Victorian Regulator Hits Crown With Record $80 Million Fine

The Victorian Gambling and Casino Control Commission (VGCCC) hits Crown Resorts with a record $80 million fine for financial wrongdoing.

The fallout from Crown Resorts’ shady business dealings continues costing the casino giant vast sums of money. The Victorian Gambling and Casino Control Commission (VGCCC) is the latest entity attacking Crown. VGCCC levied a record $80 million fine on Crown for the “China UnionPay process.”

The China UnionPay process mainly occurred at Crown Melbourne between 2012 and 2016. The process was simple yet highly illegal because it contravened China’s strict gambling laws in addition to helping facilitate money laundering.

VGCCC issued a statement on its website detailing how the process worked.

“The Crown Towers hotel issues a room charge bill to the patron, falsely asserting that the hotel had provided services to the person. The patron would pay the bill using their China UnionPay credit or debit card and receive a voucher acknowledging receipt of funds. Then the patron, accompanied by a Crown VUP host, took the voucher to the cage and exchanged it for cash or chips.”

Crown’s scheme became apparent during the recent royal commission into its business. The royal commission explained the reasons why Crown hatched the plan.

“China had imposed strict restrictions on Chinese nationals transferring money out of China. Between the years 2012 and 2016, a Chinese national could not transfer more than US$50,000 per year to another jurisdiction. The Chinese currency restrictions were well known to Crown Melbourne executives. The CUP process was devised to enable the illegal transfer of funds from China.

A Record $80 Million Fine Lands at Crown’s Door

VGCCC said it had no other choice than to impose a record $80 million fine. It revealed that Crown used the China UnionPay process 2,769 times, transacting $163,892,289 between 2012 and 2016. Crown offered information to VGCCC, showing it, in theory, made $32,422,983 profit from the scheme.

Allowing the China UnionPay process contravened section 68 of the Casino Control Act. In addition, the VGCCC said it is not far-fetched to imagine organised crime figures taking advantage of the process. Furthermore, helping Chinese nationals bypass their country’s currency laws is not only unethical but illegal.

The record $80 million fine is massive but could have been far worse. It could have issued a $500,000 fine for each of the breaches of section 68 and a $500,000 for each year Crown financial statements were untrue. This equates to $1.4 billion, so a record $80 million fine is like pocket change in comparison. Crown’s overall cooperation saved it from the higher amount.

Fine Will Not Harm Crown’s Credit Rating

According to Fitch Ratings, receiving a record $80 million fine will not impact Crown Resorts’ credit rating. The company has a solid financial footing; even a $125 million shareholder settlement failed to rock the boat. A lack of impact on the casino’s credit rating means the $8.9 billion sale to Blackstone should remain unaffected.

“The latest Crown fine is unlikely to negatively impact the sale because it falls below the material adverse clause in the agreement between Crown and Blackstone. Before it goes into effect, the agreement establishes a minimum reduction of Crown’s net assets of $750 million for certain items.”

These latest goings on happen as Crown waits to hear if the Federal Court of Australia will give the green light for the Blackstone sale to progress. Crown’s shareholders voted in favour of the sale last month, but red tape holds up the deal. Crown and Blackstone are hopeful of a June 6 hearing. Crown explained more in an ASX statement.

“The date of the final hearing depends on when the condition precedent relating to Blackstone obtaining gaming regulatory approvals is satisfied. At that point, Crown will seek to have the final hearing fixed for the earlier possible date and will announce the date via the ASX announcements once it is known. Crown’s current estimate as to when the final hearing will take place is the week commencing Jun 6, 2022.”