Sydney Slots Venues Let High-Risk Gamblers Bet Millions: AUSTRAC

Leading Sydney club and slot machine operator Mounties Group paid out almost A$10.5m ($6.8m) in winnings over five years to a handful of identified “suspicious customers” despite red flags for money laundering, according to a court statement by Australia’s federal transactions regulator.

Court filings released by AUSTRAC this week flesh out alleged violations of anti-money laundering and counter-terrorism financing (AML/CTF) legislation by Mount Pritchard District and Community Club (Mounties Group), the owner of nine venues with slots and other electronic gaming machines (EGMs) in the offending period.

AUSTRAC’s prosecution of Mounties Group in federal court is the regulator’s first major legal action into Australia’s pubs and clubs sector, home to one of the highest concentration of slot machines per capita in the world.

Mounties Group is one of Australia’s largest club interests, with AUSTRAC noting that Group EGM volume and revenue for the four years ending June 30, 2023 amounted to A$4.17bn and A$459m, respectively.

At least six alleged contraventions of the federal Anti-Money Laundering and Counter-Terrorism Financing Act 2006 point to a potential maximum fine of nearly A$190m, according to the filings.

The case also serves as a warning to the wider industry, which has been shielded from scrutiny for decades by powerful lobby groups and has relied on third companies to provide allegedly deficient compliance services and checks.

Among a series of alleged breaches, Mounties Group failed to apply enhanced due diligence to customers that its own staff identified as “high risk”.

In addition, Mounties Group failed to perform enhanced due diligence on, and continued to provide gambling services to, ten identified “suspicious customers” despite their risk-bearing gambling activity, including high frequency play, gambling volume exceeding likely financial capacity, high-volume cheque payouts, EGM “bill stuffing”, trading cash and tickets with other customers, and other activity that alerted the New South Wales state government gambling regulator.

The names of the ten customers, who between them generated nearly A$140m in gambling volume and enjoyed payouts totalling A$10.46m, were redacted from the AUSTRAC court filing.

In the offending period, “Mounties served innumerable customers without adequate controls,” the filing says.

“In spite of Mounties being aware of the high ML/TF risk posed by the Sample Suspicious Customers, Mounties either failed to consider whether ongoing business relationships ought to be maintained with the customers or concluded that ongoing business relationships ought to be maintained notwithstanding the ML/TF risk posed by the customers.”

In other contraventions, the regulator alleges that Mounties Group’s mandated AML/CTF Program, created and maintained by the consultancy company BetSafe, contained no real-world methodology to identify or manage money laundering risk and lacked a substantive staff training process.

Instead, the program described procedures and staff responses “in general terms without explaining how any measures were to be deployed”, the filing says. 

AUSTRAC also alleges that five independent reviews of Mounties Group’s AML/CTF Program conducted by private company Legal Review consisted only of interviews with two Mounties officers and BetSafe’s managing director and “reading the … Program in effect at the time”.

At no time did Legal Review attempt to “review, test or verify the efficacy of the steps taken by Mounties … to implement its AML/CTF Program”, the filing says.

The AML/CTF Program also failed to maintain a competent transaction monitoring program with risk-based systems and controls, leaving staff unclear on how to perform duties such as gaming machine cash flow analysis, watching for high-volume game play, EMG data distortion, and identifying suspicious transactions.

The Program’s enhanced due diligence section allegedly misled staff on company responsibilities under national AML/CTF rules, limiting their duties and narrowing source of funds checks to politically exposed persons, as tagged by the company.

The AUSTRAC filing also alleges Mounties Group failed to ensure that all board members received AML/CTF training as required by the rules, and failed even to note which staff completed the training.