Chapter 06

Money laundering

Introduction

1. Money laundering is the act of disguising or legitimising the origins of money used in or derived from crime.¹
2. By disguising the instruments and proceeds of crime, criminals are better able to avoid detection, prosecution and the confiscation of their illicit funds under proceeds of crime legislation.²
3. Money laundering has devastating effects. It enables almost all serious and organised crime, facilitates tax evasion and undermines the integrity of the legitimate economy.³ Money laundering allows criminals to hide and accumulate wealth, avoid prosecution, evade taxes, increase profits through reinvestment and fund further criminal activity.⁴ Money laundering is itself a crime, attracting penalties of up to life imprisonment.⁵
4. In 2015, the then Australian Crime Commission (ACC) estimated that in the two years prior, serious and organised crime cost the country $36 billion.⁶ Money laundering both supports and conceals those crimes and was recognised by the ACC as one of three critical organised crime risks.⁷
5. In 2011, Australia’s financial crime regulator, AUSTRAC, published a report on money laundering in Australia. AUSTRAC explained money laundering and its consequences in the following way:

   Criminals generate profits from illegal activities such as fraud, drug trafficking, tax evasion, people smuggling, theft, arms trafficking and corrupt practices. They rely on laundering or cleaning this ‘dirty’ money to legitimise or hide its illegal origins.

   Money laundering involves processing illicit profits in ways which mask ownership and make funds appear to have come from legitimate sources. This enables criminals to hide and accumulate wealth, avoid prosecution, evade taxes, increase profits through reinvestment, and fund further criminal activity, including terrorism.⁸

