Insights / July 8th, 2024

AUSTRAC Cracks Down On Pubs And Clubs With Gaming Machines

AUSTRAC – Australia’s anti-money laundering and counter-terrorism financing (“AML/CTF”) regulator – has made it clear that compliance in the gaming sector is, and will continue to be, a top priority for the regulator. AUSTRAC’s recent action in this space, which includes undertaking surveillance activity and securing hundreds of millions of dollars’ worth of penalties, demonstrates that this is not an empty threat.

With AUSTRAC targeting all kinds of businesses in the gaming sector, from regional venues to inner-city casinos, pubs and clubs with gaming machines (often referred to as ‘pokies’) should take immediate action to ensure that they are complying with all of their AML/CTF obligations.

How do criminals manipulate gaming machines?

Gaming machines are popular tools for money laundering due to the significant amount of money that is fed through them, together with the fact that they are anonymous, easy to access and cash friendly.

The following are some of the ways that gaming machines are used to launder money:

  • A criminal will deposit a large amount of dirty cash into a gaming machine, gamble for a short period of time and then withdraw the majority of their funds, exchanging their ticket for clean cash from the register.

  • A criminal will recruit a vulnerable regular to engage in the above activity on their behalf in exchange for a small share of the profits. For this reason, pubs and clubs should be wary of both new customers and regulars.

  • A criminal will use dirty cash to purchase a winning ticket from a legitimate player and exchange it for clean cash from the register.

Criminals will often use several different venues to avoid triggering alarm bells, making their illegal activity more difficult to identify.

What AML/CTF obligations do pubs and clubs have?

Pubs and clubs licenced to operate gaming machines have a number of AML/CTF obligations, including obligations to:

  • enrol with AUSTRAC;

  • keep certain records; and

  • report suspicious transactions.

Pubs and clubs licensed to operate more than 15 gaming machines (irrespective of how many they actually operate) have additional AML/CTF obligations, including obligations to:

  • have a compliance officer;

  • conduct a money laundering/terrorism financing risk assessment;

  • adopt and maintain an AML/CTF program; and

  • carry out customer due diligence (KYC) procedures.

What happens if a business fails to comply with its AML/CTF obligations?

AUSTRAC can respond to a business’ failure to comply with its AML/CTF obligations with a range of penalties, including fines and court proceedings. While the penalty that AUSTRAC chooses will depend on the nature of the breach, the regulator has demonstrated that it is not afraid to impose or pursue significant pecuniary penalties in respect of both large and small entities.

In 2023, Crown Melbourne and Crown Perth were ordered by the Federal Court to pay $450 million in penalties for non-compliance with their AML/CTF obligations. In 2024, SkyCity Adelaide was ordered by the Federal Court to pay $67 million in penalties for non-compliance with its AML/CTF obligations. Also in 2024, AUSTRAC issued a $16,500 infringement notice to regional NSW’s Katoomba RSL for failing to comply with its AML/CTF obligation to lodge an annual compliance report.

How can I make sure that I am complying with my AML/CTF obligations?

If you have any questions about what your AML/CTF obligations are or how to comply with them, please get in touch with Richard Hopkin or Emma Johnson from Cowell Clarke’s Financial Services Team. Our team has extensive experience helping clients establish, review and update their AML/CTF compliance frameworks to effectively mitigate the myriad risks posed by money laundering and terrorism financing.

As provided by AUSTRAC CEO Peter Soros, “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.”

If you have any questions about this insight, please get in touch with Cowell Clarke’s Financial Services team by contacting Richard Hopkin, Emma Johnson or Zac Mizgalski.

Thank you to Alex Dorrington for his contribution to this insight.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.

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