SkyCity Entertainment Group is facing court action from an Australian regulator for alleged failures at SkyCity Adelaide, accused of “systemic failures” in how it countered illegal activities.

The company told the NZX today that the Australian Transaction Reports and Analysis Centre is taking it to court.

Austrac is the federal agency responsible for detecting, deterring and disrupting criminal abuse of the financial system to protect the community from serious and organised crime.

Peter Soros, Austrac deputy chief executive, said today: “Investigations into SkyCity had found systemic failures in its approach to anti-money laundering and counter-terrorism financing obligations....[and] identified a range of circumstances where SkyCity failed to carry out appropriate ongoing customer due diligence. SkyCity also failed to develop and maintain a compliant AML/CTF program, leaving it at risk of criminal exploitation.”

SkyCity Adelaide is facing charges. Photo / supplied

Austra’s allegations are extensive and include that SkyCity:

• Failed to appropriately assess the money laundering and terrorism financing risks it faced, including the likelihood and impact of those risks, and to identify and respond to changes in risk over time;
• Did not include in its AML/CTF programs appropriate risk-based systems and controls to mitigate and manage the risks to which SkyCity was reasonably exposed;
• Failed to establish an appropriate framework for board and senior management oversight of the AML/CTF programmes;
• 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 SkyCity;
• 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.

Since mid-2021, SkyCity is understood to have made changes to how it operates including more people and better systems in its anti-crime units.

Michael Ahearne, SkyCity chief executive, said today: ”Providing a safe and responsible environment for our customers and communities is a priority for us. We take our anti-money laundering obligations seriously and remain committed to enhancing our processes. We will continue to work with all our regulators on the ongoing enhancements of our AML/CTF programmes.”

Documents on the civil proceedings will be on Austrac’s web page once they have been lodged with the court, SkyCity said.

“SkyCity Adelaide 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,” the company said today.

Analysts are factoring in a potential A$50 million ($54.5m) of fines from after state and federal investigations - but say this might be conservative and more might need to be paid.

Jarden analysts Adrian Allbon and Jason Cao said this was the amount they anticipated might be due in 2024 by the business.

Austrac has previously said it had identified potential non-compliance by SkyCity Adelaide.

Allbon and Cao said SkyCity chairman Julian Cook cited the matter at last month’s annual meeting, “noting SkyCity continues to respond to both Austrac and South Australia state regulator inquiries but also too early to say anything definitive on where these may go. We have factored in A$50m of fines across both reviews, paid in full year 2024 estimated”.

In 2021, Austrac announced that SkyCity Adelaide and some other casino operators in that country were being investigated for non-compliance with legislation designed to counter money laundering and the financing of terrorism.

The A$50m was potentially conservative when compared to the A$300m factored into Jarden’s Star Entertainment Group estimates for the New South Wales state fine of A$100m ($109m), estimated Queensland state fine which Jardens put at a potential A$100m and estimated Austrac fine of A$100m, which in total equate to around 15 per cent of Star Entertainment Group revenues, the kiwi analysts said.

On March 1, Austrac said its case against Crown Perth and Crown Melbourne was for serious and systemic non-compliance with Australia’s anti-money laundering and counter-terrorism financing laws.

Nicole Rose, Austrac chief executive, said then that Crown had allegedly failed to meet its obligations, making their business and Australia’s financial system vulnerable to criminal exploitation.

“Austrac’s investigation identified poor governance, risk management and failures to have and maintain a compliant AML/CTF program detailing how Crown would identify, mitigate and manage the risk of their products and services being misused for money laundering or terrorism financing,” she said in March.

“They also failed to carry out appropriate ongoing customer due diligence including on some very high-risk customers. This led to widespread and serious non-compliance over a number of years. Austrac has taken this strong action to achieve enduring change and ensure that Crown will fully meet their obligations to protect themselves and Australia’s financial system from criminal activity.”