6. At least $10 billion is estimated to be laundered through the Australian economy annually.⁹

The vulnerability of casinos to money laundering

7. Gaming venues are an ideal location in which to launder money.¹⁰ They are one of the few remaining institutions where cash is commonplace. Casinos in particular present an attractive environment for money laundering.¹¹ They are notorious for attracting money launderers.¹²
8. It is not only Australian criminals and crime syndicates who seek to launder the proceeds of their crimes. Many foreign nationals come to Australia and its casinos with the same objective: to transform and clean illegal funds into usable currency.
9. Casino operators are not unlike banks in that they offer patrons a wide range of financial services: they maintain customer accounts, exchange foreign currency, facilitate electronic funds transfers, act as money transmitters and cheque cashiers and themselves write cheques.¹³ Often these services are available 24 hours a day.¹⁴
10. It is the variety, frequency and volume of financial transactions that casinos undertake, together with their cash-intensive nature and round-the-clock accessibility, that makes casinos particularly vulnerable to money laundering.¹⁵
11. Because cash is an anonymous store of value and leaves no audit trail, it is a medium favoured by criminals.
12. There are several ways to launder money through a casino. Initialism, a specialist AML consultancy engaged by Crown Resorts, identified 51.¹⁶
13. Obvious examples include:
    • Cash derived from a criminal enterprise being used to purchase casino chips for the ostensible purpose of gambling and those chips then being redeemed (as purported ‘winnings’) in cash, cheque or money transfer. Following redemption, the funds appear to have been derived from a legitimate source, namely, from gambling activity.
    • A criminal organisation deposits funds into a casino operator’s bank account for use by a casino patron. The patron then purchases chips with the credit in their account before later redeeming those chips, again creating the appearance that the funds have been derived from a legitimate source.¹⁷
14. Other methods of money laundering employed at a casino may involve the exploitation of the following features and activities at casinos.
15. Casino VIP rooms and high-stakes gambling:
    • Casino VIP rooms offer exclusive access to high-stakes gaming tables, where high-value bets are routinely placed, if not required as a condition of entry. High-stakes gaming is vulnerable to abuse because it is common for players to gamble with large volumes of cash, the source and ultimate ownership of which may not be readily discernible.¹⁸
16. Junkets:
    • For reasons discussed at length in Chapter 7, junkets are widely recognised as being susceptible to exploitation by money launderers. Features of junkets that make them vulnerable include: (a) people associated with junkets carrying large sums of cash into or out of the country; (b) junket operators moving large sums of money electronically between casinos and jurisdictions; and (c) layers of obscurity around the source and beneficial ownership of money used on junket tours.¹⁹
    • In his evidence, A Police Officer in the Organised Crime Intelligence Unit of Victoria Police observed that, in their experience, money laundering through junkets at the Melbourne Casino was ‘rife’, with ‘money that we highly suspected was illicit … flooding into junket accounts on a daily basis’.²⁰
17. Electronic gaming machines:
    • EGMs, known colloquially as ‘pokies’, offer criminals an accessible way to launder smaller sums of criminal proceeds. Criminals may launder illicit cash through EGMs by claiming gaming machine payouts from legitimate players (that is, paying cash to a player who has accumulated credits and then requesting a cheque from the gaming venue in a sum equivalent to those credits) or by putting large amounts of cash or credits through an EGM and then converting the credits to cash in the payout voucher as ‘winnings’.²¹
18. Multiple jurisdictions:
    • Where a casino operator operates casinos across multiple jurisdictions, criminals may seek to convert chips purchased with dirty money at one casino into credit to be transferred to a second casino in another jurisdiction. Once transferred, the credit can be converted back to chips at the second casino and those chips later redeemed, with the funds appearing to have been derived from a legitimate source. Because the transaction takes place in stages, across casinos and jurisdictions, it is difficult for staff at a single casino to identify the transaction as suspicious and for any single regulator to detect it.²²
19. Structuring:
    • Structuring refers to the practice of deliberately splitting what could be a single cash transaction into several smaller transactions, each of which is less than $10,000 individually but which collectively equal or exceed $10,000.²³ Cash transfers of $10,000 or more constitute ‘threshold transactions’ under the AML/CTF Act, which must be reported to AUSTRAC. Structuring is done to avoid the transfer of cash coming to the attention of AUSTRAC.
    • It is possible that a person might deposit two or more sums of less than $10,000, but which together exceed $10,000, in short succession for legitimate gaming or other reasons. While such transactional behaviour is an indicator that money laundering may be occurring, it is not in and of itself proof of money laundering.²⁴
    • If carried out for the sole or dominant purpose of not giving rise to a ‘threshold transaction’ (and a corresponding ‘Threshold Transaction Report (TTR)’ to AUSTRAC) under the AML/CTF Act, structuring is a criminal offence attracting a penalty of up to five years’ imprisonment.²⁵
20. Cuckoo smurfing:
    • Cuckoo smurfing refers to a process where the flow of a legitimate payment is intercepted and replaced with a deposit of illicit funds by one or more third parties.²⁶
    • Cuckoo smurfing is facilitated by professional money laundering syndicates that work with a corrupt remitter based overseas. The corrupt remitter:
      • accepts an instruction from a customer to make a payment to an Australia-based beneficiary customer; and
      • hijacks the money transfer coming into Australia in order to place funds that are sourced from criminal activity into the Australia-based beneficiary account.²⁷
    • Generally, the beneficiary customer receiving the funds is expecting legitimate funds
      to be deposited into their account and is not aware that the funds transferred are the proceeds of crime.²⁸
    • The term ‘cuckoo smurfing’ is used because of similarities between this money laundering method and the activities of the cuckoo bird. Cuckoos lay their eggs in the nests of other bird species, which then unknowingly take care of the eggs, believing them to be their own.²⁹ Similarly, the Australian beneficiary customer may be unaware that the funds transferred into their account are the proceeds of crime and that these funds have been deposited into their account through a criminal process.³⁰
    • The following picture from a joint Australian Federal Police (AFP) and AUSTRAC fact sheet on cuckoo smurfing explains how the process works:

