50%

The UK gambling industry could be facing a 50% remote gaming duty tax, as new Chancellor Rachel Reeves searches for revenue-raising measures ahead of a tough first Autumn Budget.

The Guardian reported that one of the ideas being given serious consideration by the Treasury is major changes to the UK’s complex array of gambling taxes. Unlike many of the tax ideas that have been floated by government sources in recent weeks, this one has received little pushback from Whitehall officials, according to the newspaper. 

Plans for the increase reportedly stem from two influential think tanks, which according to the Guardian are also backed by one of the party’s most significant donors. 

A central theme of the Labour government’s initial 100 days in charge has been their commitment to plugging a £22bn gap that they claimed was left by the previous tenure. 

Online casino games are thought to be at the centre of potential tax hikes, as part of a campaign pushed by multimillionaire Labour donor, Derek Webb. 

Webb, who has elevated his stature as a Labour donor in recent years, was also key for the campaign to restrict maximum stakes on Fixed Odds Betting Terminals, a regulation that had a major impact on the retail gaming sector. 

The Institute for Public Policy Research (IPPR), which put forward the proposals, said as much as £2.9bn could be raised now, a figure growing to  £3.4bn by 2030 through the increasing of remote gaming duty to 50%, more than double the 21% it currently sits at. 

Additionally, another think tank backed by Webb, the Social Market Foundation, is reportedly looking at a proposal that would have a smaller impact on the industry, but still strengthen government finances. 

Despite it being seen as a diluted increase in taxes, the plans would still be likely to double taxes paid by gambling companies – another move that would likely lead to backlash from the sector. 

£417m

evoke revenue for the third quarter of 2024 was fuelled by a positive trajectory of gaming for the firm, which grew by 10%. Overall revenue increased by 3% to £417m. 

These figures caused the group to confirm expectations for the second half of 2024 are in line with the mid-term target of 5-9% year-over-year growth.

The quarter marks the first time that the operator has reported growth since the opening quarter of 2022, as it shifts focus from the UK.

It underlines a period of transformation for the operator under the leadership of CEO Per Widerström, with the operator reporting year-to-date revenues standing at £1.27bn (-1%).

Widerström commented: “I have now been in position for a year, and I am pleased that the turnaround of the business is working, with the first quarter of revenue growth since Q1 2022 and positive underlying trends. 

“We are achieving our plans to improve trading in the short-term, while simultaneously radically transforming the Group’s capabilities for the long-term.”

10%

Entain has stated that its performance in the third quarter of 2024 was “ahead of expectations”, as online net gaming revenue (NGR) has risen by up to 10% year-over-year.

However, newly appointed CEO Gavin Isaacs also apprised investors regarding the impact of a potential tax increase on the UK gambling market. Isaacs noted that such increases would “have a materially, detrimental impact on the economic contribution of wider industry”.

The gaming group reiterated its update from last month that its UK&I online operations have returned to YoY growth “sooner than expected”, adding that all key markets delivered growth during the quarter as well.

Following the “stronger than expected” Q3, Entain has upgraded its guidance for FY24 to expect online proforma NGR growth to be mid-single-digit positive on a constant currency basis, as the operator has “increased confidence for the balance of the year.”

Isaacs, who was confirmed as CEO of Entain at the beginning of September, added that the company is “already on a path of strategic and operational improvement”.

£197.4m

Rank Group has lauded a positive period of growth, as UK casino engagement fuelled a net gaming revenue (NGR) increase of 12% to £197.4m. 

For the group’s first quarter reporting period, ending 30 September 2024, Rank saw a 10% increase in land-based NGR, as Grosvenor saw a 13% increase in NGR to £95.3m. 

John O’Reilly, Chief Executive, commented: “We have continued to build on the momentum that we have generated over the past year and a half, and I am very pleased with our start to this financial year.” 

“Rank is now a stronger and more sustainable business, and we are looking forward to the land-based legislative reforms coming to fruition in 2025.”

There was also significant growth for the firm’s Mecca operations, as the NGR of venues grew by 4%, driven by a 5% increase in spend per visit with visits down 1%. 

Furthermore, for its two flagship brands, Mecca and Grosvenor overall digital NGR rose by 15%, as both brands enjoyed significant engagement. 

