Chinese billionaire's $1.8b punt among ‘big, fat, red flags' ignored by The Star, inquiry told

Chinese billionaire's $1.8b punt among ‘big, fat, red flags' ignored by The Star, inquiry told

Huang Xiangmo, the Chinese billionaire behind the political downfall of former Labor senator Sam Dastyari, forked out $1.78 billion over eight years to gamble at The Star Sydney, an inquiry was told.

The source of those funds and the fact that Huang had multiple Chinese passports with different names and different birthdays were questioned during the inquiry by the Independent Liquor and Gaming Authority (ILGA) of NSW that is investigating The Star Entertainment Group’s (ASX: SRG) suitability to hold a casino licence in the state.

This was among a number of revelations on Day 11 of the inquiry during which Naomi Sharp SC grilled The Star’s general manager of financial crime investigations, Kevin Houlihan.

Sharp had earlier in the day put it to Houlihan that he had ignored a ‘big, fat red flag’ that indicated money laundering was taking place in a private room for high rollers specially set up at The Star Sydney for the world’s biggest junket operator Suncity Group Holdings of Macau.

The ILGA review also heard that The Star did not sever ties with the junket operator until after the arrest of Suncity CEO Alvin Chau by Macau authorities in November last year over allegations of cross-border gambling and money laundering activities.

Under questioning towards the end of Day 11, Houlihan was quizzed on the perceived lack of due diligence by The Star to determine whether property billionaire Huang was a fit person to gamble at the casino. The $1.78 billion that he had outlaid on gaming tables at the casino between 2010 and 2018 was of particular interest, and more precisely The Star’s understanding of the source of these funds.

Houlihan agreed it was an ‘extraordinary amount of money for a buy in’. However, he said Huang did not raise any concerns about his propriety to gamble at the casino because his profile was ‘consistent with a high value customer’ who was not convicted of a crime or under investigation of a crime.

Huang, who was alleged to be an agent of Chinese influence, had his Australian visa revoked in 2019 after allegations by ICAC that he left an Aldi bag with $100,000 in cash at the NSW Labor Party’s headquarters in 2015. Dastyari resigned from the Senate in 2017 due to his controversial association with Huang.

Huang was one of a number of parties highlighted by the inquiry as examples of potentially inadequate oversight by The Star that could expose the casino to money laundering activity by high rollers.

Bags of cash

Earlier in the day, Sharp probed Houlihan on the long leash that The Star had given Suncity from 2018 to operate an exclusive high rollers room known as Studio 95 at the Star Sydney. The inquiry had previously revealed that Suncity had its own staff manning a service desk, including a cash cage where punters could buy chips, which was in breach of its agreement with Star.

Staff from The Star had observed a number of ‘suspicious’ transactions in 2018 and 2019 at Studio 95, including the exchanging of large bags of cash for gambling chips at the Suncity cage and a number of these transactions being tallied by money-counting machines.

It led to a senior investigator within Houlihan’s team to call out early that Suncity was ‘operating a business model under our noses which is problematic for Star’ in relation to anti-money-laundering compliance.

While Houlihan said he did not see firm evidence of money laundering he agreed there were ‘serious risks’ that money laundering was occurring in Salon 95 at that time. Houlihan eventually pushed Sharp’s patience due to the reserved nature of his responses to her questions. Sharp’s assertion that activities observed at Studio 95 presented clear evidence of money laundering were played down by Houlihan who argued that there was a ‘suggestion’ of suspicious activity.

“Let’s cut to the chase here,” Sharp said. “This is a big, fat, red flag that money laundering was going on in Salon 95, isn’t it?”

“It’s a red flag, yes,” Houlihan responded.

“It’s a big fat red flag, isn’t it?” Sharp insisted.

The inquiry heard that The Star triggered police investigations into a number of individuals in relation to ‘suspicious transactions’ at Salon 95. However, Houlihan, a former law enforcement officer, said the police arrests were in relation to dealing with the proceeds of crime rather than money laundering.

The arrests were the result of investigations known as Operation Luna and Operation Moneybags undertaken by The Star compliance team.

Despite persistent non-compliance by Suncity to the terms of its agreement with The Star, Houlihan said the matters related to ‘potential rogue employees of Suncity’. However, he added that The Star’s money laundering investigations team actively did ‘more than just report to the police’.

At times, Sharp appeared frustrated by Houlihan’s responses to her questioning. At one point, she asked him if he was offering ‘candid responses’.

Laundering $2 million a day

Sharp questioned why The Star had any dealings with Suncity at all, including an earlier report that found it was laundering up to $2 million a day between 2013 and 2015.

“A significant amount of this money was suspected of being generated from drug trafficking activities,” said Sharp.

She highlighted The Star’s continued relationship with Suncity even after a damning report released by the Hong Kong Jockey Club in 2019 that revealed the junket operator was involved in ‘large-scale money laundering activities’. Suncity and Chau were banned from the Hong Kong Jockey Club following the release of this report.

Houlihan said it was not his decision that the time to maintain the arrangement with Suncity.

“I was satisfied they (the directors of Suncity) were of good repute at the time,” he said.

Sharp responded: “I would suggest that position is completely unreasonable.”

The Star’s group manager of due diligence and intelligence, Angus Buchanan, contributed to the report for the Hong Kong Jockey Club prior to joining The Star. Buchanan was more forthright in his responses when giving evidence on Day 5 of the inquiry.

Buchanan confirmed the findings of the report that former Suncity CEO Chau was involved in illegal bookmaking, drug trafficking and large-scale money laundering activities.

Houlihan did not agree with some of the findings in the Hong Kong Jockey Club report, particularly in relation to the findings about Chau.

Sharp put it to Houlihan that he had asked Buchanan to water down an independent report he was preparing for The Star in 2020 that included details found in the Hong Kong report. Houlihan denied he sought to water down of the report, but rather to make it more ‘succinct’.

The Star did not sever ties with Chau until the day of his arrest in December 2021.

The hearing continues.

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