21. Criminals who launder money at a casino by exchanging dirty money for chips to then be redeemed as purported winnings may be motivated to engage in game play before redemption. This is because actual gambling will help avoid their conduct appearing suspicious to casino staff (it otherwise involves converting money into chips and those chips back to money for no readily apparent legitimate purpose). Any money lost in the process of gambling is regarded as an acceptable ‘cost of doing business’.
22. Insofar as certain money laundering methods increase levels of game play within a casino, casino operators stand to benefit. The more robust and effective their AML measures, the less revenue they will generate.
23. A casino operator who is not of good repute, having regard to their character, honesty and integrity, may be tempted to turn a blind eye to money laundering in their casino in pursuit of profit. This is one reason why the Casino Control Act is concerned with the character (and financial soundness) of a casino licensee and their ongoing suitability.³¹
24. A key aim of the Casino Control Act is to ensure that the management and operation of casinos remains free from criminal influence and exploitation.³²
25. A casino operator who knowingly permits its operations to be exploited by money launderers, and potentially also one who unknowingly does so, cannot be suitable to hold or continue to hold a casino licence under the Casino Control Act. Neither can a casino operator who is reckless as to the possibility of such exploitation.
26. A difficulty for casino operators in this respect is that there is ‘often little observable basis for distinguishing between those patrons laundering funds in the casino and all other casino patrons’.³³ This difficulty is compounded by the fact that there is no single method of money laundering and, over time, existing methods of money laundering may evolve and new methods be developed in an attempt to sidestep existing counter-measures and exploit new technologies.³⁴
27. In order for a casino operator to effectively mitigate the risk that its services will be used to launder money and, in turn, enable serious and organised crime, it must: (a) be acutely aware of the indicators of money laundering in a gaming environment; (b) have in place robust systems to detect and deter such conduct; and (c) ensure that those systems are regularly reviewed and functioning as intended. This much can be expected of a suitable licensee and is, by and large, mandated by legislation.

The history of AML/CTF regulation in Australia

28. The Commonwealth Government first enacted legislation to combat money laundering by the Cash Transaction Reports Act 1988 (Cth) (CTR Act). The CTR Act was the result of several royal commissions that uncovered links between tax evasion, fraud, organised crime and money laundering.
29. The CTR Act established the Cash Transaction Reports Agency and had as an aim the tracking of cash transactions.³⁵ The Act required cash dealers to report cash transactions of $10,000 or more to the Director of the Cash Transaction Reports Agency. A ‘cash dealer’ included ‘a person who carries on a business of operating a gambling house or casino’.³⁶
30. In 1989, the Financial Action Task Force (FATF) was established to lead international efforts to fight money laundering. The FATF is a 39-member intergovernmental body that sets global AML and CTF standards. Australia is a founding member of the FATF.³⁷
31. In 1990, the FATF issued a series of 40 recommendations designed to be enacted in national legal systems to help better combat money laundering.³⁸
32. Some of the recommended measures were already embodied in the CTR Act. To meet others, the CTR Act was significantly amended.³⁹ It was renamed the Financial Transaction Reports Act 1988 (Cth) (FTR Act) and, to reflect its broader remit, the Cash Transaction Reports Agency was renamed AUSTRAC.⁴⁰
33. From time to time since 1990, the FATF has revised its recommendations to account for evolving and increasingly sophisticated money laundering techniques and to strengthen existing AML/CTF measures.⁴¹ New iterations of the FATF’s recommendations were published in 1996, 2003 and 2012, with the 2012 recommendations updated in October 2020.⁴²
34. In 2005, the FATF evaluated Australia’s compliance with its 2003 recommendations on money laundering, and nine special recommendations on terrorism financing. At that time, the Commonwealth was already reviewing Australia’s AML/CTF regime.⁴³ These events culminated in the enactment of the AML/CTF Act on 12 December 2006, together with the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (AML/CTF Rules) made under section 229 of that Act. In performing his or her functions under the Act, the AUSTRAC CEO must have regard to any relevant ‘FATF Recommendations’.⁴⁴
35. The AML/CTF Act largely replaced the FTR Act. AUSTRAC continued in existence under its auspices.⁴⁵ The AML/CTF Act contains a host of measures designed to detect, deter and disrupt money laundering and other serious financial crimes. It applies to providers of designated services, including gambling services. Accordingly, Crown Melbourne is subject to a number of obligations imposed by the Act.

