SkyCity Heading to Federal Court – Faces Massive Fines

SkyCity Entertainment Group is on the hook for a substantial fine from the federal court after an AUSTRAC investigation.

SkyCity Entertainment Group is heading to federal court where it faces substantial financial penalties. The Australian Transaction Reports and Analysis Centre (AUSTRAC) investigated the New Zealand-based gaming company, and it does not like what it uncovered. AUSTRAC alleges the live dealer casino operator is failing its obligations under the Australian Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

SkyCity runs five casinos, four in New Zealand and one in Australia. In addition, the company offers online casino games and allows customers to play blackjack online via its license in Malta. It is SkyCity Adelaide that AUSTRAC is all hot and bothered about. The Adelaide casino boasts 90 gaming tables in addition to 990 pokies and electronic gaming machines.

AUSTRAC launched its investigation in June 2021, following similar inquiries into Crown Resorts and Star Entertainment. They responded to concerns that the casino is failing Australia’s strict anti-money laundering rules. The regulator looked into SkyCity Adelaide in 2016 but found no issues. However, a second look into the casino’s operations in 2019 uncovered evidence of serious non-compliance between 2018 and 2019. Those failings are resulting in a trip to the federal court.

SkyCity Confirms Upcoming Federal Court Case

All companies listed on the Australian Securities Exchange (ASX) are bound by law to report anything that has the potential to affect the company’s share price. SkyCity posted a statement on the ASX confirming the upcoming federal court action.

“SkyCity Adelaide places the utmost importance on compliance with its regulatory obligations, including its anti-money laundering compliance, and will give the allegations in the AUSTRAC claim, once received, careful consideration before responding.”

“In the event of AUSTRAC’s claim was to be accepted in whole or in part by the Federal Court of Australia, SkyCity Adelaide may be subject to a civil penalty to be imposed by the court, which may be material. SkyCity understands that AUSTRAC has not yet identified the level of penalty it intends to seek.”

AUSTRAC takes regulatory breaches seriously. It recently fined Star Entertainment $100 million. The evidence it has on SkyCity Adelaide is damning. In effect, there is no chance SkyCity can deny wrongdoing.

AUSTRAC Report Makes For Shocking Reading

AUSTRAC’s thorough investigation and the subsequent report highlight some shady business at SkyCity Adelaide. For example, AUSTRAC alleges the casino’s representatives knew some of their customers had money laundering and other crimes on their criminal records. SkyCity failed to perform due diligence checks on 124 customers. Consequently, 59 customers with known criminal links gambled extensively at the Adelaide property.

Furthermore, one customer, known in the report as “Customer 30” has strong links to a family of drug traffickers. The casino allowed Customer 30 to turn over $34 million in high roller casino games in only four years.

“Customer 29” is another customer linked to the illegal drug trade; three of his family are in jail for drug offences. Despite this, SkyCity Adelaide did not thoroughly investigate the person. Customer 29 listed his occupation as a “meat-packer”, a job that pays around $28 per hour. However, Customer 29 spend as much as $56 million at the casino.

AUSTRAC presented its findings to the federal court but is unsure of the severity of a suitable fine. The federal court will decide a suitable punishment. However, any punishment comes once SkyCity reviews the claims and enters its response. It is unlikely the federal court will issue a $100 million fine, although the fine should be large. SkyCity had NZ$639 million of revenue during the last financial year, resulting in a NZ$33.6 million loss. One expects the court to issue a fine in line with revenue and profits. For comparison, Star had revenue of $1.53 billion.