Star questioned about approach to money laundering risks
A long-time Star Entertainment director has hit out at the company’s executives for their “lack of maturity” about money laundering risks.
The Australian Financial Review reports that when Sally Pitkin appeared before a NSW inquiry into Star’s suitability to hold a casino licence, she said it wasn’t necessary for the casino to look back at its money laundering risks but to “focus on the future”.
In an independent report written by consultancy KPMG, which Star tried to claim legal professional privilege over to keep from AUSTRAC, revealed the company did not have “mature” anti-money laundering and counterterrorism financing checks to match the high risk nature of the casino business.
The inquiry previously heard from former CEO Matt Bekier, who branded the reports “wrong” and was “hostile” and “rude” to KPMG partners when he met with them to discuss the report.
Mr Bekier gave evidence to the inquiry that he got “frustrated” with the KPMG partners for “what I perceived to be poor client service”, but denied he was trying to get them to change their findings.
The inquiry heard that Star executives met with KPMG several times in June and July 2018 to discuss the report, despite it being finalised.
Ms Pitkin said she had not been aware of that at the time, but it made her question the independence of the report.
“The final report had been issued and I didn’t understand the extent of the interactions and obvious pushback on what was in the report,” she said.
“It could well come close to challenging the independence of KPMG.”
‘Independence’ of report raises eyebrows
She said that it was standard practice for management to have the “opportunity…to see a draft of a report to provide input, to challenge, to question” when external consultants were hired, but that the process was meant to occur before the report was finalised.
The inquiry heard Star’s general manager of compliance and responsible gambling and chief risk officer had already approved the accuracy of KPMG’s report before it was tabled to the board.
Ms Pitkin added the fact Star’s executives challenged KPMG’s report, and failed to convince the consultants to change it, showed they had an outdated understanding of how money laundering risk should be managed.
“In reading the sorts of matters that management raised, I thought it reflected a lack of maturity in their understanding of how they need to lift in AML/CTF terms.”
The report found Star had been applying too low a standard to its anti-money laundering protections and it should benchmark its processes against those of the financial services industry, which had tougher scrutiny of tax transactions.
Ms Pitkin said that management “pushed back” on the suggestion that patrons bringing “significant amounts of money” into the casino should be classified as high money laundering risk though.
“Of course, we know that casinos, that large amounts of cash, create a higher risk of money laundering, and I think that management was stuck in the view of ‘but we’re a casino, we deal with large amounts of cash and provided we follow AML/CTF rules…that’s what’s important’,” she said.
“But KPMG are saying ‘no, look at it through a more mature lens of the risk here because of the volumes of cash’.”
But despite conceding Star’s approach had been immature and that KPMG’s report sparked enhancements in its AML processes, Ms Pitkin denied Star should have queried the money laundering risk posed by existing patrons who would have been classified as high risk by the new scheme.
“Those customers bringing in large amounts of money would have still been dealt with under the prior program where they would have been reported to AUSTRAC on transactions,” she said.