The current AML/CTF regime

36. The AML/CTF Act and the AML/CTF Rules establish a framework under which ‘reporting entities’ are required to:
    • enrol with AUSTRAC
    • report certain currency transactions to AUSTRAC
    • provide their designated services only in accordance with an AML/CTF program having certain characteristics
    • lodge transaction and compliance reports with AUSTRAC
    • comply with record-keeping requirements related to the provision of the designated services.⁴⁶
37. Any entity that provides a ‘designated service’ is a reporting entity.⁴⁷ Examples of designated service providers include banks, credit unions, remittance dealers, casinos and other providers of ‘gambling services’.⁴⁸
38. Along with a host of other services provided by casinos, gambling services include accepting bets, paying out winnings, allowing a person to play a gaming machine and exchanging money for chips.⁴⁹
39. Crown Melbourne is a reporting entity for the purposes of the AML/CTF Act.
40. The AML/CTF Act imposes two primary obligations on reporting entities:
    • the obligation to comply with the reporting obligations in the Act within specified timeframes
    • the obligation to implement an AML/CTF program that has certain mandatory features.⁵⁰
41. It is an offence for a reporting entity to provide designated services without an AML/CTF program and otherwise than in accordance with that program.⁵¹
42. The primary purpose of the program is to ensure that a reporting entity identifies, manages and mitigates the risk that the designated services it provides will be exploited to launder money or finance terrorism.⁵²
43. An AML/CTF program is ordinarily required to have two parts: Part A (general), which sets out procedures to identify, manage and reduce the risk that the reporting entity ‘reasonably faces’ to its provision of services that might involve or facilitate money laundering or terrorism financing; and Part B (customer information), which sets out procedures for identifying, collecting and verifying certain customer information (known as KYC).⁵³
44. A reporting entity is obliged to carry out customer due diligence in the manner prescribed by Part B of its AML/CTF program.⁵⁴
45. The AML/CTF Act requires the content of an AML/CTF program to be risk based.⁵⁵
46. When determining appropriate systems and controls to adopt in its program, a reporting entity must have regard to the nature, size and complexity of its business and the type of money laundering/terrorism financing risk that it might reasonably face.⁵⁶ In identifying the risk, it must consider:
    • its customer types, including any politically exposed persons
    • the types of services it provides
    • the methods by which it delivers those services
    • the foreign jurisdictions with which it deals.⁵⁷
47. The requirement that a reporting entity has and implements an AML/CTF program tailored to its particular circumstances means that the burden of detecting, deterring and disrupting money laundering falls not only on AUSTRAC as the relevant regulator, but also on reporting entities directly. It is those entities, at the coal face, who are best placed to stop money laundering before it occurs, or to detect and report the activity.

