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Australian money laundering watchdog AUSTRAC has sued subsidiaries of the embattled Star Entertainment Group over “innumerable” violations of casino reporting and due diligence obligations that could result in fines totalling billions of dollars.
AUSTRAC on Wednesday (November 30) commenced a civil action in Federal Court in Sydney against Star’s “serious and systemic non-compliance” with anti-money laundering (AML) and counter-terrorism financing (CTF) laws, according to a media release.
Star’s casinos in New South Wales (NSW) and Queensland states are all subject to the lawsuit, which follows a compliance campaign launched in September 2019, an investigation into Star’s Sydney casino that started in June 2021, then expansion of the investigation to Queensland the following January.
“AUSTRAC’s investigation identified a multitude of issues including poor governance and failures of risk management and to have and maintain a compliant AML/CTF program,” said Nicole Rose, CEO of AUSTRAC.
“The Star Entities also failed to carry out appropriate ongoing customer due diligence which has led to widespread and serious non-compliance over a number of years.”
AUSTRAC alleges that Star’s companies did not take their monitoring obligations seriously, failing to assess risk and maintaining deficient AML/CTF programs.
Board members and management lacked a framework to oversee these programs, and combined with a lack of adequate due diligence measures, failed to perform appropriate scrutiny of higher risk customers, the statement said, including foreign-owned junket operators and customers.
Consequently, the companies allowed customers to use opaque, high-risk payment channels without a risk profile for the sources of money or the customers themselves, it said.
In a concise statement filed with the court on Wednesday, AUSTRAC alleged “innumerable” breaches of Section 81 of the federal Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which requires an appropriately executed AML/CTF program.
The statement also alleged that the NSW subsidiary Star Sydney committed 1,189 breaches of Section 36 of the act, which mandates ongoing customer due diligence and AML/CTF risk mitigation, as well as 325 breaches by Star’s Queensland operation.
The latter violations correspond to the 1,189 and 325 “high-risk customers” that Star has provided services to since November 2016, including customers linked to organised crime and excluded from casinos by NSW police.
The statement noted a maximum fine of between A$18m and A$22.2m (US$12m-$15m) per offence, potentially amounting to hundreds of millions of dollars in fines even if only a fraction of the allegations are established.
“The … risk management failures occurred [while] operating a highly profitable business.
“Between July 2016 and October 2020, Star Sydney and Star Qld made over A$1.6bn in revenue from junkets.
“Star Sydney and Star Qld [Queensland] avoided expending funds that should have been invested in compliance including on IT, staffing, and the development of AML/CTF controls.
“The money saved by Star Sydney and Star Qld by its non-compliance is reflected in its lack of expenditure on risk management and compliance.”
The AUSTRAC lawsuit quickly follows regulatory probes into, and declarations of, Star’s licence unsuitability in NSW and Queensland, as well as a A$100m fine for Star in NSW in tandem with the suspension of its licence, with casino operations continuing under an external manager.
Seemingly unconcerned by casino operations for years as junket operations flourished, AUSTRAC’s tougher focus on gambling since 2019 has resulted in legal action against Star rival Crown Resorts, an enforcement investigation into online giant Entain, audits into corporate bookmakers bet365 and Sportsbet, and warnings for land-based slot parlours in pubs and clubs.
AUSTRAC has also launched a wider casino crime investigation dubbed “Operation Kitten”, reportedly in response to “historical police inaction” on organised crime in casinos.
