AUSTRAC agrees A$405m penalty fine for Crown Resorts

Australia’s Transaction Reports and Analysis Centre (AUSTRAC) has submitted a request to a Federal Court in Sydney to award a staggering penalty fine of A$450m to gambling operator Crown Resorts for breaching anti-money laundering and counter-terrorism financing (AML/CTF) regulations at both its Melbourne and Perth land-based locations.

Filing a joint submission to the court following a year-long probe, AUSTRAC and the Blackstone Group-controlled operator, reached an accord on the proposed penalty in question. This was filed in the form of a 133-page statement on “agreed facts and admissions” centred around Crown’s numerous years of noncompliance under the now previous management.

In a statement afforded to the Federal Court by AUSTRAC, Crown provided a definitive admission of guilt regarding a widespread failure to assess the unwelcome abundance of AML/CTF risks running throughout its land-based operations.

These violations can be attributed to a complete lack of appropriate, internal risk-based systems that in any way, could mitigate non-complicity. In fact any consideration or due diligence regarding AML/CFT non-compliance has, until now, been overlooked, Crown did not even possess a close to acceptably effective mechanism for transaction monitoring.

Crown itself has publicly apologised for this lack of due diligence and expressed a commitment to improve its operations and secure itself and its clients against money laundering and terrorism financing (ML/TF).

This pending fine from AUSTRAC is set to be the largest one yet suffered by Crown or in Australia’s history, following the culmination of a calamitous period that would see the former executive chairman James Packer’s tenure end in an inevitable resignation.

These regulatory shortcomings included a series of fines, government probes and years of dismally unsavoury media coverage related to their illicit activities, including their raft of fiscal and strategic failures in the Chinese market.

The court is due to make a decision on the matter through a hearing on July 10th and 11th.

New management at Crown Resorts

Steve McCann’s replacement as newly appointed Crown CEO, Ciarán Carruthers, gave this statement with regard to the on-going situation:

First and foremost, I want to reiterate that these historical failings were unacceptable, and on behalf of Crown Resorts, our new owners and leadership, I apologise for the failings of the past.

After making it abundantly clear that Crown’s current management agrees that the previous failings were intolerable, he would continue his statement, shifting to Crown’s commitment to change,

The company that committed these unacceptable, historic breaches is far removed from the company that exists today. The Crown of today is committed to harm minimisation and becoming the world leader in the delivery of safe gambling and entertainment.

The statement offered by Crown then listed a range of internal governance and compliance reforms, significantly developed with the aid of AUSTRAC themselves and the various gambling regulators in the Australian states of New South Wales, Victoria and Western Australia.

One must question such promising statements of change from Crown as, while it is true they are under new management with differing directives, compliance issues have not evaporated as of yet.

In February of last year, private equity and alternative investment management company Blackstone Inc. acquired Crown Resorts for a fee of A$8.9b. Intriguingly, the agreement stipulated that they would be allowed to exit this deal if the most recent penalty exceeded the figure of A$750m.

Subsequent to the takeover, numerous other regulatory bodies have already demanded smaller yet still significant fines for a variety of alternate non-compliance issues, including Victoria’s gambling regulator fining Crown A$30m over improper customer cheque practices, A$58m for cashcard scam activity along with A$120m in November for even further breaches.

In light of this, only time will tell if Crown can succeed in cleaning up the act and replenishing the legitimacy of its reputation.

What is far more certain is that this record breaking fine will have even more severe consequences for some other industry leaders along with a holistic effect for Australia’s internationally significant industry, an instance exemplified by The Star Entertainment Group, which has already received a lawsuit from AUSTRAC over what are being described as “innumerable” violations of similar AML/CTF regulations.

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