A$13.1m

The High Court of Australia has ordered SkyCity Entertainment Group to pay an additional A$13.1m (approx €8m) in casino duty to the Treasurer of South Australia over a dispute about loyalty points and gaming revenue.

The dispute was over the interpretation of the Casino Duty Agreement dated 27 October 1999, regarding the “treatment of loyalty points converted to gaming machine play for the purpose of calculating casino duty at the SkyCity Adelaide casino”.

In a statement, the operator said the High Court ruled against SkyCity, confirming the South Australian Court of Appeal’s interpretation of the agreement of “credits on gaming machines arising from the conversion of loyalty points, when played by customers, are to be included in gaming revenue for the purpose of calculating casino duty at the SkyCity Adelaide casino”.

As such, SkyCity Adelaide is now obliged to pay an additional A$10.3m casino duty in addition to A$2.8m “of additional casino duty payable as a consequence of that part of the Court of Appeal’s earlier judgement that was not appealed to the High Court”.

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The dispute was over the interpretation of the Casino Duty Agreement dated 27 October 1999, regarding the “treatment of loyalty points converted to gaming machine play for the purpose of calculating casino duty at the SkyCity Adelaide casino”.

In a statement, the operator said the High Court ruled against SkyCity, confirming the South Australian Court of Appeal’s interpretation of the agreement of “credits on gaming machines arising from the conversion of loyalty points, when played by customers, are to be included in gaming revenue for the purpose of calculating casino duty at the SkyCity Adelaide casino”.

As such, SkyCity Adelaide is now obliged to pay an additional A$10.3m casino duty in addition to A$2.8m “of additional casino duty payable as a consequence of that part of the Court of Appeal’s earlier judgement that was not appealed to the High Court”. 

The High Court has also ruled in favour of the Treasurer of South Australia’s position on the interest clause in the agreement, which amount will be determined by a judge of the Supreme Court of South Australia at a later date.

SkyCity has stated that if the Supreme Court’s decision is unfavourable to SkyCity Adelaide, the casino could be forced to pay penalty interest on the additional casino duty, “which could be up to around A$25.3m”.

As of 30 June 2024, the operator had recognised the provision of A$13.1m concerning the potential additional casino duty payable, but not the possible penalty interest as “there remain a range of potential outcomes and no present obligation exists”.

“This is a long running matter involving highly technical tax issues regarding the calculation of casino duty,” commented Jason Walbridge, CEO of SkyCity.

“Given the complexities, both parties decided to seek declaratory relief through the court. We look forward to the resolution of this matter and will continue to work with RevenueSA to achieve this.”

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In reflection of the financials, CEO Jason Walbridge noted that he is “confident” that the operator is “set up to build” into the future. The operator also reiterated its earnings guidance for FY2025.

‘Challenging operating environment’ results in flat revenue

Publishing its FY24 results, SkyCity declared that underlying revenue, including gaming GST, was NZ$959.6m, flat when compared to the previous year (2023: $957.1m).

The operator noted that revenue was impacted by “reductions in gaming revenue were offset by higher levels of premium table play and non-gaming revenue”. Reported gaming revenue stood at $638.3m.

This resulted in an 8% decline in underlying group EBITDA to $277.8m (2023: $301.8m).

Net profit after tax stood at $123.2m at the end of the reporting period, down 7.2% YoY (2023: $132.8m) “reflecting the impact of the lower earnings” as “depreciation and amortisation, funding costs and tax paid on underlying earnings” were all consistent with last year.

Total reported revenue for SkyCity in FY2024 stood at NZ$928.5m, flat compared to the previous year (2023: $926.2m), while reported revenue from continuing operations was the same figure and flat YoY, resulting in a reported EBITDA of $138.2m, down 16.7% (2023: $165.9m) “due to the difficult operating environment and the impact of the significant accounting adjustments”.

Underlying gaming revenue was $727.7m, down 2.9% YoY (2023: $749.7m), while non-gaming revenue rose by 11.8% to $231.8m (2023: $207.4m). 

