, but the trial attracted just 14 participants and the government is still sitting on a recommendation from its gambling reform panel to make cashless gambling mandatory.

Minns suggested last month that the government would not adopt the recommendation.

“Despite everybody’s best effort to have cashless gaming rolled out across NSW gaming, it’s largely proved to be ineffective,” he said.

“It hasn’t worked, it’s not driven down the incidence of problem gambling, the take-up rate has been lower than we thought, the cost of compliance is enormous, astronomical.”

AUSTRAC will allege that Mounties’ anti-money laundering and counterterrorism financing program did not have adequate risk assessment, did not contain adequate staff awareness training, and had weak transaction monitoring and due diligence processes.

It will also allege that Mounties failed to monitor specific customers appropriately despite the money-laundering risks they presented.

A statement released by Mounties said the group took its money laundering obligations seriously and had dedicated significant resources to improving its capabilities since AUSTRAC notified Mounties of its concerns.

“Mounties has been co-operating with AUSTRAC throughout its investigation and will continue to engage constructively with the regulator throughout the course of the proceedings.”

Mounties is the first club to be targeted by AUSTRAC in its crackdown on money laundering through pubs and clubs, which follows proceedings against casinos, bookmakers and online betting platforms.

Crown was fined $450 million in 2023 and AUSTRAC has argued for a $400 million fine to be imposed on Star Entertainment after it was found to have facilitated known organised crime figures to clean billions of dollars through its casinos.

Casinos have since been subjected to new regulations, including mandatory cashless play, stringent know-your-customer checks and cash input limits on gaming machines.

Star Entertainment said in its quarterly report on Wednesday that average daily revenue at its Sydney casino was down 17 per cent since those regulations took effect.

Thomas said smaller gambling operations such as pubs and clubs needed the same focus on controlling organised crime and money laundering that was applied to the big casinos.

“Just because they might be a community-run club doesn’t mean they’re not exposed to the same criminal risk, and doesn’t mean they don’t have any other legal responsibilities. They have legal responsibilities the same as our casinos do and they need to make sure they’re controlling the flow of illicit funds.”

A ClubsNSW spokeswoman said the industry was working proactively with AUSTRAC to ensure anti-money laundering and counter-terrorism financing risk controls were actively managed.

“ClubsNSW is committed to promoting AML/CTF best practice and looks forward to hosting AUSTRAC CEO Brendan Thomas as a guest speaker at its annual conference later this year,” she said.

Former ClubsNSW employee turned whistleblower Troy Stolz said he had raised concerns with AUSTRAC about the industry’s failure to comply with anti-money laundering requirements as far back as 2016.

The third-party contractors who oversaw the clubs’ anti-money laundering programs took a cookie-cutter approach to compliance that did not take into account the individual risk profiles of each club, he said.

“This is the start of something massive,” Stolz said.

“If the largest and most profitable club through pokies in NSW can’t get their head around compliance, what are the rest of the clubs and pubs doing?”

The Federal Court will now determine whether Mounties breached anti-money laundering and counter-terrorism financing laws and if so, what penalties to impose.

A spokesman for NSW Gaming Minister David Harris said the government would respond to the recommendations of the independent panel on gambling reform “in due course”.

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