Amid lax AML control

Inquiry report finds The Star unsuitable to run its Sydney casino; license now at risk

The Star Sydney.
2022-09-13
Reading time 3:29 min

The Star Entertainment Group has been found unsuitable to operate its casino in Sydney, according to Adam Bell SC’s inquiry into the company's operations there. The Australian giant could potentially face the loss or suspension of its Sydney casino license after the investigation found lax anti-money laundering controls.

Philip Crawford, the NSW Independent Casino Commission chief, described the inquiry's report as a “sad reading” that details the operator's “scant regard” for harm minimization. Disciplinary options also include a fine of up to AUD 100 million ($69 million) or the appointment of an outside manager to oversee the casino, reports Bloomberg.

As reported by ABC News Australia, Crawford spoke of “institutional arrogance” when it came to the company’s actions. “Their willingness to take risks in pursuit of financial goals has been appalling," he added. The regulator's chief further explained that the Commission’s major concern regarding the Star after reading the report is its culture, which he thinks does not have “any short-term fix."


Philip Crawford, NSW Independent Casino Commission chief

The Independent Casino Commission’s chief confirmed that Star had allowed money laundering and organized crime to infiltrate the casino, and took “deliberate steps” to cover their tracks; and added that some of that behavior continued even after the public inquiry began. 

"They tended to ignore the risk inherent in all of their conduct, and then they tried to hide their conduct," Crawford said. "Financial goals seemed to have been the main driver of their conduct."

Crawford disclosed that the report found that “a number of extremely serious governance, risk management and cultural failures of The Star Entities occurred” during and before the period being reviewed, further reports the cited source.

Bloomberg reports that the months-long probe uncovered a raft of apparent misdeeds, including allegedly disguising more than AUD 900 million as hotel expenses that was instead withdrawn by patrons on Chinese bank cards to be gambled, in contravention of Chinese capital controls. This was known as the China Union Pay scheme.

Crawford also highlighted the “serious misconduct” by junket operator Suncity in Salon 95, which were considered “a manifestation of a culture where business goals took priority over compliance goals." According to Crawford’s view, the Star “treated the NSW Independent Liquor and Gaming Authority with disdain; as an impediment to be worked around."

One patron withdrew more than AUD 100 million on his Chinese credit card, including AUD 22 million in a three-day period in April 2015, the report found. The case study “shows revenue was prioritized and compliance and risk management concerns were ignored,” the report said. The company's shares, which were halted from trading Tuesday, have slumped 28% this year.  

The report also identifies a number of specific breaches of the casino control act, as well as the internal control measures under which it operates. These constitute specific breaches of its casino license," he added. 

The review did not include any recommendation about the necessary changes to render The Star suitable to operate, as it was not in the terms of reference. Now the company has 14 days to respond to the report. 

According to Crawford, The Star admitted at the start of the inquiry that it had been unsuitable to hold a license but made eight submissions as to why it was suitable now. However, Bell did not agree with any of those submissions.

The commission has now sent a show cause notice to the company, asking it to show why “disciplinary action should not be taken against it." These could include revocation or suspension of their casino license, fines, or a combination of both. The Commission’s chair indicated that, to him, “doing nothing is not an option”. 

Crawford stated there were no adverse findings against individual directors or board members, but that failure occurred because there was never a fresh set of eyes looking over their practices. Bell found them “well-meaning people, well-credentialed, but at the end of the day, they didn’t have a clue what was going on in their own company."

It took nearly 18 months for The Star rival Crown to address the issues identified by the Bergin Inquiry to satisfy the Authority. Now, a provisional license has been issued for it to operate. Crawford expects it will take Star just as long, if not longer, to fix their own culture. 

"We still have inspectors/investigators down there very frequently," he said. "I'm afraid the cultural, institutional arrogance hasn't changed much, there is still an unwillingness to show the right level of transparency."

Hospitality and Racing Minister Kevin Anderson said the NSW government would take Crawford’s recommendations after Star had their chance to respond to the review. He warned the government would be "cracking down hard on Star."

"It is disgraceful and we are outraged as to the operations of this particular company," he said. "The flagrant disregard for the rules and regulations they should be operating under is breathtaking. The people of NSW expect casinos should operate at the highest standards; it's very clear that Star has not been doing that."

In a statement to the Australian Stock Exchange, Star's interim chairman Ben Heap said the company was considering the review's findings and matters raised in the show cause notice, and intended to respond in 14 days. 

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