Gaming machine revenue fell by 5.1% to $453.2m (2023: $477.4m), table game revenue dropped by 2.4% to $225.6m (2023: $231.3m), premium table revenue improved by 53.6% to $39.5m (2023: $25.7m) and online gaming revenue decreased by 39.2% to $9.3m (2023: $15.4m).

“SkyCity is coming off a very challenging financial year, with the combination of the soft economy, cost-of-living pressures in both New Zealand and Adelaide, and responding to various regulatory matters.”

SkyCity Entertainment Group CEO Jason Walbridge

Reported loss from continuing operations and total net loss for SkyCity was $143.3m, down significantly from the previous year (2023: $8m profit).

The net loss was due to several “significant accounting adjustments, including a $94.3m (A$86.2m) impairment of the SkyCity Adelaide assets and a tax adjustment of $129.6m following changes to New Zealand tax legislation”.

However, SkyCity has reported the “successful early refinance in August 2024 of selected tranches of debt maturing in 2025 and 2026, including a new issue of US$150m of USPP notes (seven-year tenure) and $217.5m of extended syndicated bank facility tranches”.

Walbridge stated: “The earnings we have announced today are a solid result despite the economic circumstances. I am confident SkyCity is set up to build on our amazing business, with a number of important and exciting milestones coming down the pipeline in the next 12 months.

“SkyCity is coming off a very challenging financial year, with the combination of the soft economy, cost-of-living pressures in both New Zealand and Adelaide, and responding to various regulatory matters.”

SkyCity’s net debt for FY24 stood at $663m (2023: $443m) due to “the buy-back of the Auckland car park concession and core capital expenditure during the year of $64m”.

The operator added that it has undrawn debt facilities of $252m and it “remains comfortably within its debt covenant ratios”.

“The recently announced refinance of $217.5m of syndicated bank revolving credit facilities and a new issue of US$150m of United States Private Placement notes, extends the maturity profile of SkyCity’s debt and support ongoing investment in the business,” the operator said.

Property performance

Walbridge also commented on SkyCity’s visitation numbers, in which it had seven million visitors across all four of its sites in FY24 and nearly 490,000 visitors going up the Sky Tower.

However, the spend per customer has fallen, which the CEO says is due to the economic environment.

Revenue per property, SkyCity Auckland improved by 4.1% YoY to $608.3m (2023: $584.1m), Hamilton dropped by 2% to $73.4m (2023: $74.9m), Queenstown grew by 3.9% to $13.6m (2023: $13.1m) and Adelaide decreased by 4.2% to $234.7m (2023: $245.1m).

“While we are continuing to see good visitation numbers across our properties as a whole, the spend per customer has decreased, reflecting the harder economic times everyone is facing,” commented Walbridge.

“We are continuing to focus on new and innovative experiences so that customers see SkyCity as an attractive entertainment destination that delivers great outcomes.”

Walbridge mentioned the settlements SkyCity had reached with various regulators across the year, including with AUSTRAC in Australia and the Department of Internal Affairs (DIA) in New Zealand regarding “historic non-compliance with relevant anti-money laundering and counter-financing of terrorism laws”.

“Progressing the various regulatory matters this year has been a positive step forward for us. That said, there is still more work for us to do as we have not met our own expectations to date.”

SkyCity Entertainment Group CEO Jason Walbridge

The operator has also agreed to temporarily close its Auckland casino gaming areas for five days in September as part of an agreement with the DIA for “historic non-compliance with obligations under its Auckland Host Responsibility Programme”.

In Adelaide, Consumer and Business Services recommenced its independent review into SkyCity Adelaide in June 2024 following the settlement of the AUSTRAC civil proceedings. By 31 December 2024, Brian Martin KC is due to report his findings to the regulator.

Mandatory carded play will also be implemented across all SkyCity casinos in FY26, with New Zealand in July 2025 followed by Adelaide in early 2026, helping the operator manage customers’ duration of play and identify when breaks are needed. 

Walbridge noted: “Progressing the various regulatory matters this year has been a positive step forward for us. That said, there is still more work for us to do as we have not met our own expectations to date.

“Our uplift programmes are our priority, and we now have a significant Transformation Programme underway with a focus on building capability to ensure compliance with our regulatory requirements. Caring for our customers will continue to be at the heart of what we do.

