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AUSTRAC: systemic failures in counter money laundering systems at Crown; proceedings issued.

AUSTRAC, Australia's combined FIU and regulator, yesterday issued civil (not criminal) proceedings against Crown alleging "serious and systemic non-compliance."

The action is against Crown Resources in both Sydney and Melbourne. The allegations are that, despite previous action and warnings, Crown remains short of the minimum standards that AUSTRAC requires.

The scale of the problem is has been demonstrated in the media with allegations of "infiltration by international criminal syndicates and money launderers."

Such is the ever-present threat of all forms of gambling. The reason Casinos attract so much attention is because they are a choke point, much like banks, through which dirty money flows. Failure to put in place and effectively operate counter-money laundering systems is seen as failing to protect society as a whole for the sake of corporate profits.

There are many ways that casinos are exposed to money laundering, many away from the machines and tables.

AUSTRAC says of Crown that it failed to undertake effective know your customer requirements in relation to 60 customers known to be high-risk. Between them, they bet more than AUD70,000 million in so-called "high roller" rooms. Collectively, they lost more than AUD1,100 million between March 2016 and October 2020. Those are big numbers and if we take the Casino's winnings and divide it by 60 people over four years, it's an average of AUD73,333.3 recurring million per person per year. That is a very crude calculation and makes several broad assumptions but it's an indication of why governments are so concerned about such "high rollers."

Crown is being held up as vicariously liable for the actions of its staff. It is alleged that Crown, through its staff, knew that some of those customers were subject to criminal prosecution for financial crimes including money laundering. Others, it is alleged, carried vast sums of money in cash in plastic bags or shoeboxes but Crown did not consider that suspicious.

It appears, however, that Crown may have filed cash transaction reports as required by Australian federal law because AUSTRAC is not prosecuting failure to file those reports. However, AUSTRAC does say that some dealing in large quantities of cash remain anonymous, even now.

In addition, it is alleged that Crown handled more than AUD300 million worth of transactions that "bore the hallmarks" of money laundering and did not file suspicious transaction reports relating to those.

AUSTRAC says that Crown stinted on financial crime risk and compliance while conducting a highly profitable business. By failing to comply with its obligations it had "avoided spending funds on IT, staff and other tools to stop money laundering."

Crown is not the only Australian casino under investigation: The Star Entertainment Group's operations in Sydney, Queensland and Adelaide are in AUSTRAC's sites.

Crown has, since the allegations were first raised, replaced its entire board and many senior managers. AUSTRAC's case is based in an investigation begun in 2020.

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