Australia: Star’s Turn in the Hot Seat

Australian gaming regulators, focused for much of the year on regulatory breaches at Crown Resorts, have turned their attention to the No. 2 operator, Star Entertainment. Like Crown, Star allegedly failed to maintain money laundering controls and turned a blind eye to organized crime.

Australia: Star’s Turn in the Hot Seat

The head of the New South Wales (NSW) gaming regulator says he was unaware of compliance breaches at the Star Sydney casino, in spite of the role he played in uncovering similar breaches at Crown Resorts.

Philip Crawford, head of the Independent Liquor and Gaming Association (ILGA), claims he knew nothing about confidential reports commissioned by Star that disclosed its failures to combat money laundering and organized crime at its properties in both Sydney and Queensland.

In an interview with the Sydney Morning Herald, the Age and 60 Minutes, Crawford pleaded ignorance. “You say it’s been happening for years. I have no knowledge of that, we don’t know that, and if it’s as bad as you say it is, then that’s certainly something [the Star] should have reported to us.”

Asked why the NSW regulator didn’t move to look at cases involving alleged drug traffickers and organized-crime figures operating at Star’s casinos, Crawford replied, “We’ve been very busy, obviously, with the Crown.”

It was Crawford who called for the Bergin inquiry into Crown Resorts. The report, released in February, showed a long pattern of noncompliance at Crown casinos in Perth and Melbourne. As a result, the ILGA denied the company a gaming license at its new casino in Sydney. The probe led to an overhaul of Crown governance and continues to threaten the company’s existence as a going concern. It also prompted royal commissions to investigate Crown operations in Victoria and Western Australia.

All the while, Star was upheld as the good guy in the scenario, a casino company that did things by the book. For a time, Star proposed to merge with Crown to create the country’s biggest gaming enterprise. All the while, Star’s compliance issues had been documented by an auditor all the way back in 2018, and sent at that time to CEO Matt Bekier.

The Star inquiry will be conducted by Adam Bell SC, the same man who acted as lead senior counsel assisting the Bergin inquiry into Crown. The inquiry will not examine misconduct or governance failures in public hearings. MP Andrew Wilkie said it would be disgraceful if the NSW regulator subjected Star to less scrutiny than Crown.

“We need an open and transparent inquiry just like Crown went through because that’s the only way we can have confidence that the inquiry is effective and that these problems are going to be cleaned up,” Wilkie said.

Former regulator David Green told Inside Asian Gaming that a regular review into Star Sydney’s casino license may be sufficient in NSW, but a royal commission could follow.

Meanwhile, Star says reports about its failures are “misleading” and adds it will “address all allegations with relevant state and federal regulators and authorities,” including Bell.

Queensland’s Office of Liquor and Gaming Regulation (OLGR) said it takes “allegations of organized crime infiltration very seriously and has one of the most robust systems in the country.” But gaming industry consultant Ben Lee said Star’s alleged bad behavior could not have flourished in an environment of strong oversight.

The Herald cited two confidential inquiries from auditing firm KPMG in 2018 that were passed on to Bekier at a meeting that May. The inquiries found that Star Sydney, Star Gold Coast and Brisbane’s Treasury did not have an anti-money-laundering system that “implemented or operated consistently to manage and mitigate the risks.”

KPMG warned that Star “may not be adequately detecting customers who may be using [the casinos] to facilitate” money laundering and terrorism financing. The auditor found that the problem was worse in “specific parts of the business, in particular where the risk may be higher.” The assessment also found the company’s enforcement department was understaffed, with “inadequate resourcing in place to operate” the anti-money laundering and terrorism financing unit.

According to the World News, between 2014 and 2021 Star knowingly wooed high rollers with alleged associations to criminal or foreign-influence elements. Among those VIPs, reported Sydney News Today, were “an alleged Sydney cocaine importer, a Canberra restaurateur and accused drug trafficker and money launderer, the nation’s most infamous accused foreign-interference agent and some of Australia’s biggest alleged tax cheats and corporate fraudsters.” The News claimed that Star let those patrons gamble vast amounts of money, ignored red flags about their conduct and lavished them with luxury goods, free hotel rooms and other incentives.

Moreover, the report alleged, VIPs banned from Crown Melbourne and Star Sydney by the NSW and Victorian police were then permitted to gamble at the Star Gold Coast.

The joint investigation by the Age, Herald and 60 Minutes found that Star allowed Chinese high-rollers to use special debit and credit cards to withdraw hundreds of millions of dollars in funds from Star resorts and disguise gambling activity as hotel expenses. Lee said Star managers should have known about these activities, and their attempts at concealment “tells you … that they are aware it is illegal.”

In 2019, a separate probe into the Australian casino industry was launched by the Australian Transaction Reports and Analysis Centre (AUSTRAC). An AUSTRAC spokesman said the agency “has enforcement investigations under way on multiple casinos, including the Star, as a result of a proactive compliance campaign.” Law enforcement and regulatory sources say AUSTRAC is building a strong case against Star, which may face severe consequences.

In related news, on October 10, the Australian reported that Star has a plan to sell and leaseback a 49 percent stake in its flagship Star Sydney. The plan was seen as a means of raising additional capital to fund Star’s Sydney expansion plans, which include development of a luxury Ritz-Carlton hotel tower and the potential purchase of 1,000 new gaming machine licenses.

It’s unlikely business will continue as usual. In an October 12 statement, Queensland Attorney General Shannon Fentiman said, “The allegations of money laundering and integrity issues are very serious, and the Office of Liquor and Gaming Regulation are undertaking appropriate investigations, along with the Queensland Police and AUSTRAC. The investigation will consider the appropriateness and effectiveness of Star’s due diligence processes in relation to anti-money laundering and how the Star approaches exclusions to ensure people are excluded from all properties where appropriate.

“The government will be considering the outcomes of the various inquiries carefully, and will make any necessary changes to the regulatory framework.” Though Star Sydney reopened for the first time in four months last week, shares dropped 23 percent due to the latest casino scandal.