Federal Court fines Star Entertainment AU$260m for AML/CTF breaches

The Federal Court of Australia has ordered Star Entertainment Group to pay a penalty of AU$260 million for breaches of the country's anti-money laundering and counter-terrorism financing laws.

Justice Cameron Moore delivered the judgment on Wednesday, following civil proceedings launched by the financial crime regulator AUSTRAC in 2022.

Justice Moore found Star responsible for significant compliance failures, stating that the company "failed to maintain a compliant AML/CTF programme and failed to monitor customers to identify, mitigate and manage money laundering and terrorism financing risks".

"In effect, Star put profit over compliance and did so on a large scale," Justice Moore said in court.

The court found breaches included inadequate verification of customer identity and sources of funds, insufficient due diligence and ongoing monitoring of customer activities, and allowing transactions and cash deposits from third parties without recording their identities.

More than 1,200 customers were allowed to gamble via "high-risk channels" without adequate safeguards, according to the court.

The court stated revenue was linked to junket operations exceeding $1.4 billion, with pre-Covid junket profits surpassing $100 million.

Star's own estimates placed revenue generated from high-risk customers between November 2016 and November 2022 at approximately $1.33 billion.

Justice Moore emphasised these figures "illustrate the potential to earn profits from a non-compliant approach" but do not directly quantify benefits derived from illegal conduct.

AUSTRAC Chief Executive Brendan Thomas said the penalty reflects the seriousness of the contraventions.

"The court found The Star did not simply fail to complete the right checks. It allowed high-risk customers to gamble without properly establishing where their money came from and put profit over compliance on a large scale," Thomas said.

He added that AUSTRAC "will not tolerate companies putting profit over their obligations to the Australian community".

Thomas criticised The Star for operating a "private casino within its casino" with insufficient oversight, facilitating continued access to excluded customers and enabling junket operations despite known risks.

The penalty is split, with AU$195 million payable by The Star Sydney and AU$65 million by The Star Gold Coast, reflecting the greater number of contraventions at the Sydney property.

Justice Moore explained the AU$260 million figure reflected previous penalties totalling $200 million already paid by Star, as well as licence suspensions and an externally appointed manager.

He rejected AUSTRAC’s proposed AU$400 million penalty and Star’s proposed AU$100 million on their own terms.

The court also credited the New South Wales regulatory response to Star’s conduct, including earlier state penalties and the loss of the Sydney casino licence after the Bell inquiry found the company unsuitable in 2022.

Justice Moore said that, but for the state response, the federal penalty would have been higher.

The penalty is payable in four equal instalments over 19 months, because Justice Moore found Star's profitability means it is likely to need to raise money to pay.

Star itself told investors in August that anything above AU$100 million would be challenging given its liquidity options.

Star went into a trading halt before the judgment was handed down.