Casinos to embrace “local independent boards” in wake of AML enquiries

Australia’s national casino operators are likely to form independent boards in every state in response to the scathing findings from the Crown and Star inquiries.

The inquiry into The Star’s gambling operations heard on Wednesday that the company failed to put in place localised subsidiary boards to manage the compliance risks associated with operating in different states.

The independent review of The Star, which is being led by Adam Bell SC, found that the national management structure led to an ambivalence toward local conduct risk issues.

The review of Star is taking place in New South Wales under the state’s Casino Control Act 1992 (NSW). The inquiry is likely to find that The Star is unfit to hold a gambling licence in NSW. The gambling operator is also facing enforcement action from the Australian Transaction Reports and Analysis Centre (AUSTRAC).

Bell said the inquiry had found a lack of local governance and oversight, reflecting the findings from the inquiries into Crown Resorts in Western Australia  and Victoria. He suggested that gambling venues such as The Star in NSW needed a local board to remain focused on state-based regulatory requirements and to liaise with local law enforcement agencies.

Outgoing chairman John O’Neill said under questioning that a local board in NSW, which was independent from the listed company’s board, would have been beneficial “in hindsight”. The observations marked the end of a two-month inquiry into the NSW gambling giant.

Licence to launder

At present, a subsidiary called “Star Sydney” holds the NSW casino licence but it is managed by its listed parent company, The Star, which also operates The Treasury casino in Queensland.

Crown’s casino in Perth is governed by a local board, which also came under fire for extensive compliance failures in a local Royal Commission. The subsidiary board is mandated under the Western Australian gambling regulations. The WA inquiry found that, despite this structure, the local board was not “truly independent” of its listed parent company.

The New South Wales inquiry has found that The Star facilitated more than A$900 million in money laundering for junket operators. It also heard that Star allowed junket operator Suncity to operate a high-roller room in secrecy, even after laundering allegations and links to organised crime came to light. The inquiry heard that Star management moved Suncity to an unbranded room, dubbed “Salon 82”, even after it purported to have closed the junket facility. 

Under questioning on Wednesday, O’Neill said this had exposed the company to significant risk of money laundering and criminal infiltration. He said that after relocating the junket operator to Salon 82, no further risk assessment was undertaken.

“I only became aware of that in the course of preparation for my evidence,” O’Neill said.

Naomi Sharp SC, counsel assisting the inquiry, described this failure as “completely unacceptable” and said it reflected a “complete disregard for very real risks of money laundering occurring in the casino.”

The inquiry is due to report its findings by August 31, 2022.

Related:
IMPACT ANALYSIS: Star Casino appoints new chairman as AML/CTF breaches escalate before inquiry
AUSTRAC claim alleges A$69 billion laundered through Crown Resorts

This article first appeared on Thomson Reuters Regulatory Intelligence.

Nathan Lynch is an experienced writer, public speaker, manager and technology enthusiast in the field of financial regulation and risk management. At Thomson Reuters, Nathan leads a team of experts who provide breaking news, deep analysis and practical guidance to risk practitioners in the global financial services sector.
Nathan manages Thomson Reuters’ award-winning Regulatory Intelligence team across the Asia-Pacific region, tracking developments in financial services law, regulation, financial crime and risk management.
Nathan has been involved in building innovative, tech-based businesses in the financial services “regtech” sector — including Complinet Australia and the Thomson Reuters Risk business.

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