Both in Australia and New Zealand, gambling services providers, casinos and clubs and hotels that have poker machines must comply with anti-money laundering and counter financing of terrorism (AML/CFT) legislations. At a minimum, they need to verify the customer's identity, a process called customer due diligence (CDD), and monitor customers’ activities and transactions to identify suspicious activities and report them to the relevant authority.
Recent cases both in New Zealand and Australia highlight issues within the gambling sector.
SkyCity and the New Zealand High Court
In May 2024, a settlement was reached between the Department of Internal Affairs (DIA), and SkyCity Casino Management Limited (SkyCity) for SkyCity breaching its AML/CFT obligations, between February 2018 and March 2023.
As part of the settlement, SkyCity has admitted to not meeting its obligations relating to
- maintaining a risk assessment
- maintaining a compliance programme
- monitoring transactions
- conducting appropriate CDD and
- terminating existing business relationships with customers when CDD could not be completed.
SkyCity and the DIA have agreed to jointly submit a penalty of NZ$4.16m to the High Court for final determination.
In its press release, the DIA stated that there was no evidence to suggest that SkyCity was directly involved in money laundering.
Crown Resorts and the Australian Federal Court
In July 2023, the Federal Court of Australia found Crown Resorts in breach of AML/CFT laws between 2016 and 2022. Crown Resorts failed to monitor over 500 customers. This included one high-risk individual who gambled for years at its casino without Crown Resorts applying proper CDD and transaction monitoring processes despite knowing the customer had been convicted of drug trafficking.
The Federal Court also found that Crown Resorts maintained business relationships with casino junket operators – agencies that facilitate the relationship between high-rollers and casinos – even when Crown Resorts was aware of allegations that a junket operator was connected to organised crime.
The revenue from gambling services provided through junket programmes represented a material source of Crown Resorts’ revenues, totalling approximately AU$1.7 billion. The junket programmes were terminated only in November 2020.
Crown Resorts was ordered to pay AU$450m. Crown Resorts dismissed several senior managers aiming to signal good intentions.
Other Breaches in Australia
The Australian Transaction Reports and Analysis Centre (AUSTRAC) has commenced civil penalty proceedings in the Federal Court against The Star Pty Limited and The Star Entertainment QLD Limited and SkyCity Adelaide Pty Ltd. These cases are still ongoing, but AUSTRAC believes that these casinos have made themselves vulnerable to criminal exploitation.
Troy Stolz, a former AML/CFT compliance officer, leaked some Club New South Wales (ClubNSW) board papers in 2019 showing that 95% of ClubNSW members were not compliant with the AML/CFT laws, effectively proving that the ClubNSW board of directors was aware of the widespread lack of compliance and still didn’t do anything to reverse the trend.
After the leak, ClubNSW retaliated with a breach of confidentiality claim against Troy Stolz. A three-year legal battle ended with an out-of-court settlement shortly after the former ClubNSW CEO was replaced.
Recommendations
Recommendations for reducing money laundering in the gambling sector are as follows:
- First, fines, such as the AU$450m for Crown Resorts, are too low to act as a deterrent when compared to casino profits. Instead civil penalties and criminal liability which hold individuals accountable for their actions are effective deterrents.
- Second, lower the threshold for cash transactions. Lower thresholds make it harder for criminals to launder money because of the need to break transactions into smaller portions to continue enjoying anonymity (in New Zealand the threshold for gambling cash transactions is NZ$6,000, Australia is looking to reduce theirs from AU$10,000 to AU$5,000).
- Third, mandatory cashless gaming requires customers to present their identity document to open an account to pre-load for use at poker machines. This minimises money laundering by removing anonymity and increasing traceability of transactions. Currently, 4,000 cashless poker machines are trialled in New South Wales, and cashless poker machines are allowed in New Zealand. However, cashless gambling machines prevent money laundering only when all poker machines will be cashless and money launderers are unable to choose cash machines.
Conclusions
Billions of dollars are laundered every year through gambling service providers worldwide. The gambling sector must comply with AML/CFT laws to detect and deter money laundering, but the New Zealand and Australia case studies show that gambling service providers often do not comply.
The lack of compliance culture comes from the top. Senior managers and boards of directors have a crucial role in overseeing AML/CFT compliance and when profit takes precedence over compliance, criminals win. Criminals are customers who bring a lot of money that the gambling sector is not ready to give up.
The New Zealand High Court and the Australian Federal Court have given a strong signal with recent fines. This points in the right direction, but more can be done. Key solutions include civil penalties or criminal liabilities for individuals in senior management roles, lower cash thresholds, and mandatory cashless poker machines.
Giulia Dondoli
Dr. Giulia Dondoli is a certified anti-money laundering specialist and founder of Total AML. Giulia helps reporting entities in New Zealand, Australia and the Pacific Island Nations to comply with AML/CFT laws.
