Following gaming regulator investigations into Star in NSW and Queensland, casino operator The Star has been sued by Austrac over alleged non-compliance with Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws and 11 current and former Star Entertainment directors and officers have been separately sued by ASIC for breaches of the Corporations Act.

Austrac v The Star Pty Limited (Star Sydney) and The Star Entertainment QLD Limited (Star Qld)

Austrac has announced that it has commenced civil penalty proceedings in the Federal Court against The Star Pty Limited and The Star Entertainment QLD Limited (the Star Entities) for alleged serious and systemic non-compliance with Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws.

Austrac claims that Star Sydney and Star Qld provide more than just gaming services to customers. They provide financial services that facilitate the movement of money into and out of the casino environment, including across international borders. These financial services are high value and high volume.

Austrac’s allegations include that the Star Entities:

• Failed to appropriately assess the money laundering and terrorism financing (ML/TF) risks they faced, including the likelihood and impact of those risks, and to identify and respond to changes in risk over time.
• Did not include in their AML/CTF programs appropriate risk-based systems and controls to mitigate and manage the risks to which the Star Entities were reasonably exposed.
• Failed to establish an appropriate framework for Board and senior management oversight of the AML/CTF programs.
• Did not have a transaction monitoring program to monitor transactions and identify suspicious activity that was appropriately risk-based or appropriate to the nature, size and complexity of the Star Entities.
• Did not have an appropriate enhanced customer due diligence program to carry out additional checks on higher risk customers.
• Did not conduct appropriate ongoing customer due diligence on a range of customers who presented higher money laundering risks.

Austrac claims that, as a consequence, in the absence of appropriate ML/TF risk oversight, the Star Entities:

• Permitted their customers to move money through payment channels that were non-transparent and involved high ML/TF risks.
• Did not understand the sources of money moving through these channels or whether there was a risk that the source of funds was illicit.
• Failed to consider whether it was appropriate that they continue an ongoing business relationship with higher risk customers.
• In the absence of these risk-based controls, the Star Entities were vulnerable to criminal exploitation.

Austrac has previously announced it issued civil penalty proceedings in the Federal Court against Crown Melbourne and Crown Perth for alleged serious and systemic non-compliance with Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) laws following Austrac’s investigations into Crown Melbourne and Crown Perth’s compliance as well as an Inquiry in NSW and Royal Commissions in Victoria and Western Australia.

Austrac has also recently announced it has issued Federal Court proceedings against casino operator SkyCity Adelaide for AML/CTF non-compliance.

ASIC v Bekier and others

ASIC has announced that it has issued civil penalty and disqualification proceedings in the Federal Court against 11 current and former directors and officers of The Star Entertainment Group Ltd for alleged breaches of their duties under section 180 of the Corporations Act.

ASIC’s case includes claims against members of the Star Board between 2017 to 2019, being John O Neill (former Chair), Matthias Bekier (former Managing Director and CEO), Kathleen Lahey, Richard Sheppard, Gerard Bradley, Sally Pitkin, Benjamin Heap and Zlatko Todorcevski.

ASIC alleges the Board members approved the expansion of Star’s relationship with certain individuals with reported criminal links, rather than addressing the money laundering risk inherent in the operation of a large casino with an international customer base by inquiring into whether Star should be dealing with them.

ASIC also alleges that Board members, when provided with information about money laundering risks affecting Star, did not take steps to make further enquiries of management about those critical risks and that this was a breach of their director duty obligations.

For example, ASIC alleges that “following discussions at an Audit Committee meeting on 23 May 2018, and at a Board meeting on 24 May 2018, of a report prepared by KPMG which had found that: risks associated with Star’s dealings with junkets were “high”, that Star had no documented money laundering and terrorism financing risk assessment or risk assessment methodology in relation to junkets, and that, where a junket operator was funded by a third party’s cheque cashing facility, Star did not enquire as to the source of the third party’s funds or as to the relationship between the junket operator and the funders, failing to take all necessary steps to ensure inquiries were undertaken and reported back to [Mr Bekier] and the Board as to certain customers’ probity, sources of wealth and sources of fund.”

ASIC further alleges that Mr Bekier and Star executives Paula Martin (former Company Secretary and Group General Counsel) and Greg Hawkins (former Chief Casino Officer) breached their duties by:

• not adequately addressing the money laundering risks that arose from dealing with Asian gambling junket Suncity and its funder, as well as continuing to deal with them despite becoming aware of reports of criminal links and in light of allegations that had been published in the media concerning Crown Resorts’ relationships with them; and
• not appropriately escalating money laundering issues to the Board.

As to Ms Martin and Harry Theodore (former Chief Financial Officer), ASIC also alleges they knowingly permitted misleading statements to be provided to National Australia Bank (NAB) regarding the use of debit cards issued by China Union Pay International Ltd (CUP) at NAB ATMs located on Star’s premises. Those statements disguised the fact that Star was permitting CUP cards to be used for gambling, which was prohibited by CUP.

ASIC claims that over $900 million was obtained by Star customers using CUP cards in NAB ATMs from 2013 to 2019.

ASIC also alleges that Ms Martin and Harry Theodore, and Mr Bekier, failed to report these matters to Star’s Board.

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
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.