“A key milestone in customer care and experience will begin next year with the introduction of 100% carded play across our New Zealand casinos by July 2025 and at the SkyCity Adelaide casino by early 2026. Once implemented, carded play will be the only way to game at SkyCity. This will help us and our customers monitor their play and identify when breaks are needed.”

Outlook

Looking ahead, SkyCity noted that its FY25 earnings guidance remains the same as provided in July – underlying group EBITDA of between $245m and $265m and no dividend expected.

The operator added that it continues its work on two other key projects – the New Zealand International Convention Centre (NZICC) and online casino gambling regulation in New Zealand.

Walbridge said: “It was a pleasure to open Horizon by SkyCity last month. It really showed what a treat we are in for with the New Zealand International Convention Centre. The NZICC will not only be a building that brings the world to us but also a stunning piece of architecture that will showcase the best of Aotearoa to the world.

“And as the New Zealand Government continues to work on online casino gambling regulation, we are enhancing our internal capabilities in preparation for a regulated market.

“We need to be mindful about the regulation of online casino gambling. Allowing too many providers could lead to an overwhelming level of gambling advertising in New Zealand. We already see that now. We want to see providers who have skin in the game in New Zealand and are committed to the public health-based approach we take to gambling.

“There is a lot going on over the next 12 months. It is going to be all about continuing to build our business, both metaphorically and literally.”

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Last month, SkyCity’s subsidiary SkyCity Casino Management Limited reached an agreement with the Secretary for Internal Affairs regarding the government body’s application to temporarily suspend the firm’s casino operator’s licence. 

The agreement was reached to temporarily close the gambling area of SkyCity Auckland after the casino failed to meet its host responsibility obligations in respect of a former customer.

The temporary closure will apply only to SkyCity Auckland’s gambling area and the food and beverage outlets within that area, while all other areas – hotels, Sky Tower, theatre and restaurants and bars outside the gambling area – will remain open as usual.

SkyCity added that it is “committed to ensuring that its staff are looked after during the closure period” and that all staff will be “rostered and paid as usual”.

Jason Walbridge, CEO of SkyCity, commented: “The closure is the result of failings on the part of SkyCity, which we have accepted responsibility for. We failed to meet the standards expected of us in this case.

“Over recent years, we have made significant progress to strengthen how we manage risk across the SkyCity Group, but there is still work to do. We are well underway and remain committed to prioritising the care of our customers. We understand that the privilege of holding a casino licence comes with significant responsibilities and obligations.”

The secretary initially made an application to temporarily suspend SkyCity Auckland’s licence for a period in the range of 10 days in September 2023. It followed a complaint to the Department of Internal Affairs in February 2022 by a former SkyCity Auckland casino customer who gambled between August 2017 and February 2021.

It was alleged by the secretary that SkyCity Casino Management Limited failed to comply with SkyCity Auckland Host Responsibility Programme requirements about the detection of incidents of continuous play by the customer.

SCML acknowledged through the agreement that it didn’t meet SkyCity Auckland HRP requirements and the detection of some incidents of continuous play by the customer “due to a design error in a technology system” developed by the operator to monitor carded customers’ continuous play. The operator noted that this has since been rectified.

In addition, SCML accepted that it “failed to exercise the level of vigilance required by the HRP to use staff observation and intervention independently” as well as technology to spot continuous play incidents by the customer and act appropriately – especially in cases where problematic behaviour is silent or hidden.

A formal apology has also been issued by SCML to the secretary for the failures and SkyCity Auckland’s gambling area will now be closed temporarily for five consecutive days in September.

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In a statement on the government’s website, Minister of Internal Affairs Brooke van Velden has said that a “high-level approach” to online casino regulation has been agreed to by the government, “designed to minimise harm, support tax collection and provide consumer protections to New Zealanders”.

Van Velden commented: “There will be a licensing system for online casinos, where operators will need to comply with a set of criteria before they will be able to offer services to New Zealanders. It will be illegal for unlicensed operators to offer services to New Zealanders.

“Licensing is how we regulate most forms of gambling domestically. This is not intended to increase the amount of gambling New Zealanders do but to ensure operators meet requirements for consumer protection and harm minimisation, as well as paying tax.”

