Federal Court orders Star Entertainment to pay A$260m for AML breaches

A ruling made public on Wednesday saw Australia's Federal Court impose a A$260m penalty on The Star Entertainment Group over serious breaches of anti-money laundering and counter-terrorism financing (AML/CTF) rules. Between November 2016 and November 2022, the operator ran an AML/CTF programme that did not meet compliance standards, and it neglected to scrutinise customers so as to identify, mitigate and manage money laundering and terrorism financing risks, the Court found.

The court ordered The Star Sydney to pay $195m, with a first instalment of $48.75m due by 25 November. The Star Queensland must pay $65m, including $16.25m by 25 November.

Among the breaches were serious shortcomings in how The Star handled its high-risk customers: it did not verify who they were or where their money came from, did not carry out proper due diligence, and did not keep watch on their activity. According to the court, this non-compliance hampered AUSTRAC and law enforcement agencies in following money back to its origin, which meant lost chances to stop unlawful activity and to recover the proceeds of crime.

Justice Moore observed that a large share of Star's business rested on ignoring the high money laundering and terrorism financing risk some customers carried, and that the conduct at issue came with a powerful financial lure. Junket revenue by itself topped $1.4bn, junket profit in the pre-COVID years was above $100m, and high-risk customer revenue across the period came to roughly $1.33bn by Star's own reckoning, the judge noted. The court acknowledged that such amounts do not gauge the benefit obtained from the contraventions, yet it treated them as showing how much profit a non-compliant approach to AML/CTF obligations could yield.

Brendan Thomas, chief executive of AUSTRAC, described the penalty as a response proportionate to how serious the contraventions were, and said that given the sanctions The Star faced in earlier casino inquiries, it adds to state and Commonwealth fines already imposed and keeps a deterrent effect going forward. According to Thomas, the court's finding went beyond a simple failure to carry out the correct checks: the operator let high-risk customers gamble without properly establishing the origin of their money.

Thomas further stated that The Star ran a private casino inside its casino with inadequate oversight, kept pursuing patrons barred from gambling in another state, and gave junkets access despite highly suspicious incidents occurring without controls being brought in. Because of the monitoring failures The Star has admitted, Thomas said, the amount of money high-risk customers moved through its casinos remains unknown, and the way those operations were run left both the casino and Australia's financial system exposed to the associated risks.

Earlier sanctions and regulatory steps against The Star, taken after Queensland and New South Wales casino inquiries looked into related regulatory failings, preceded this A$260m penalty. Since AUSTRAC announced its investigation in November 2022, both the probe and the unknown size of the eventual penalty have hung over Star Entertainment. The Star had said nothing publicly about the Federal Court judgment, and shares in The Star Entertainment Group Ltd ended Wednesday in Sydney flat at A$0.13, after climbing more than 13% on Tuesday when its fiscal first quarter financial results came out.