Significant penalty for Australian casino operator follows other regulatory action imposed in Queensland and New South Wales for related regulatory failings
Australia’s Federal Court has ordered The Star Entertainment Group to pay a penalty of A$260 million for serious anti-money laundering and counter-terrorism financing (AML/CTF) breaches.
In a ruling published Wednesday, the Court found that The Star failed to maintain a compliant AML/CTF program and failed to monitor customers to identify, mitigate and manage money laundering and terrorism financing risks between November 2016 and November 2022.
The Court has ordered The Star Sydney to pay $195 million, with the first instalment of $48.75 million due by 25 November, while The Star Queensland must pay $65 million, including $16.25 million by 25 November.
The AUSTRAC investigation and uncertainty about the resulting penalty have weighed on Star Entertainment since the investigation was first announced in November 2022.
AUSTRAC CEO Brendan Thomas said that in light of the penalties The Star was subjected to under previous casino inquiries, the penalty reflected the seriousness of the contraventions and builds on previous state and Commonwealth fines to provide ongoing deterrence value.
“The Court found The Star did not simply fail to complete the right checks,” said Thomas. “It allowed high-risk customers to gamble without properly establishing where their money came from and put profit over compliance on a large scale.
“AUSTRAC will not tolerate companies putting profit over their obligations to the Australian community. It permitted a private casino within its casino to operate without appropriate oversight and continued courting customers who had been excluded from gambling in another state.
“The Star allowed junkets to engage in highly suspicious incidents without intervening controls and despite its concerns about these activities, and the known risks associated with junkets, it allowed ongoing access to its private gaming rooms.”
Thomas said that due to The Star’s admitted deficiencies in monitoring, nobody knows how much money high-risk customers pumped through its casinos.
“But we do know the risks involving significant amounts of money and instead of closing the door to those risks, The Star’s operations exposed the casino and Australia’s financial system to them,” he said.
Justice Moore said: “…a significant part of Star’s business was dependent upon turning a blind eye to customers who presented a high ML/TF risk.”
“There is a strong financial incentive to engage in the conduct the subject of the contraventions. Casinos can stand to benefit handsomely if the inflow of money, including cash, from domestic and overseas sources, can occur with limited friction and limited scrutiny.”
The Court found The Star’s non-compliance with the AML/CTF Act “undermined the ability of AUSTRAC and law enforcement agencies to trace money to its source, resulting in a loss of opportunity to disrupt unlawful activity and recover the proceeds of crime.”
The contraventions included serious failures in the management of The Star’s high-risk customers, including failures to verify customer information and source of funds, conduct appropriate due diligence and monitor customer activity.
The gambling channels operated by The Star carried elevated money laundering risks, including limited transparency over the source of funds and facilitation of third-party transactions and cash deposits in circumstances where the identity of the third party was not recorded.
Justice Moore said: “Star continued to receive and profit from money that evidence available to it suggested was most likely from criminal activity and was being laundered.”
“The revenue from junkets alone was over $1.4 billion… and the profit from junkets in the pre-COVID years exceeded $100 million. Likewise, the revenue from high-risk customers alone over the [November 2016 to November 2022 period] was approximately $1.33 billion on Star’s own calculation…it illustrates the potential to earn profits from a non-compliant approach to AML/CTF obligations”.
While those figures are not a measure of the benefit derived from the contraventions, the Court said they illustrate the potential to earn profits from a non-compliant approach to AML/CTF obligations.
The $260 million penalty follows other significant penalties and regulatory action imposed on The Star following Queensland and New South Wales casino inquiries for related regulatory failings.
The Star is yet to publicly comment on today’s Federal Court judgment.
Shares in The Star Entertainment Group Ltd (ASX:SGR) closed unchanged at A$0.13 per share in Sydney Wednesday, having gained more than 13 per cent on Tuesday following the release of its fiscal first quarter financial results.