Regarding licences, only a limited number will be allocated via auction, each lasting three years and being conditional on meeting regulatory requirements.

Online gambling will only be prohibited for those aged 18 or over, with operators only being able to offer online casino games, not sports betting or lottery.

In addition, licensed gambling operators will be allowed to advertise, but with strict limits in place. Previously, advertising by licensed gambling operators was prohibited. Sponsorship by online casinos will remain illegal.

Van Velden added: “I expect the new regulatory system to be in place from early 2026 and the public will have the opportunity to provide feedback during the Select Committee process. Once established, the Department of Internal Affairs will be the regulator.”

The New Zealand minister added that further details regarding the regulation of online casinos will be announced later this year.

SkyCity Entertainment Group has also provided a statement showing its support for online casino regulation.

“The SkyCity Entertainment Group remains supportive of the regulation of online casino gaming in New Zealand with an emphasis on strong host responsibility and delivering community benefits in New Zealand.”

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As a result, SkyCity Auckland’s gambling area will be closed for five consecutive days in 2024, with the agreement conditional “on the Gambling Commission consenting to the withdrawal of the application by the secretary”, which has been filed.

The operator has also forecasted an impact of approximately NZ$5m on its underlying group EBITDA in FY25 following the temporary closure.

The application to temporarily suspend SkyCity Auckland’s licence for a period in the range of 10 days was initially made by the secretary in September 2023. It followed a complaint to the Department of Internal Affairs in February 2022 by a former SkyCity Auckland casino customer who gambled between August 2017 and February 2021.

The secretary alleged that SCML failed to comply with SkyCity Auckland Host Responsibility Programme requirements about the detection of incidents of continuous play by the customer.

Through the agreement with the secretary, SCML has acknowledged that it didn’t meet SkyCity Auckland HRP requirements and the detection of some incidents of continuous play by the customer “due to a design error in a technology system” developed by the operator to monitor carded customers’ continuous play.

The operator noted that this has since been rectified.

“SkyCity places great importance on host responsibility and takes these failures very seriously. On behalf of the SkyCity board and management team, I accept and apologise for these failures.”

Callum Mallet, Chief Operating Officer New Zealand at SkyCity

In addition, SCML accepted that it “failed to exercise the level of vigilance required by the HRP to use staff observation and intervention independently” as well as technology to spot continuous play incidents by the customer and act appropriately – especially in cases where problematic behaviour is silent or hidden.

A formal apology has also been issued by SCML to the secretary for the failures and SkyCity Auckland’s gambling area will be closed for five consecutive days in 2024 on dates agreed to by both parties “to resolve the matter in an expedient manner and without undue delay”.

Callum Mallet, Chief Operating Officer New Zealand at SkyCity, commented: “SkyCity places great importance on host responsibility and takes these failures very seriously. On behalf of the SkyCity board and management team, I accept and apologise for these failures.”

SkyCity’s Chair, Julian Cook, noted: “Reaching this agreement to close the SkyCity Auckland gambling area for five days resolves this matter. However, there is still considerable work required and underway to improve our risk systems, including our approach to mitigating financial crime and problem gambling.

“It is clear that historically SkyCity’s focus, resources and investment have fallen short of what was required of the business. This is not acceptable and, as part of meeting our regulatory obligations and wider social licence, we are committed to fully addressing this.”

“There is still considerable work required and underway to improve our risk systems, including our approach to mitigating financial crime and problem gambling.”

Julian Cook, Chair at SkyCity

As part of a multi-year transformation programme established in 2021 to strengthen risk management across the SkyCity Group, the company has undertaken several actions.

Measures include refreshing its board with specialist risk expertise directors; a Board Risk and Compliance Committee to oversee AML/CFT, host responsibility, risk and other compliance obligations; a Board of Transformation Sub-Committee to take charge of the transformation programme; and adopting three lines of accountability control framework.

A Group Chief Risk Officer was also appointed; enhancement and investment in further AML/CFT resourcing and capability, processes and systems; higher standards of due diligence on customers, lowering cash thresholds for enhanced customer due diligence and ceasing junket operators deals; and increase financial crime, risk and compliance and host responsibility teams capacities.

