Australia's financial crime regulator AUSTRAC has launched four high-profile formal investigations into ASX-listed companies over their compliance with anti-money laundering regulations, with three casinos and one of the nation's leading banks in its sights.
National Australia Bank (ASX: NAB), Crown Perth, SkyCity Adelaide and Star Sydney all made announcements this morning that AUSTRAC was formally investigating their operations, although no link has been established between the four cases which are each being treated separately by the regulator.
All four companies have received notices that AUSTRAC's regulatory operations branch identified "potential serious non-compliance" with anti-money laundering and counter-terrorism financing (AML/CTF) rules.
The move comes nine months after Westpac (ASX: WBC) was ordered to pay Australia's largest every civil penalty of $1.3 billion, following AUSTRAC investigations that led the bank to admit to 23 million breaches of AML/CTF regulations.
The regulator's scrutiny will be déjà vu for Crown Resorts (ASX: CWN), whose Melbourne casino received a formal investigation notice in October last year and is currently in the throes of a Royal Commission, as is Crown Perth.
Crown Resorts explained it would fully cooperate with AUSTRAC in the process, and provided historical context in an ASX update today.
"The Crown Board has recently received legal advice that a practice that existed at Crown Melbourne between 2012 and 2016 contravened section 68 of the Casino Control Act," the group said.
"This practice involved Crown receiving payment from debit or credit cards of international guests at Crown Melbourne's Crown Towers Hotel, with the funds then available to the patron for gaming at the Casino (the hotel card process)," Crown said, noting $160 million had been transacted through the hotel card process over the four-year period.
"Section 68 of the Casino Control Act prohibits a casino operator from, in connection with any gaming or betting in the casino, providing money or chips as a part of a transaction involving a credit or a debit card."
Both matters relating to SkyCity Entertainment Group's (ASX: SKC) Adelaide casino arose following an AUSTRAC assessment that began in September 2019 focusing on its management of customers identified as high risk and politically exposed in the financial years of FY16 and FY18.
"AUSTRAC has made clear that it has not made a decision regarding the appropriate regulatory response that it may apply to SkyCity Adelaide, including whether or not enforcement action will be taken," SkyCity said.
"AUSTRAC has indicated that it will request information from SkyCity as part of its investigation. SkyCity will fully cooperate with AUSTRAC in relation to those inquiries and with the investigation of SkyCity Adelaide.
"SkyCity takes its anti-money laundering responsibilities and obligations very seriously. SkyCity has processes and practices in place in its business to detect and prevent money laundering and continually reviews these to ensure it meets all anti-money laundering requirements."
The investigation into Star Entertainment's (ASX: SGR) Star Sydney operation also stems from an AUSTRAC compliance assessment that began in September 2019, which was also focused on high-risk and politically exposed customers but over different periods - FY16 and FY19.
"AUSTRAC has advised that it has not made a decision regarding the appropriate regulatory response that it may apply to The Star Sydney, including whether or not enforcement action will be taken. AUSTRAC has indicated that it will request information and documents from The Star as part of its investigation," The Star said.
"The Star takes its anti-money laundering obligations very seriously and will fully co-operate with AUSTRAC in relation to its requests for information and documents and the investigation."
The potential non-compliance identified at NAB relates to customer identification procedures, ongoing customer due diligence and compliance with Part A of NAB's AML/CTF Program.
Similarly to the communication given to SkyCity, AUSTRAC told NAB it had not made any decision about whether or not enforcement action would be taken, with the added clarification that at this stage it was not considering civil penalty proceedings.
"NAB takes its financial crime obligations seriously. We are very aware that we need to further improve our performance in relation to these matters. We have been working to improve and clearly have more to do," NAB CEO Ross McEwan said.
"NAB has an important role in monitoring and reporting suspicious activity and keeping Australia's financial system, our bank and our customers safe.
"It is a key priority for everyone at NAB to uplift our financial crime capabilities, minimise risk to customers and the bank, and improve operational performance. That's why we are so focused on getting the basics right every time to protect our customers and our bank."
Since June 2017, NAB has invested about $800 million as part of a multi-year program to uplift its financial crime and fraud controls and has more than 1,200 people dedicated to managing financial crime risks.
A spokesperson for AUSTRAC acknowledges NAB has invested significantly in programs of work to make its financial crime risk capability more mature, noting the bank is cooperating fully and has demonstrated a sustained commitment to addressing AUSTRAC's concerns.
The spokesperson says the regulator works with state and territory regulators and law enforcement partners to actively address the significant risks of money laundering through casinos.
"The enforcement investigations into the casinos followed a AUSTRAC compliance campaign that began in September 2019 that assessed whether the casinos were effectively managing their obligations," the spokersperson says.
"As a result of this proactive compliance work, AUSTRAC commenced enforcement investigations into Sky City Adelaide, The Star Sydney and Crown Perth in 2021.
"AUSTRAC also works with state and territory regulators, to share information, including from compliance assessments, to support regulation and education of the gambling sector."
Shares in all four companies were down by 10:30am AEST with SKC experiencing the biggest fall of 3.53 per cent, followed by SGR (-2.27 per cent) and NAB (-2.18 per cent). The response from CWN shareholders, perhaps more accustomed to negative regulatory updates, was less pronounced with a drop of 0.71 per cent.
AUSTRAC warns of "cuckoo smurfing"
In a separate development, last week AUSTRAC released a new financial crime guide about a sinister practice with an endearing name.
The regulator released the guide to warn businesses and their customers about the dangers of a money laundering method known as 'cuckoo smurfing', which is used to move illegal funds into Australia and disguise profits from criminal activities.
When the method is used, Australian account holders will commonly be expecting genuine funds to be deposited into their account from a friend, relative or business partner overseas, and they are unaware the funds transferred into their accounts have in fact come from criminals using funds generated from drug dealing and other serious criminal activities.
AUSTRAC CEO Nicole Rose PSM said if businesses identified behaviour indicating potential cuckoo smurfing, they must report it to AUSTRAC so together they can disrupt criminal syndicates targeting the bank accounts of Australians.
"This method has been used by criminal syndicates involved in crimes that inflict serious harm on our community such as drug trafficking, slavery, fraud and corruption," Rose said.
"We rely on financial businesses to report to AUSTRAC and partner with enforcement to stop these criminal syndicates and protect members of the Australian community."
Money transfer businesses, banks and financial institutions are urged to monitor for indicators of potential criminal activity including cash deposits appearing inconsistent with expected transaction activity of an account holder, cash deposits conducted on the same day across multiple branches and ATMs, and multiple cash deposits predominately in amounts under $10,000.
Some of the most at-risk banking customers include Australian expats and exporters, as well as international students studying in Australia.
If members of the public notice any suspicious activity occurring in their bank account, including the warning signs above, they should immediately report it to their bank in the first instance, or call Crime Stoppers on 1800 333 000.
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