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The New South Wales (NSW) Crime Commission has heaped new pressure on slot machine operators and the state government in a report recommending mandatory cashless use of slots to stem billions of dollars in laundered funds per year.
The commission on Wednesday (October 26) released the 71-page report of the Project Islington Inquiry into money laundering through electronic gaming machines (EGMs) at hotels (pubs) and clubs.
NSW crime commissioner Michael Barnes said in a statement that the report’s eight recommendations would mitigate against a level of criminal activity that is “impossible to determine”.
Slots money laundering is “high risk and inefficient” and “not widespread”, according to the report.
But Barnes said: “It is clear from our investigations it involves many billions of dollars every year”, adding that the state’s slots turnover in the 2021 financial year was A$95bn.
“These basic reforms will help exclude vast sums of dirty cash that are primarily the proceeds of drug dealing. I’m sure venues won’t argue they should keep receiving that,” he said.
The recommendations include introducing a “mandatory cashless gaming system to minimise EGM related money laundering within pubs and clubs”.
The system should include player identification and all associated gaming data with “one to one links between player cards and a bank account”, a ban on player card transfers and a maximum daily cash load of A$1,000 ($640), the report said.
“This would allow for a clear electronic trail to be recorded if law enforcement agencies or regulators need to trace the source of the funds used to gamble, and the movement of money back into [the] bank account,” it said.
“Significantly limiting the presence of cash at the venue and restricting a player card from transferring funds to more than one account moves an element of risk from the gaming sector to the banking sector, which has a more mature regulatory regime around flagging suspected money laundering.
“This would also address a current vulnerability in EGM data collected by the pubs and clubs,” it said.
Other recommendations include standardisation of EGM data through legislation or regulations to better identify money laundering, as well as several areas in which government and industry can combine to promote or compel best practice on data monitoring, venue exclusion of suspected criminal actors or proxies, staff training and anti-money laundering (AML) education.
One recommendation would enable government agencies, venues or the regulator to “recommend the cancellation/revocation of an RCG [responsible conduct of gaming] certification” for gaming staff and management.
No such revocation power currently exists, but the report notes the proportion of staff and managers that pose a risk via criminal histories or associations is likely “small”.
The report also found that operator obligations under AML legislation are “misunderstood by many venues as restricting their ability to exclude patrons or revoke their membership, leading to money launderers not being reported or not being excluded from venues”.
The commission’s report, prepared in conjunction with the NSW Independent Liquor & Gaming Authority (ILGA), places new pressure on NSW Premier Dominic Perrottet, whose government has been heavily criticised by anti-gambling organisations for working too closely with lobby group ClubsNSW and not acting aggressively against slots-linked criminal activity.
Particularly since November 2021 when a gambling investigations official with state gaming overseer Liquor & Gaming NSW warned journalists that billions of dollars were washing through the state’s ubiquitous slots segment.
The NSW Crime Commission probe was announced the following month.
ILGA’s then-chairman Philip Crawford, who now heads the NSW Independent Casino Commission (NICC), complained in leaked documents the following May that ILGA had “very few regulatory levers to pull” against the slots industry.
In an emailed statement to VIXIO GamblingCompliance on Wednesday, a NICC spokesperson said the NICC “welcomes the … findings and recommendations” that dovetail with new mandatory requirements for EGMs in casinos.
“The NICC’s efforts to reduce the potential for money laundering in casinos could create a spillover effect whereby criminals turn their attention to pubs and clubs. It is thus pragmatic for these venues to transition to cashless gaming in line with casinos," she said.
“The NICC will consider the report and how it can work with the [NSW Crime Commission] and other regulatory bodies to strengthen anti-money laundering and counter-terrorism financing measures in the gaming industry.”
National financial transactions regulator AUSTRAC and the Australian Criminal Intelligence Commission assisted the NSW Crime Commission and ILGA in producing the report, adding to the institutional gravity of the findings.
Pending the NSW government’s response to the report, the slots industry in the state now faces one of its toughest periods of reform in its history after years of formidable advocacy and political work by ClubsNSW.
ClubsNSW is notorious for former officers learning from the National Rifle Association in the United States on political strategy and for exerting significant influence over state and federal politicians at home.
However, in a sign of a turning tide, media outlets have given ample attention to ClubsNSW's former AML officer and terminally ill whistleblower Troy Stolz, who is locked in legal action with the lobby group over his allegations of AML non-enforcement.
Stolz has since found an unlikely ally in disgraced former Crown Resorts boss James Packer, who attacked ClubsNSW earlier this month for its “ruthless, unethical behaviour” in litigating against a dying man.
NSW Premier Perrottet has also signalled a change in fortune for the slots segment, stating his government will “do what is right” in reducing government tax revenue from slots operations.
Other observers, however, point to an infamous incident in a club in the Sydney suburb of Dee Why as transforming the politics surrounding the industry.
A slots-addicted VIP customer gambled some A$3.7m over two years at the venue before committing suicide in May 2018 after allegedly losing hundreds of thousands of dollars in one session.
The death triggered a record fine for the club and a push for new legislation and galvanised community resistance to the industry’s enormous political muscle.