SkyCity has also reduced risk and complexity with a lower risk tolerance to limit ways customers can transact; enhanced facial recognition technology in Auckland and Hamilton to monitor continuous play; increased ATM monitoring in Auckland and Hamilton for withdrawals and declined transactions; increased customer interactions to assess for problem gambling signs; and rolled out an Advanced Host Responsibility staff training programme for frontline staff.

“It is encouraging to see the work SkyCity has already done to lift its performance in this area and its public commitment to continue to improve.”

Department of Internal Affairs

Lastly, the operator has committed to mandatory carded play across New Zealand casinos by mid-2025, and at its Adelaide casino by the end of next year.

The Department of Internal Affairs added: “The Department acknowledges the swift action taken by SkyCity to improve their system for detecting indicators of potential problem gambling after being alerted to the issue relevant to this case, and appreciates their proactive and pragmatic approach to resolving the complaint. 

“It is encouraging to see the work SkyCity has already done to lift its performance in this area and its public commitment to continue to improve.”

Reflecting on the SkyCity Auckland five-day closure, the group noted that the impact on underlying group EBITDA in FY25 is expected to be around NZ$5m. As a result, underlying group EBITDA for FY25 is now expected to fall between $245m and $265m.

This figure was previously between $250m and $270m, which did not include any potential temporary licence suspension impact, but it did incorporate the temporary closure of the Auckland casino’s gambling area.

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Through the agreement, GiG Comply will assist SkyCity in monitoring affiliate marketing, making sure that it is abiding by brand guidelines and regulatory requirements, with an emphasis on responsible gambling and safeguarding the brand.

Mads Birch Jespersen, Director of Marketing & Media from SkyCity, stated: “In a rapidly evolving online casino landscape like New Zealand and given the comprehensive compliance standards that SkyCity is determined to uphold, GiG Comply offers an additional filter for us to meet these standards.

“The tool allows us to explore and expand our online presence while keeping everything in line within our regulatory strategy.”

Gentoo Media noted that the link-up demonstrates the two parties’ dedication to high compliance and brand protection standards, with SkyCity able to meet ever-changing igaming regulatory requirements.

“We are thrilled to add SkyCity to our growing list of partners for GiG Comply, and we look forward to assisting them with their compliance strategy, safeguarding their brand,” added Rasmus Bank Nielsen, Head of GiG Comply.

“We hope our new partnership with SkyCity is the start of a long-standing collaboration to strengthen their affiliate marketing compliance, ensuring that they will remain in control of all of their marketing, and are in line with responsible gaming.”

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After brokerage and legal costs, the casino operator’s shareholding of around 10 per cent in the online gaming provider and media services operator is expected to generate net proceeds of approximately NZ$55m (€31m).

SkyCity noted that it intends to use the sale’s proceeds to “pay down debt as part of its ongoing prudent approach to capital management”.

Acquiring the shareholding in April 2022 for €25m (approximately NZ$40m at the time), the casino operator explained that it has divested in GiG because the shareholding is “non-core to its ongoing operations and is now not considered strategically necessary”.

However, SkyCity added that it continues to have a “valuable relationship” with GiG through its involvement with SkyCity Online Casino.

SkyCity’s divestment comes as GiG officially launches the split of the company into two separate entities, GiG Media and Platform & Sportsbook, with the former being rebranded as Gentoo Media.

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The resumption of the investigation follows the conclusion of the casino’s proceedings with the Australian Transaction Reports and Analysis Centre for its breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

Investigations into SkyCity Adelaide began in July 2022, after Consumer and Business Services, the South Australia gambling regulator, appointed Martin to conduct an independent review under section 22(2) of the Casino Act 1997 (SA) regarding “the suitability of SkyCity Adelaide to continue to hold the SkyCity Adelaide casino licence and the suitability of SkyCity to continue to be a close associate of SkyCity Adelaide”.

However, in February 2023, the investigation was put on hold as Martin advised former Liquor and Gambling Commissioner Dini Soulio that he was unable to determine the question of whether the casino was suitable to hold a licence until the AUSTRAC proceedings had been resolved.

