AUSTRAC Launches Proceedings Against StarCity Adelaide

Australia’s financial crime watchdog has officially begun civil proceedings against SkyCity Adelaide. The Australian Transaction Reports and Analysis Centre (AUSTRAC) announced last week it is initiating civil penalty proceedings against the New Zealand casino.

The proceedings come after an extensive investigation against the casino. AUSTRAC is levying numerous charges against the casino, and the resulting penalties could cost the casino a significant sum of money.

AUSTRAC Opens Proceedings in Federal Court Against SkyCity Adelaide

On Wednesday, AUSTRAC officially announced the commencement of legal proceedings against StarCity Adelaide. The financial crimes regulator began an investigation in June 2021.  It found what it called “systematic failures” in the casinos’ approach to their obligations to AML/CTF laws.

According to the press release, the charges against StarCity Adelaide are extensive. The charges claim that StarCity:

• Failed to determine the terrorism financing and money laundering risks the casino faced. It asserts the casino also could not assess the impact of the risks on the casino or respond in a timely fashion.
• Did not implement proper risk-based systems and controls to manage the various risks facing the casino.
• Failed to set up oversight policies for senior management and Board members for the AML/CTF programs.
• Did not institute appropriate monitoring programs to identify fraudulent and suspicious activity.
• Failed to create a due diligence program for players that may be higher risk.
• Did not conduct due diligence on various customers that showed higher money laundering risks.

Peter Soros, the Deputy CEO of AUSTRAC, was quoted in the press release stating, “AUSTRAC’s investigation identified a range of circumstances where SkyCity failed to carry out appropriate ongoing customer due diligence. SkyCity also failed to develop and maintain a compliant AML/CTF program, leaving it at risk of criminal exploitation.”

He later stated, “The requirement for regulated entities to have appropriate AML/CTF controls and systems in place is not optional and should be taken seriously by all businesses regulated by AUSTRAC.”

Star Entertainment Facing Hefty Penalties

The matter will now go to Federal Court, where potential penalties against the casino will be determined. Looking at court documents provided by AUSTRAC, it is unclear how penalties will be determined.

For example, it determined that SkyCity failed to provide due diligence for customers approximately 124 times. However, for charges that the casino failed to enact appropriate anti-money laundering programs, court documents claim an “innumerable” amount of violations.

Furthermore, each violation mentioned above carries civil penalties between $18 million and $22 million for each instance. The 124 violations pertaining to due diligence could net penalties of $2.23 and $2.72 Billion alone. Depending on what the judge determines, SkyCity Adelaide could also be facing civil penalties that could negatively impact the long-term profitability and success of the casino.

According to Mr. Soros, “AUSTRAC continues to work with SkyCity to ensure it complies with its obligations under the AML/CTF Act and to ensure it continues to meet its obligations in the future.”

“This is the third civil penalty proceeding AUSTRAC has brought against businesses operating in the casino sector. It should serve as a warning to casinos and all other businesses regulated by AUSTRAC to take their AML/CTF obligations seriously and comply with the AML/CTF Act and AML/CTF Rules.”

Stock Price Drops Sharply After AUSTRAC Announcement

On Wednesday, the stock price for SKYCITY Entertainment Group LTD dropped to $2.60. This nearly matched the stock’s July low. The stock price flirted with $3 on multiple occasions since that time. Overall, the stock has fallen 10% in share price in the last two weeks.

This was more than a knee-jerk reaction. Stock prices were unable to rebound in the two days following the announcement. Stock prices continue to hoover around $2.61 early in the week. With the continual legal troubles of the company, it may be some time before share prices rebound in any meaningful way.