It is now quite clear that the key financial regulator AUSTRAC is going to shake up the Australian casino industry in a way that wasn’t apparent last June when an expanded inquiry was first revealed after months of the focus being on Crown.
In the June announcement AUSTRAC widened a probe into due diligence at casinos, ratcheting up pressure on a sector that has struggled in the wake of the bad news and problems at Crown.
Months into an investigation of top player Crown Resorts, AUSTRAC said it was formally looking into possible breaches of background check rules at rival Star Entertainment Group and New Zealand’s SkyCity Entertainment Group.
Despite the trio of probes, it should be clear to investors that given the revenue and employment importance of casinos to state governments that AUSTRAC’s eventual actions will not end the industry in this country.
The punishments will be managerial and monetary and shareholders will suffer for a while.
Crown had been under intense pressure after an inquiry in NSW in early 2021 found it unfit for a license at a just-opened $2.2 billion Barangaroo casino in Sydney.
That probe in turn sparked royal commissions in two other states (Victoria, which has already reported and WA, which is due to report in March).
The AUSTRAC probe was expanded to its Perth city in June, just days before the regulator expanded the probe to Star and Sky City.
Now Star has joined Crown in having all its operations examined by AUSTRAC.
Star Entertainment Group’s announcement said AUSTRAC has expanded its investigation into the casino operator’s alleged money laundering failures at other operations – these were taken to be Star’s gold Coast and Brisbane casinos.
In a statement to the ASX the company said that following AUSTRAC’s initial investigation at its Sydney casino, “The Star has subsequently been advised by AUSTRAC that it has expanded the scope of its investigation to other entities within The Star group.”
The Star said the agency had advised it would be requesting information and documents from the company as part of its investigation.
The expanded investigation means the regulator is readying to produce an adverse report against the company and a massive fine (and for Crown as well). AUSTRAC’s expanded probe has almost certainly ended any hopes of a takeover of Crown.
AUSTRAC boss, Nicole Rose gave a big hint at the perceived problems the regulator saw in the sector when she wrote in a newspaper article in June of last year.
“The Australian casino sector is at risk of criminal misuse due to the products and services they offer…We have an enforcement investigation under way at Crown casino that demonstrates the seriousness of our concerns. And we also have significant compliance work under way on the casino sector.”
In June when AUSTRAC announced its investigation, the Queensland Office of Liquor and Gaming Regulation (OLGR) revealed a similar inquiry, As the investigation is widening its scope to include the other Star casinos, AUSTRAC will share its findings with Queensland’s police and the state’s gaming regulator. There is no decision if any action might be taken against the operator.
When AUSTRAC revealed its original Star probe last June, the NSW regulator, the Independent Liquor and Gaming Authority started its own probe three months later.
Reports in the Nine newspapers and 60 Minutes have claimed that Star had embraced for around seven years “criminal or foreign-influence” operations and enabled “suspected money laundering, organised crime, large-scale fraud, and foreign interference.”
According to the media reports Star’s board of directors was repeatedly made aware of the issues but didn’t do anything to intervene.
The media reports also accused the board of ignoring a 2018 report by KPMG that warned Star of serious failings to combat money laundering, terrorism financing, and corruption financing, and risks and its Sydney and Queensland casinos.
Star has rejected these claims, but clearly, they have fed into the expanded investigation by AUSTRAC.
The higher offer for Crown from US group Blackstone has been enthusiastically supported by the Crown board and its media and market mates, but the AUSTRAC investigation and potential action could sink the deal, or force more changes.
