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Australian transactions watchdog AUSTRAC has taken casino operator Crown Resorts to court over “serious and systemic non-compliance” with anti-money laundering (AML) laws, potentially impacting a Blackstone Group takeover bid.
AUSTRAC commenced civil proceedings against Crown in Federal Court following “detailed enforcement investigations” into Crown’s operations in Melbourne and Perth, it said in a statement on Tuesday (March 1).
“AUSTRAC’s investigation identified poor governance, risk management and failures to have and maintain a compliant AML/CTF [counter-terrorism financing] program detailing how Crown would identify, mitigate and manage the risk of their products and services being misused for money laundering or terrorism financing,” CEO Nicole Rose said.
“They also failed to carry out appropriate ongoing customer due diligence, including on some very high risk customers,” she said. “This led to widespread and serious non-compliance over a number of years.”
The court action coincides with New York-based Blackstone Group’s likely takeover of Crown, following the signing in February of a scheme implementation deed that includes an A$89m break fee for both parties.
However, the takeover still requires shareholder and regulatory approval and allows for Blackstone to pull out of the deal in the event of a material adverse change to Crown’s circumstances.
In a lengthy statement to the court, AUSTRAC alleged that the Crown board’s “oversight with respect to junkets was seriously deficient”.
“Instead of applying heightened risk-based controls, Crown Melbourne and Crown Perth permitted some junket operators to operate cash administration desks in private gaming rooms; facilitate the distribution of winnings to junket players and third parties; and facilitate transactions through non-transparent Crown bank accounts.”
The media statement said the possibility of a civil penalty order and the size of any order “are matters that are before the court”.
However, in its court statement, AUSTRAC alleged hundreds of contraventions by the two properties since March 2016 and that each contravention can attract a maximum fine of around A$22m ($16m).
AUSTRAC has issued fines in the hundreds of millions of dollars to high-profile banks over money laundering, and secured a A$45m settlement from lottery and wagering giant Tabcorp Holdings in 2017.
AUSTRAC’s court action follows an 18-month probe and conform with various findings of New South Wales state’s Bergin Inquiry and/or Victoria state’s Royal Commission into Crown Resorts over the last two years.
They include poor risk management and poor responses to changes in risk, deficient AML/CTF programs and board oversight thereof, the absence of a transaction monitoring program fitting the scale of Crown’s operations, and a lack of due diligence planning and execution over many years.
The statement indirectly acknowledged that an almost complete change in management and board membership has produced a more reformist and compliant company culture, but this was insufficient to ward off new court action.
“Crown is taking steps towards improving its systems, processes and resourcing … however, there is further work to do and AUSTRAC will continue to work closely with Crown to address ongoing compliance concerns,” it said.
