King-hits keep coming for The Star as AUSTRAC launches civil enforcement action

The king-hits keep coming for Star Entertainment Group (ASX: SGR) with the financial crimes watchdog adding to the casino operator’s woes after launching a Federal Court action alleging ‘serious and systemic’ failures that exposed the group to criminal exploitation.

A month after The Star was issued a $100 million fine by the NSW Independent Casino Commission and with the prospect of a similar fine looming in Queensland, AUSTRAC has filed civil penalty proceedings against company for allegedly failing to adhere to anti-money laundering (AML) and counter-terrorism financing (CTF) laws.

The action involves two Star subsidiaries, The Star Pty Limited and The Star Entertainment QLD Limited, which are the respective operators of the group’s Sydney and Queensland operations.

It also follows similar enforcement action by AUSTRAC against Melbourne-based casino operator Crown Resorts in March this year.

In a statement to the ASX today, The Star says the penalty sought by AUSTRAC has not been detailed.

AUSTRAC launched its investigation into The Star on 7 June 2021 and extended it to include the company’s Queensland operation in January this year.

The financial crimes authority says it has worked closely with state and federal agencies, including AISIC and the NSW and Queensland gaming regulators, the latter of which found The Star unsuitable to hold a casino licence following separate inquiries.

In its Federal Court action, AUSTRAC is alleging The Star allowed its casino customers to move money through non-transparent payment channels which exposed the group to being a conduit for money laundering and terrorism finance.

The authority says The Star didn’t ‘understand the sources of money moving through these channels or whether there was a risk that the source of funds was illicit’.

The Star is also alleged to have failed to consider whether it was appropriate that they continue an ongoing business relationship with higher risk customers.

Matters relating to the current Federal Court action were raised extensively by the NSW Independent Liquor and Gaming Authority’s review of The Star’s casino licence earlier this year, and the subsequent Queensland Office of Liquor and Gaming Regulation review.

The inquiries heard that while senior management was responsible for developing a culture of acquiescence that gave rise to the stated risks over the past decade, The Star’s former board of directors was said to have been largely kept in the dark in relation to the poor oversight. Most of The Star's board has since resigned or not sought re-election.

But AUSTRAC still has the board in its sights, alleging that both the board and senior management ‘failed to adopt and maintain programs to control those ML/TF risks appropriately’.

It further alleges that The Star:

• Did not have a transaction monitoring program to monitor transactions and identify suspicious activity that was appropriately risk-based or appropriate to the nature, size and complexity of the Star entities.
• Did not have an appropriate enhanced customer due diligence program to carry out additional checks on higher risk customers.
• Did not conduct appropriate ongoing customer due diligence on a range of customers who presented higher money laundering risks.

“AUSTRAC’s investigation identified a multitude of issues including poor governance and failures of risk management and to have and maintain a compliant AML/CTF program,” says AUSTRAC CEO Nicole Rose.

“The Star entities also failed to carry out appropriate ongoing customer due diligence which has led to widespread and serious non-compliance over a number of years.”

Robbie Cooke, the new CEO of The Star appointed to get the casino operator back on track, says the company is reviewing the statement of claim, adding that the group has co-operated with AUSTRAC throughout its investigation.

“We are transforming our culture, transforming our business,” says Cooke.

“We are committed to improvement but there is a lot still to do.

“Our goal is to earn back the trust and confidence of AUSTRAC and all our regulators. We will continue to work with AUSTRAC as we build a better, stronger and more sustainable company.”

The Star earlier this week announced that it had issued a response to a show cause notice issued by the Queensland Attorney-General which is yet to decide on its next enforcement step after finding the group unfit to hold a Queensland casino licence.