In Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Crown Melbourne Limited [2023] FCA 782 the Federal Court of Australia ordered casino operators Crown Melbourne and Crown Perth (Crown) to pay a combined $450 million penalty, payable over 2 years, without interest, for breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). The Court also ordered Crown to pay AUSTRAC’s costs of $3.4 million. Background.

Crown admitted that it had contravened sections 81(1) and 36(1) of the AML/CTF Act, including that Crown Melbourne and Crown Perth’s AML/CTF programs were not based on appropriate risk assessments, did not have appropriate systems and controls to manage their risks, and were not subject to appropriate oversight by their Boards and senior management.

The serious nature of the breaches meant that Crown allowed high-risk activities to take place in its casinos, without intervention, on an ongoing basis.

The breaches included:

• Crown continued a business relationship with a major casino junket operator until 2021, although being aware of allegations the operator was connected to organised crime.
• Crown failed to appropriately monitor billions of dollars in transactions (including international payment flows) which impacted its ability to identify and disrupt possible suspicious activity and to report suspicious matters to AUSTRAC and law enforcement.
• From March 2016 to December 2018, there were at least 75 suspicious ‘incidents’ involving a total of around $23 million in cash, in a private gaming room which Crown Melbourne gave one casino junket operator exclusive access to.
• Crown failed to monitor 546 customers in relation to the provision of designated services.

With respect to Crown’s Board and senior management, Justice Lee observed:

“Crown now acknowledges that at all times during the relevant period, the Act and Rules required that a reporting entity’s Part A programme must be subject to the ongoing oversight of each reporting entity’s board and senior management. As part of this oversight, Crown’s boards and senior management were responsible for oversight of the management of ML/TF risks faced by its business in accordance with the Act and Rules.

In apparent recognition of, among other things, the importance of compliance with Crown’s AML/CTF obligations and the significance of the breaches which are the subject of the proceedings, the Crown boards and senior management have been completely reconstituted.”

With respect to the agreed penalty and the settlement of the action, Justice Lee commented:

“At the outset, however, it is worth saying a number of things about aspects of the conduct of this litigation and how agreed orders were proposed to the Court….

The fact that agreed orders were accepted by the Court in earlier cases suggests the relevant judge was satisfied that AUSTRAC was not being overly pragmatic in not proceeding to a contested hearing on liability or penalty. On balance, and not without some hesitation, for reasons detailed below, I am similarly satisfied in this case. But it is appropriate to sound a note of caution. If a regulatory body approaches litigation on the basis that it will not run to a contested hearing and always reaches an agreement, it risks being perceived as a soft touch. As I will explain, if the proposed penalty falls within the lower end of a permissible range, the Court will generally accept the proposed penalty even if the Court may have been disposed to select a higher figure. Speaking generally, and without finding that such a criticism can presently be made of AUSTRAC (or Crown for that matter), if a regulator never runs contested hearings and always eventually agrees, a danger arises that a sophisticated contravener will approach negotiations on the basis that it can present obstacles to making admissions, and delay and hold out to secure what they perceive to be the lowest possible permissible figure confident that the regulator will not take them on….

the issuing of a press release was foreshadowed to the Court and was appropriate and accurate as far as it went. But what it did not indicate is that an agreement had been struck whereby the proposed penalty is subject to a payment plan over two years. The significance of this, among other things, is that the net present value (NPV) of the proposed penalty today is not $450 million. It is common ground that at the usual and default post-judgment interest rate, assuming no discount, the NPV of the proposed penalty is approximately $405 million. As I noted to the parties at the hearing, one must compare “apples with apples”. In other regulatory proceedings involving AUSTRAC, penal orders were made without a deferred payment plan. Publicity engendered as to the comparability between this proposed penalty and other penal orders was unfortunately confused by such an approach, although I hasten to add I accept this was unintentional.”

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Author: David Jacobson
Principal, Bright Corporate Law
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The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.