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Australia's anti-money laundering regulator AUSTRAC has launched civil proceedings in the Federal Court against Mount Pritchard District and Community Club - known as Mounties - over its approach to managing the risk of criminals running "dirty money" through its poker machines.
AUSTRAC alleges serious and systemic non-compliance with Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws at the club - one of the largest of its kind in NSW.
The regulator also alleges Mounties contravened the AML/CTF Act, providing gaming services to its customers in circumstances where it had not adopted and maintained a program in compliance with AML/CTF rules.
AUSTRAC CEO, Brendan Thomas says AUSTRAC alleges failures in Mounties’ approach to its anti-money laundering obligations have left it open to criminal exploitation.
"Mounties is one of the largest and most profitable club groups in NSW. It owns 10 venues, 8 of which operate approximately 1,400 poker machines and it makes hundreds of millions of dollars in revenue from money gambled on those machines," Thomas says.
"This is a big company with an even bigger responsibility to ensure its clubs are managing the risks that criminals can run dirty money through its gaming machines.
"AUSTRAC’s 2024 Money Laundering in Australia National Risk Assessment identified pubs and clubs as a medium risk sector, but when those businesses are exposed to cash, especially in circumstances where known money laundering risks are not being managed, the risk increases."
AUSTRAC has made the following specific allegations that Mounties' AML/CTF program:
- did not have an adequate risk assessment;
- did not contain appropriate staff risk awareness training;
- did not contain appropriate risk based systems and controls in its transaction monitoring program;
- did not include appropriate risk based systems and controls in its enhanced customer due diligence processes;
- was not subject to an independent review that met the requirements of the Rules; and
- that Mounties failed to appropriately monitor a number of its customers with a view to identifying, mitigating and managing the money laundering risk that Mounties faced.
"A business operating at this scale, in a cash intensive sector, is exposed to a high degree of money laundering risk," says Thomas.
"In 2022 for example, the NSW Crime Commission released its Project Islington report which determined that billions of the approximately $95 billion gambled in NSW poker machines in 2021-22 was likely to be dirty money.”
AUSTRAC also alleges Mounties failed to appropriately maintain its AML/CTF Program, with aspects of its program outsourced to a third party provider, Betsafe, which also provides AML/CTF programs to a number of other pubs and clubs.
"Like many other AUSTRAC reporting entities, Mounties outsources aspects of its AML/CTF program but what it can’t outsource is its AML/CTF obligations," Thomas says.
“Relying on third party providers doesn’t absolve a business of its obligations under the AML/CTF Act. If a reporting entity outsources key parts of its program to a service that is not fit for purpose – especially without proper oversight or resourcing – they run a real risk of non-compliance.
"All reporting entities, regardless of size, must stay actively involved in how their AML/CTF program is designed, implemented and monitored and I would say the same thing to other pubs and clubs who think bringing in a provider is a set and forget solution."
AUSTRAC also alleges a number of specific instances where Mounties failed to appropriately monitor specific customers, despite the money laundering risks they presented.
"Customer due diligence and transaction monitoring in a club that processes hundreds of millions of dollars a year through its poker machines, a significant amount of which is cash, is going to require a robust approach when it comes to verifying a customer’s source of funds," Thomas says.
A spokesperson for Mounties says the club has been co-operating with AUSTRAC throughout its investigation and will continue to engage constructively with the regulator throughout the course of the proceedings.
"As a matter of priority, we are reviewing AUSTRAC's originating application and concise statement, relating to alleged contraventions of our obligations to maintain a compliant program and conduct appropriate ongoing due diligence of customers under the Anti-Money Laundering and Counter-Terrorism Financing Act," the spokesperson says.
"We take our anti-money laundering obligations seriously and have been dedicating significant investment and resources to transform our AML/CTF capabilities since being notified by AUSTRAC of its concerns.
"As a Club and?a profit-for-purpose organisation, we are focused on acting in the best interests of our member communities. We will do everything we can to ensure any impact is minimised."
The legal proceedings come at a time that casino operators like The Star Entertainment Group (ASX: SGR) have held gripes that regulators have singled out their operations to enforce cash limits and carded play, but haven't done the same with other venues that offer poker machines.
The Star has previously noted a loss of market share against the backdrop of this dynamic, and in results released today it reported an increased quarterly EBITDA loss to $27 million in the three months to 30 June, compared to an EBITDA loss of $24 million in the March quarter.
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