A report into Australia’s Star Entertainment Group has recommended the company be found unsuitable to hold a NSW casino license for The Star Sydney, although it remains to be seen what regulatory action will be taken by the newly inaugurated NSW Independent Casino Commission (NICC).
According to the final report from Adam Bell SC following his recent review into The Star Pty Ltd, made public by the NICC on Tuesday, Star Entertainment Group and a number of its subsidiaries “is presently unsuitable to be concerned in or associated with the management and operation of a casino in NSW.”
The report does not, however, offer any assessment of what, if any, changes would be required to render the group suitable if it was found to be unsuitable by the regulator.
“That is a matter for determination by the [NICC],” it said.
Nevertheless, the Bell Report details a wide range of reasons for finding The Star unsuitable – among them the illegal use of China UnionPay cards to fund gambling at The Star Sydney, Star’s dealing with Asian junket operator Suncity Group and the company’s response to independent audits of its anti-money laundering (AML) and counter terrorism financing (CTF) controls.
In response, the NICC said Tuesday that it has issued The Star with a show cause notice and is considering its options for disciplinary action.
“The report is, quite frankly, shocking,” said NICC Chief Commissioner, Philip Crawford. “It provides evidence of an extensive compliance breakdown in key areas of The Star’s business.
“Not only were huge amounts of money disguised by the casino as hotel expenses, but vast sums of cash evaded anti-money laundering protocols in numerous situations, most alarmingly through Salon 95 – the secret room with a second cash cage.
“In addition to Bell’s analysis of the very real risks of criminal infiltration and the concealment with which senior staff conducted business, the report details cases of individual patrons exposed to gambling harms.
“We are in the process of taking stock of the report’s content. There are a range of implications across 30 recommendations that need to be worked through. Once we have given The Star the opportunity to respond to the notice, we will be in a position to determine an appropriate disciplinary approach.”
According to the Bell Report, which details evidence provided during the inquiry, China Union Pay cards were utilized by 1,307 Star patrons across 8,912 transactions between July 2013 and March 2022, for combined transactions totalling AU$908 million (US$626 million).
This was despite the fact that, “Management of The Star and Star Entertainment were aware that the China UnionPay process was a means of circumventing Chinese capital flight laws.”
Not only did Star fail to conduct appropriate risk assessment or source of wealth checks on patrons utilizing this process, it also devised a temporary cheque cashing facility to overcome the problem of funds transacted via China Union PayCards taking up to 48 hours to hit Star’s bank accounts. This, the report said, was despite the company being advised that there was a risk the regulator would regard the temporary cheque cashing facility as a breach of the Casino Control Act, which prohibits operators from issuing credit to players.
The report also highlights Star’s relationship with Suncity, specifically the provision of a private gaming room known as “Salon 95” and assistance in installing a “service desk” within the room, which ultimately operated as a casino cage. Despite CCTV cameras observing multiple instances of Suncity employees exchanging cash for chips and vice versa in contravention of the Casino Control Act, Suncity was permitted to continue operating the service desk through September 2019, when it was moved to a new private room called “Salon 82”.
Star, it added, also failed to act on an internal report which “raised extremely serious concerns about the probity of Suncity and its founder Mr Alvin Chau” and which were also highlighted by media reports aired that same year into Suncity’s relationship with Crown Resorts.
“By this time in the second half of 2019, and despite all that was known by [Star] about Suncity and Mr Chau, no further risk assessment of Suncity and Mr Chau was conducted,” the Bell Report states.
“In the circumstances this was inexcusable and wholly inconsistent with the casino operator’s obligations to manage the risks of criminal infiltration and money laundering.”
In finding Star unsuitable, the Bell Report references a “systemic cultural problem” that flowed from the top down.
“There were reporting failures by the senior management team at Star Entertainment,” it states. “[Matt] Bekier as Managing Director and Chief Executive Officer must bear significant overall responsibility for these failures. However, the Board must also bear some responsibility, because it was required to have systems and processes in place to ensure that it received the information it needed. This was also a failure of risk management and reflected a systemic cultural problem.”
Management, Bell says, “repeatedly chose to run risks rather than avoid or contain them. Too often the question which was asked was ‘how can we do this?’ rather than ‘should we be doing this?’
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“The dangerous combination of deficient risk management processes, a cavalier approach to risk by the business units of Star Entertainment, the lack of a specialist risk ‘champion’ and the high risk environment of casinos in which Star Entertainment was operating assists to explain how the problems identified in the public hearings of this Review occurred.”
Despite these findings, IAG understands The Star Sydney is most likely to face a similar pathway forward to that adopted by regulators in Victoria and Western Australia where Crown Resorts was recently given two years to prove it has reformed under the supervision of an independent monitor.
The now displaced NSW Independent Liquor & Gaming Authority (ILGA), which was handed a copy of Bell’s report in August (since turned over to the NICC), has already appointed an independent monitor to oversee and report on The Star Sydney’s operations.
ILGA also oversaw Crown’s efforts to prove reform in NSW, having initially been found unsuitable to open the casino at Crown Sydney following release of the Bergin Report in early 2020. The casino eventually opened its doors on 8 August this year having been granted permission in June.
