IMPACT ANALYSIS: Star Casino appoints new chairman as AML/CTF breaches escalate before inquiry

The Star Entertainment Group Pty Ltd has announced to the Australian Stock Exchange (ASX) that John O’Neill will assume the role of executive chairman, following the resignation of Matt Bekier.

This comes as the inquiry undertaken by Adam Bell SC has revealed the casino had laundered billions of dollars for high-profile clients and flagrantly breached anti-money laundering and terrorist financing (AML/CTF) laws, lied to its own bank in the process so that illegal gambling transactions could be hidden from the regulator.

The Bell inquiry is determining whether Star is suitable to hold a casino licence in Sydney.

Breach of laws

As inquiry continues, it is revealing similar intentional breaches of the AML/CTF laws as was in the case of Crown, which was last month accused of ” serious and systemic non-compliance” with anti-money laundering laws by the Australian Transaction Reports and Analysis Centre (AUSTRAC). This has complicated a A$6.3 billion buyout by Blackstone, the private equity giant.

At the time Star was painted as the “clean” casino, the Bell inquiry has however established that Star and its senior management were intentionally not following AML/CTF laws.

The inquiry revealed last week that high-end property developer, Phillip Dong Fang Lee, purchased A$2.72 billion in chips through the Star casino in Sydney over 15 years only losing A$57 million in the process. It was also revealed that another billionaire, Huang Xiangmo bought A$1.7 billion worth of chips over a period of five years.

The inquiry also heard that Star avoided regulatory oversight and helped other high rollers bring in millions of dollars of offshore money, set up a secret gambling room for criminal gangs linked to a junket operator in SunCity Macao, and hid SunCity’s illegal cash cage from the New South Wales State casino regulator.

The Bell inquiry has already established that Star’s senior management involved by deception the National Australia Bank (NAB) and created a scheme in 2013 by which international high rollers could use a debit card to move money out of China and into their accounts for gambling.

The debit card was meant to be used for hotel services and accommodation, yet Star senior management gave evidence at the inquiry that they misled NAB by disguising the movements of money and itemising it as hotel accommodation. One client was able to move A$2.5 million in three days that was never reported to AUSTRAC.

The inquiry is revealing that not only were there serious failures of compliance, but that senior management had orchestrated a deception against AUSTRAC and the NSW new regulator.

The deception was so fine-tuned that in 2017 AUSTRAC officials conducted a two-day inspection onsite of the casino and concluded that there was nothing concerning with Star’s AML/CTF program. It is astonishing how easy it was to hide the illegal transactions from federal and state regulators.

Senior management were part of problem

With the announcement of the promotion of O’Neill as chairman with a pay rise of A$125,000 each month, maybe sending the wrong message to the government and the regulators. O’Neill, who was the former CEO, was part of Star’s senior management team that allowed these astonishing AML/CTF contraventions to occur.

The inquiry heard that the senior management did not accept a KPMG audit report in 2018 that pinpointed serious contraventions of the AML’s law.

The board at Star are grappling with serious issues that are unfolding every day before the inquiry. Shareholders would be concerned about the information being revealed before the inquiry and that independent internal reports were either rejected or watered down which raises questions about senior management and the board’s oversight and whether they intentionally put profit before the law.

On the face of it, it may appear to be inappropriate to appoint O’Neill and give him a pay rise when such serious contraventions have been exposed on his watch. The ASX announcement has indicated that O’Neill’s position may only be short term as the board is embarking upon a “program of renewal” and that changes will need to occur.

“While the board considers it critical that the company has stability in this transitional period to a new managing director and CEO, it acknowledges the need for accelerated board change,” Star’s ASX announcement said.

Inquiry continues

What the Crown, Bergin and the now Star inquiries are revealing is a complete failure of the Australian casinos and state casino regulators to ensure casinos were obeying AML/CTF laws. This massive failure has now posed a risk to the Australian community as billions of dollars were laundered in casinos which allowed themselves to be infiltrated by internal and foreign criminal enterprises right under the noses of federal and state casino regulators. Senior management in these casinos were involved and may not be held to account.

Related:
IMPACT ANALYSIS: ASIC warns companies to get their whistleblower policies in order
AUSTRAC claim alleges A$69 billion laundered through Crown Resorts

This article first appeared on Thomson Reuters Regulatory Intelligence.

Niall is a senior regulatory intelligence expert, Asia Pacific.  He joined Thomson Reuters in 2013 from FTI Consulting, where he was managing director for investigations in Australia.  Prior to that, he was was a senior specialist advisory for the Australian Securities & Investments Commission (ASIC) and the director of enforcement for the Dubai Financial Service Authority (DFSA).

Niall is a Barrister of the High Court of Australia and has over twenty years experience in financial markets and international regulation. In 2002, he was awarded an ASIC Australia Day Honour Medal for his work in corporate investigations.  He has written a book on corporate investigations published by Thomson Reuters and has been a commentator in the Australian Financial Review and television on financial crime, regulation and compliance.

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