AUSTRAC Launches Federal Court Proceedings Against SkyCity Adelaide

On December 7, 2022, the Australian Transaction Reports and Analysis Centre (AUSTRAC) commenced civil penalty proceedings against major Australian casino operator SkyCity Adelaide for alleged “serious and systemic non-compliance” with Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regulations. Its enforcement action follows similar proceedings against Star Entertainment Group entities, which took place on November 30.  

According to court documents, SkyCity casino permitted multiple customers to conduct buy-ins using $50 notes that were dirty, sticky and appeared to have been buried. The documents also outline numerous SkyCity customers with alleged links to organized crime, human trafficking, loan sharking, and sex slavery. 

SkyCity AML/CTF Failures

According to AUSTRAC Deputy CEO Peter Soros, “[the] investigation identified a range of circumstances where SkyCity failed to carry out appropriate ongoing customer due diligence.”

AUSTRAC’s allegations of SkyCity include:

• Failing to appropriately assess the money laundering and terrorism financing risks it faced, including the likelihood and impact of those risks, and responding to changes in risk over time
• Not including appropriate risk-based systems and controls in its AML/CTF programs
• Failing to establish an appropriate framework for board and senior management oversight of the AML/CTF programs
• Not having a truly risk-based transaction monitoring program to monitor transactions and identify suspicious activity  that is appropriate to SkyCity’s nature, size, and complexity
• Not having an appropriate enhanced due diligence (EDD) program to carry out additional checks on higher-risk customers
• Not conducting appropriate ongoing customer due diligence (CDD) on a range of customers who presented higher money laundering risks

SkyCity has commented on the proceedings, saying it “will continue to cooperate with AUSTRAC more generally, particularly in the ongoing implementation of enhancements to its Adelaide AML/CTF control frameworks as outlined in SkyCity’s FY22 annual report.”

Investigating Crown Resorts

In 2019, AUSTRAC also investigated Crown Resorts Limited, specifically the company’s Melbourne and Perth casinos. AUSTRAC’s investigation found that Crown Resorts had inadequate CDD policies and procedures, failed to report suspicious matters to AUSTRAC, and enabled customers to gamble using casino chips purchased with large sums of cash. The investigation also uncovered that the casinos had established relationships with junket operators and high-roller customers without undertaking adequate due diligence checks.

Following the investigation, Crown Resorts entered into an Enforceable Undertaking with AUSTRAC to address the identified issues. This included the appointment of an independent auditor to review the casinos’ AML/CTF compliance, establishing a new AML/CTF program, and implementing more stringent CDD policies and procedures.

AUSTRAC’s Focus on Cash-Intensive Sectors

Speaking at FINSIA’s “The Regulators” event in May, AUSTRAC CEO Nicola Rose outlined AUSTRAC’s priorities for 2022, which included a key focus on high-risk, cash-intensive sectors such as pubs, clubs, casinos, and betting agencies. To achieve this, AUSTRAC noted its commitment to improving awareness of the importance of AML/CFT obligations and completing compliance assessments. 

In its Pubs and Clubs with Gaming Machines Regulatory Guide, AUSTRAC reminds businesses of their reporting obligations under the AML/CTF Act. According to this law, companies with entitlements under license to operate EGMs must submit suspicious matter reports (SMRs), threshold transaction reports (TTRs), and compliance reports to AUSTRAC.   

To aid the submission of these reports, AUSTRAC provides a list of possible indicators of suspicious activity, including:

• Cashing out credits with minimal or no game-play 
• Redeeming credits using different cashiers each time 
• Refusing or being reluctant to produce identification upon request 
• Producing false identification 
• Gaming in a way that is inconsistent with their profile (e.g., the customer receives welfare benefits but gambles with or carries substantial amounts of cash) 
• Multiple same-day gambling activities 
• Asking for cheques to be written in someone else’s name 
• Approaching other patrons to purchase their winning tickets 
• Bringing a large quantity of cash to be exchanged at the cashier for higher denominations

AUSTRAC also issued a fact sheet – “AML/CTF Tips for Pubs and Clubs” – to advise the sectors with gaming machines on how they can protect themselves from being abused for money laundering and terrorism financing. Further detailed guidance and fact sheets for cash-intensive sectors include:

• Preparing and implementing an AML/CTF program
• Money laundering in pubs and clubs: myths vs. facts
• Effective suspicious matter reporting
• Pubs and clubs: staff awareness

Key Takeaways 

Compliance teams operating in any of AUSTRAC’s priority focus sectors should ensure they are familiar with the regulator’s extensive guidance that has been published on significant risks/typologies and how to handle them. 

All official resources can be found on the AUSTRAC website, including guidance on:

• Identifying and verifying source of funds and source of wealth
• Forced sexual servitude
• The misuse of payment text fields
• Suspicious crypto behaviors 
• De-banking