Star Entertainment Court Hearing over AUSTRAC Fine Now Underway
The Federal Court proceedings involving The Star Entertainment Group and Australia's financial crime watchdog AUSTRAC commenced this week, marking a critical juncture in the ongoing scrutiny of the company's anti-money laundering (AML) and responsible gambling compliance failures. The case follows a string of regulatory investigations across New South Wales and Queensland that have significantly undermined the casino operator's reputation and operations.
LISTEN TO THIS ARTICLE:AUSTRAC is seeking to impose a civil penalty of at least AU$400 million against Star, claiming the proposed amount is proportionate to the scale and severity of the alleged breaches. Legal counsel for AUSTRAC, Simon White SC, argued that such a penalty is appropriate for both specific and general deterrence, highlighting the necessity of holding large gambling operators accountable for significant AML shortcomings. The penalty reflects a culmination of compliance failures related to high-risk clients and poor internal controls over countless years.
Central to the regulator's case is Star's previous relationship with the now-defunct junket operator Suncity Group. The group facilitated extensive VIP gambling activity at The Star Sydney and The Star Gold Coast casinos.
According to AUSTRAC, between 2016 and 2020, the company hosted 117 high-risk customers who collectively participated in approximately 350 junket tours operated by Suncity at The Star Sydney alone. These VIP rooms reportedly generated weekly turnovers exceeding AU$70 million prior to the COVID-19 pandemic.
Star's legal team is pushing back against AUSTRAC's proposed penalty, claiming that a fine of AU$100 million would already stretch the company's financial limits. The company contends that such an amount would be more appropriate given its current financial standing.
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New Fines Could Jeopardize Star's Future
Star has stated that penalties exceeding that figure could jeopardize its financial viability. This comes at a time when the firm is attempting to recover from a prolonged period of financial distress and reputational damage.
Only weeks ago, Star announced that it had secured an AU$300 million funding lifeline involving Bally's Corporation and Australian investor Bruce Mathieson through his private investment entity, Investment Holdings Pty Ltd. This capital injection was essential to keeping the company afloat, with an initial AU$100 million already disbursed by Bally's in April. The full transaction is subject to shareholder approval, and it is intended to support the company as it navigates mounting costs and revenue declines in the wake of extensive regulatory scrutiny.
Star has emphasized that the company had been operating under severe financial constraints before the investment deal was finalized. The AU$300 million capital raise is considered essential for its near-term survival. Nonetheless, the prospect of a multi-hundred-million-dollar fine imposed by AUSTRAC has cast new doubt on whether the investment will be sufficient to stabilize the company's financial outlook.
The scale of the penalty being pursued by AUSTRAC draws parallels with the AU$450 million fine issued to Crown Resorts in 2023 for similar compliance failures. That case served as a benchmark for enforcement in Australia's gambling sector and reinforced the regulatory focus on AML controls, particularly in high-risk casino environments involving international VIPs and junket operations.
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