Investors have been here before and they knew what to do as soon as regulator AUSTRAC was investigating Crown Casino in Melbourne.
Sell first and ask questions later is the only logical reaction as soon as one of Australia’s smallest but most feisty regulators in the form of AUSTRAC gets involved.
It is hard to forget the $1.3 billion civil fine Westpac ended up paying this year – the largest in Australian corporate history – after it was found to have breached anti-money laundering laws 23 million times.
Even though Crown Resorts (ASX: CWN) may not have a case to answer, the prudent thing for investors to do was to mark down the company’s already diminished shares by an instant 6% once the market opened on Monday.
AUSTRAC’s simple job snaring lots of scalps
AUSTRAC’s brief is very simple – it enforces the Federal Government’s Anti-Money Laundering and Counter-Terrorism Financing Act, which was enacted in 2006.
Designed to help police and security agencies stop international crime and terrorism, the Act requires financial institutions and other companies that handle large or cross-border money movements to report certain transactions.
Given some of the fairly unimpressive evidence from Crown major shareholder James Packer and various directors so far to the NSW Independent Liquor & Gaming Regulator, it is hard to be optimistic about the chances that Crown have complied with all of the various AUSTRAC requirements such as having adequate systems to monitor money laundering and terrorism financing risks, identifying customers, keeping all records and reporting any suspicious transactions in a timely way.
Investigation followed controversial junkets
While AUSTRAC didn’t provide too much detail about their investigation, the fact that it started back in September 2019 suggests that it relates to the infamous junket tours that involve operators with alleged organised crime links in Asia and also potential money laundering.
Reports of these junkets led to the NSW inquiry and have also prompted an investigation by the Victorian casino regulator.
According to the 2019 media reports, Crown had set up two shell companies – Riverbank Investments and Southbank Investments – that allowed high rollers to take out lines of credit after depositing in the shell companies’ accounts.
Crime gangs could be involved
Some of the high rollers using these accounts were allegedly linked to organised crime gangs.
Crown told the ASX that it has received a notice from AUSTRAC about potential “non-compliance” and that the regulator had referred the matter to its enforcement team, after which Crown shares fell 6% to $8.45.
AUSTRAC said its concerns examined “Crown Melbourne’s management of customers identified as high risk and politically exposed persons.”
“The potential non-compliance includes concerns in relation to ongoing customer due diligence, and adopting, maintaining and complying with an anti-money laundering / counter-terrorism financing program,” Crown said in the ASX statement.
Crown shares have fallen more than 32% so far this year even in the current period of market strength, with some notably poor performances by Crown directors before the NSW inquiry one of the recent catalysts for the shares to fall.
Crown Resorts chair Helen Coonan has admitted the casino’s vetting process to identify whether Chinese junket operators were linked to organised crime were not “robust” enough.
The former Howard-era Liberal Senator and Minister told the New South Wales gaming inquiry the major casino chain failed to implement adequate risk measures regarding the junkets, which lured VIP players to its gaming venues.
Crown Resorts shares closed down 8.2% at market close on Monday, October 19.