SkyCity facing penalties despite review finding it is suitable to operate Adelaide Casino

The review into SkyCity Adelaide Casino by retired Supreme Court Judge Brian Martin KC clears a significant hurdle for the New Zealand-based SkyCity Entertainment Group, but the company warns that it still faces potential enforcement action from the South Australian Liquor and Gambling Commission.

The 541-page report handed down today comes on the heels of AUSTRAC, Australia's anti-money laundering and counter-terrorism financing (AML/CTF) regulator, securing a $67 million fine against SkyCity in June last year.

The inquiry was put on hold between February 2023 and June last year while AUSTRAC pursued the civil proceedings in the Federal Court which found the casino operator’s AML/CTF programs failed to meet their legal requirements and that the company did not carry out appropriate ongoing customer due diligence.

The Martin report handed down today points to several primary areas of concern, including the failure of the company’s Adelaide board to “exercise its functions and fulfil its responsibilities prior to November 2021, the lack of AML/CTF compliance and inadequacies in the Host Responsibility Program and implementation”.

Among the findings, the report says that since the Adelaide licence was granted to SkyCity in 1999, and until November 2021, “the Adelaide board did not meet and did not receive any reports”.

“Until November 2021, the Adelaide board failed to function as a board and failed to make relevant decisions required of the licensee’s board,” says the report.

“Consequently, until November 2021 the licensee failed to discharge the duties imposed on it by the licence, the approved licensing agreement and the regulatory regime under which the casino operated.”

The report notes that SkyCity took steps to review its compliance program following an investigation launched by AUSTRAC in June 2021.

While the “lack of management” by the Adelaide board was rectified by the end of 2021, the report finds that the “demarcations of lines of authority between the Adelaide and (SkyCity Entertainment Group) boards were not, by January 2023, entirely resolved”.

The report finds that, between 2016 and 2022, the resources applied to the AML/CTF compliance program were “grossly inadequate and the lack of resources exacerbated the poor implementation of the program”.

During this period, the report says that Adelaide Casino, including senior management, had a “lack of understanding of the obligations of the casino operator with respect to AML/CTF compliance”.

“Training of staff at all levels was seriously inadequate,” it says.

According to the Martin report, there has been a “substantial commitment” by SkyCity to address its failings at Adelaide Casino since they were exposed.

“If I had been asked to determine the suitability of the licensee and SCEG (SkyCity Entertainment Group) at the end of October 2021, the inevitable answer would have been that neither were suitable,” Martin writes in his report.

“Since then, the situation has changed.

“The significance of past failures needs to be considered in the context of the licensee’s subsequent behaviour, changes in personnel and the licensee’s current corporate culture and governance.

“I am satisfied that, today, the licensee is a suitable person to hold the licence and operate the casino.”

Liquor and Gambling Commissioner Brett Humphrey says the Martin report is “an extremely thorough consideration” of SkyCity Adelaide’s conduct and the changes made since AUSTRAC secured its Federal Court ruling.

“I accept Mr Martin’s findings that SkyCity Adelaide is suitable to hold and operate the casino licence and SkyCity Entertainment Group is suitable to be SkyCity Adelaide’s close associate,” says Humphrey.

“But let me be clear, this is by no means a clean bill of health for SkyCity Adelaide.

“Even though many of the issues raised have either been addressed or are being addressed through a program of work being supervised by the independent monitor since August 2023, the deficiencies and breaches uncovered are deeply concerning.”

Humphrey says he is considering the report’s findings and the work being undertaken by Consumer and Business Services to determine potential enforcement action against the casino operator.

“I will also be looking at what measures may be required for the ongoing future operations of the licence,” he says.

“In the interests of transparency, I have formed the view that Mr Martin’s report should be made public while I continue to consider the next steps.”

Parts of the report have been redacted and will remain so to “protect personal and commercial concerns”.

“However, after discussions are had with relevant stakeholders, some of those redactions may be removed in the coming months,” says Humphrey.

“As this is still very much a live matter from my perspective, I am unable to comment further on Mr Martin’s findings, or pre-empt any action that I may choose to take in response.”

Meanwhile, SkyCity says it will continue to work “cooperatively” with the Liquor and Gambling Commissioner and SA’s Consumer and Business Services to implement the Building a Better Business Program (B3).

The program, developed by SkyCity Adelaide in conjunction with independent casino monitor Kroll Australia, focuses on AML/CFT capability, gambling related harm minimisation and cultural transformation. It is expected to be completed by 30 June 2027.

"We fully accept and acknowledge the findings of the report that we did not measure up to the standards required, and we apologise for those failings,” says SkyCity CEO Jason Walbridge.

"We further acknowledge Mr Martin's findings and the Commissioner's comments that we still have work to do.

"We have made significant enhancements in terms of leadership, resourcing and systems, including a commitment to invest $60 million over three years to transform our culture, to uplift our financial crime and host responsibility practices.

“Our team has worked hard to raise our standards, better meet our obligations and improve how we look after our customers”.