SkyCity Adelaide was then directed by the commissioner to appoint an independent monitor to “oversee a program of work aimed at ensuring the casino was meeting its anti-money laundering and counterterrorism financing obligations and its obligations in relation to minimising gambling harm”.

Last week, following joint submissions filed by SkyCity and AUSTRAC, the Federal Court of Australia ordered SkyCity Adelaide to pay a A$67m penalty to AUSTRAC for the AML/CTF Act breaches.

With the conclusion of the AUSTRAC proceedings, Acting Liquor and Gambling Commissioner Fraser Stroud has requested for Martin to recommence the investigation, which is expected to be completed by the end of the year.

“Given the AUSTRAC proceedings have now been finalised, I have determined that Mr Martin’s review should recommence,” commented Stroud.

“Given his knowledge and understanding of the subject matter and the considerable work he had done prior to the AUSTRAC proceedings beginning, resuming this work will be the most effective way to determine the suitability of the casino licensee.

“Since Mr Martin’s review was placed on hold, Kroll Australia has been appointed to oversee SkyCity Adelaide’s work in addressing deficiencies in its anti-money laundering and counter-terrorism financing obligations.

“These developments will be taken into account as Mr Martin resumes his investigation.”

In a statement, SkyCity and SkyCity Adelaide noted that they will “continue to cooperate with Consumer and Business Services and the Acting Commissioner in relation to the independent review”.

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SkyCity has also been ordered to pay the Australian Government agency’s costs of $3m.

Civil penalty proceedings were commenced by AUSTRAC in December 2022, analysing historical contraventions of the AML/CTF Act during the period of December 7, 2016 to December 14, 2022.

This action stemmed from a compliance campaign initially started by the agency in September 2019.

Last month, SkyCity and AUSTRAC filed joint submissions with the Federal Court, with the operator admitting that it operated in contravention of the AML/CTF Act under two different sections.

• Section 81 – its AML/CTF Programs did not meet the requirements of the AML/CTF Act and AML/CTF Rules.
• Section 36 – it did not carry out appropriate ongoing customer due diligence with respect to certain higher-risk customers and customers transacting through higher-risk channels.

The court found that SkyCity’s AML/CTF programs did not meet AML/CTF Act requirements and that appropriate ongoing customer due diligence was not carried out.

Justice Lee agreed with the $67m penalty for SkyCity, which AUSTRAC says “takes into account SkyCity’s cooperation during the investigation and admissions enabling early resolution of the proceedings”.

This is also the second civil penalty the agency has secured against Australian casinos, as last year, the Federal Court ordered Crown Melbourne and Crown Perth to pay a $450m penalty over two years for breaches of the AML/CTF Act.

AUSTRAC stated that SkyCity admitted that its contraventions “made it vulnerable to criminal exploitation, and exposed the Australian community and financial system to money laundering and terrorism financing risk”.

In addition, the operator said that its failure to comply with the AML/CTF Act “allowed high-risk customers to move millions of dollars through the casino, in ways that made the source and ownership of the funds unclear”.

The agency noted that the casino offered “services through high-risk channels and to high-risk customers without appropriate risk-based controls” and failed to carry out required checks on 121 customers, “including where SkyCity knew customers were the subject of law enforcement interest, or where there were indications that some posed a higher risk of money laundering”.

According to AUSTRAC, SkyCity also did not establish an “appropriate framework to ensure adequate board and senior management oversight of its AML/CTF programs”.

The agency added that SkyCity has taken steps to address the issues identified, but the remediation remains ongoing.

Peter Soros, acting CEO of AUSTRAC, commented: “Criminals will always seek to take advantage of the gambling sector to clean their dirty money. If casinos and other gambling entities have weak anti-money laundering systems and controls, they leave themselves vulnerable to criminal exploitation.

“Today’s result shows AUSTRAC is prepared to take action when businesses, including casinos, fail to comply with the legislation. Businesses who ignore their obligations are affecting the Australian community by leaving the door open to criminal activity.

“Money laundering is not a victimless crime. It happens because criminals are trying to clean their dirty money obtained by lucrative illegal activities like trafficking drugs or humans, and it is often reinvested to further criminal enterprises and amplify these harms.”

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