Big Trouble for Star Entertainment

For the last two years, Crown Resorts has weathered bad publicity and government inquiries stemming from allegations of money laundering, negligence, and ties to criminal organizations. While their problems continue, it looks as though they’re about to have company in the form of fellow Australian gambling giant Star Entertainment.

On Sunday, the trio of The Sydney Morning Herald, The Age, and 60 Minutes released reports showing that Star had enabled money laundering in their Brisbane, Sydney, and Gold Coast casinos. It should be noted that these are the same three media outlets that also released the damning reports regarding Crown.

As expected, the reports were met with a flurry of activity. The stock for Star went into a tailspin, resulting in a loss of almost $1 billion from their market value. Not to be outdone, regulators announced investigations in Victoria, Western Australia, Queensland, and New South Wales.

The Accusations

According to the media reports, here are the most notable sins that Star Entertainment may be guilty of:

• Star accepted VIP gamblers who were known criminals. These individuals included a money launderer, tax cheats, corporate fraudsters, foreign-interference agent, and a cocaine dealer.
• Many of the individuals listed above had been flagged by authorities due to their criminal activities. However, this didn’t stop Star from accepting them.
• When audit specialists KPMG were brought in, they found that Star was “profoundly failing to combat the risk of money laundering, terrorism financing, and corruption with its Sydney and Queensland casinos.”
• It was also revealed that Star’s policies to combat money laundering were not in line with industry standards.
• From 2014 to 2018, Chinese VIPs were allowed to use special credit and debit cards to withdraw hundreds of millions of dollars in order to skirt China’s anti-gambling rules.
• According to the report, this pattern of behaviour went on for about seven years. When the board of directors were made aware, they took no significant action to resolve the issues.

To back up their claims, the involved reporters have cited “internal company documents, court cases and law-enforcement intelligence briefings, as well as a dozen sources with detailed knowledge of Star’s operations.”

It Gets Worse

As if all that wasn’t bad enough, certain activities of Star’s Mark Walker have also come to light. According to the Herald, Walker “maintained a secret and longstanding relationship” with infamous white-collar criminal Michael Gu.

The latter’s property group, iProsperity, went down the tubes last year, with around $245 million still owed to investors. Gu is accused of stealing at least $21 million for himself, and his current whereabouts are unknown.

Walker previously worked for Crown, and iProsperity wired $5.9 million to Crown Melbourne between 2014 and 2017. As The Age noted, it bore “all the hallmarks of money laundering.”

During 2017, Walker started working for Star. When he switched jobs, Gu came along with him. This doesn’t mean they’re guilty of anything involving Crown, but it sure looks suspicious.

Star Entertainment Responds

The day after the report became known, Star issued a press release. It stated “The Star is concerned by a number of assertions within the media reports that it considers misleading.”

It then added, “The Star operates in a heavily regulated industry. We are subject to thorough and ongoing regulatory oversight including compliance checks and reviews across the company’s operations in NSW and Queensland.”

On Tuesday, they followed up with another release.

“Recent media reports have asserted that reports prepared by KPMG in 2018 were kept secret and not adequately acted on. These assertions are incorrect.”

“The KPMG review made a number of specific recommendations that The Star could implement to more effectively identify, manage and mitigate money laundering risks. The Star initiated a program to address all recommendations from the review. That program of work was conducted from mid-2018 to early 2020.”

Learning from Crown’s Failures

At first glance, the situations with Crown and Star look remarkably similar. In both cases, foreign VIPs and accusations of money laundering are at the root of the problem. Also, both companies are developing properties worth billions of dollars, and these issues pose a threat to their success.

However, Star has learned a thing or two after watching Crown over the last two years. Here’s what they’ve done differently:

• They have quickly responded to the allegations and denied any wrongdoing.
• Star began winding down their relationships with junket operators in February, and those have now been halted indefinitely.
• The casino operator is considering cashless payments, which would make it easier to track transactions.

Will this be enough to keep them out of the same regulatory hot water as Crown? Only time will tell.