The Victorian Gambling and Casino Control Commission (VGCCC) has imposed an $80 million penalty on Crown Resorts (ASX: CWN) for its role in facilitating high rollers at its casino to evade anti-money laundering rules and China’s currency controls between 2012 and 2016.
The disciplinary action was taken following findings from the Royal Commission that the casino allowed patrons to move almost $164 million out of China by linking payments from China Union Pay (CUP) credit and debit cards to Crown Melbourne’s Southbank hotel reception.
This is the first time the VGCCC has used its stronger enforcement powers under legislative amendments to the Casino Control Act, which increased the maximum allowable penalty from $1 million to $100 million.
“Crown’s CUP process was a clandestine, deliberate process, which not only breached the Casino Control Act but was also devised to assist patrons to breach China’s foreign currency exchange restrictions,” VGCCC chairperson Fran Thorn said.
“Crown was aware of the risk that the CUP process could be illegal but decided to run that risk. In doing so, it showed no regard for upholding its regulatory obligations. Indeed, it went to some lengths to hide what it was doing.
“Crown benefited handsomely from its illegal conduct. The fine will ensure that Crown is stripped of the revenue it derived from the CUP process and will send a clear message that it must comply with its regulatory obligations.”
On imposing the penalty, the VGCCC took regard of Crown’s cooperation and contrition in admitting its CUP process - which derived an estimated revenue of $32 million - was illegal and ‘completely unacceptable’.
The $80 million figure represents 21 per cent of the Crown's pre-COVID annual net profit after tax in 2019, and is almost the same as the $79.5 million NPAT registered in the year the pandemic began. Since then the casino and resort operator has been running at a loss.
“Crown acknowledges its historic failings. The China UnionPay process ceased in 2016. Upon becoming aware of this historical conduct, Crown's Board immediately commissioned an independent investigation and shared the findings with the Victorian Royal Commission, the Victorian Commission for Gambling and Liquor Regulation (the predecessor to the VGCCC) and other regulators,” a statement from Crown in response to the fine confirmed.
“Crown’s Board and senior management are committed to the delivery of a comprehensive reform and remediation program to ensure Crown delivers a safe and responsible gaming environment and continues to cooperate with the VGCCC on all matters arising from the Victorian Royal Commission Report.”
Crown has been under additional scrutiny since NSW Independent Liquor & Gaming Authority (ILGA) commissioned The Bergin Inquiry in 2019 into alleged criminal activity at Crown Resorts, which concluded the company was “quite unsuitable” to hold a casino license in NSW.
This represented a much more significant outlay for Crown than the $1 million fine it received from VGCCC the month before, in April 2021. The Victorian regulator issued the penalty, the maximum allowable at the time, after concluding Crown failed to comply with its regulatory obligations regarding its conduct with junkets and junket operators.
Building on the findings of the Bergin Inquiry, in October 2021 the Victorian Royal Commission found that Crown engaged in "illegal, dishonest, unethical and exploitative" conduct after uncovering further failures in governance, risk management and responsible service of gaming.
It also found that tax breaches were instigated by or undertaken with the knowledge of multiple senior staff, and were then intentionally concealed from the regulator for fear of being caught out.
However, the Commission concluded the immediate cancellation of Crown’s licence was not in the interests of the community due to the real risk of significant harm to the Victorian economy and innocent third parties, and a belief that the company would reform itself to be suitable to hold a licence in the future.
The VGCCC is currently undertaking a separate investigation into mechanisms that persisted after 2016 that enabled cards to be used to access cash at Crown Hotels, which were then potentially used for gambling. However, Crown Melbourne considers these transactions do not contravene the Casino Control Act.
The VGCCC is also considering further disciplinary proceedings against Crown related to the separate findings from the Royal Commission, which may each attract a fine of up to $100 million.
Earlier this month, Crown shareholders voted to approve an $8.9 billion buyout of the group by private equity group Blackstone Inc (NYSE: BX). The buyout was favoured by 92 per cent of shareholders; however, the deal still requires three gaming regulators to sign off on the acquisition.
The fine comes as rival casino and resort operator The Star Entertainment Group (ASX: SGR) is investigated by the Independent Liquor and Gaming Authority of New South Wales for similar behaviour.
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