The reporting requirements under the AML/CTF Act

48. In addition to implementing a risk based AML/CTF program, the AML/CTF Act obliges reporting entities to notify AUSTRAC of suspicious transactions, threshold transactions and international funds transfer instructions.⁵⁸
49. In the circumstances specified in the AML/CTF Act, reporting entities are required to submit:
    • SMRs⁵⁹
    • TTRs⁶⁰
    • International Funds Transfer Instruction (IFTI) reports⁶¹
    • AML/CTF compliance reports.⁶²
50. Each report must take a particular form and be submitted within a particular timeframe. AUSTRAC may then request additional information.⁶³
51. Generally speaking, an SMR must be submitted where a reporting entity has reasonable grounds to suspect that a designated service it has provided or proposes to provide may involve the proceeds of crime or otherwise be related to money laundering, the financing of terrorism, tax evasion or some other serious offence. An SMR must also be submitted if the reporting entity has reasonable grounds to suspect that the person with whom they are dealing is not who they say they are.⁶⁴
52. Among other things, the SMR must contain details of:
    • the reasonable grounds for suspicion relating to the suspicious matter
    • the person or entity to which the report relates (including in the case of the individual, if known, their full name, telephone number, address, date of birth, occupation, country of citizenship and any aliases used and, in cases where their identity is unknown, a description of the person and an indication as to whether the reporting entity holds any video footage or photographs of the person)
    • the relevant designated service involved and whether it was or is proposed to be provided.⁶⁵
53. Depending on the grounds for suspicion, a reporting entity is obliged to submit an SMR to the AUSTRAC CEO within 24 hours to three business days of forming the relevant suspicion.⁶⁶ Failure to comply is an offence under the AML/CTF Act.⁶⁷
54. A reporting entity must not disclose to any person other than AUSTRAC that it has submitted or is required to submit an SMR, or any information from which those facts could reasonably be inferred.⁶⁸ An unwarranted disclosure is referred to as ‘tipping off’ and it is an offence under the AML/CTF Act, punishable by up to two years’ imprisonment.⁶⁹
55. A TTR must be submitted when a reporting entity starts to provide or provides a designated service to a customer that involves a ‘threshold transaction’.⁷⁰ As noted earlier, a threshold transaction is one that involves the transfer of physical currency of $10,000 or more or its foreign currency equivalent.⁷¹ Physical currency means cash.⁷² The transfer may involve either paying or receiving cash.⁷³
56. Among other things, the TTR must contain details of:
    • the customer’s full name, date of birth, address and, if known, any aliases used by the customer, any business name(s) and ABN(s) under which they operate and their telephone number (or similar details if the person conducting the threshold transaction is not the customer)
    • the transaction itself
    • the recipient of the money.⁷⁴
57. A reporting entity is obliged to submit a TTR to the AUSTRAC CEO within 10 business days after the day on which the transaction took place.⁷⁵ Failure to comply is an offence under the AML/CTF Act.⁷⁶
58. An IFTI report must be submitted when a person receives instructions in connection with the electronic transfer of funds into or out of Australia.⁷⁷
59. Depending on the type of IFTI, an IFTI report must contain details of:
    • the names of the payer and payee
    • complete payer information or tracing information depending on the type of transfer
    • the name and identity of the ordering institution or beneficiary institution and any relevant branch information
    • the amount and currency transferred
    • the date of transfer.⁷⁸
60. A person must submit an IFTI report to the AUSTRAC CEO within 10 business days after the day on which the person sent or received instructions about the relevant transfer.⁷⁹ Failure to comply is an offence under the AML/CTF Act.⁸⁰
61. The quality, accuracy and timely provision of these reports is important. Together with information and reports AUSTRAC receives from other sources, these reports equip AUSTRAC with the data it requires to identify and analyse transactions of concern and patterns of suspicious activity. The intelligence can then be shared with appropriate law enforcement bodies and actioned as required.⁸¹ The failure to provide these reports, or to provide them in a timely fashion, risks money laundering going undetected and unchecked. At best, its identification is made more difficult or delayed.

Crown’s AML/CTF program

62. As required by the AML/CTF Act, Crown has an AML/CTF program.⁸² It is a joint program that applies to Crown Melbourne, Crown Perth, Crown Sydney and any other Crown company that might provide designated services from time to time (and that does not already have an AML/CTF program of its own).⁸³
63. The current iteration of the joint Crown AML/CTF Program was approved by the Crown entities to which it applies, including Crown Melbourne, at a joint board meeting on 2 November 2020.⁸⁴ At that meeting, Crown Melbourne resolved to appoint Mr Nicholas Stokes as its AML/CTF Compliance Officer.⁸⁵

Money laundering at Crown Melbourne

64. The ability of a casino operator to identify, manage and mitigate money laundering risk is an important factor in ensuring that its casino operations remain free from criminal influence and exploitation.
65. A particular area of interest for this Commission was whether and how Crown Melbourne has managed and mitigated its money laundering risks, and how it proposes to do so in future. Crown Melbourne recognises that its ability in this area is central to an assessment of its suitability to continue to hold a casino licence.⁸⁶
66. The Commission heard evidence from a number of AML/CTF experts, Crown employees and two witnesses from law enforcement with AML experience.
67. The evidence was given by:
    • five AML/CTF experts:
      • Ms Katherine Shamai: a partner at Grant Thornton and the author of Grant Thornton reports into the Southbank and Riverbank accounts
      • Mr Neil Jeans: the principal of Initialism and previous AML advisor to Crown⁸⁷
      • Ms Lisa Dobbin: a partner at Deloitte and the person leading Deloitte’s forensic investigations into a range of AML matters at Crown
      • Mr Alexander Carmichael: the Managing Director of Promontory Financial Group and the author of Promontory’s reports into Crown’s vulnerabilities to financial crime and assessing Crown’s strategic AML capability
      • Ms Robyn McKern: a partner at McGrathNicol and the person who led McGrathNicol’s forensic review for the Commission into certain aspects of Crown’s response to the money laundering risks it confronts at its casinos
    • three witnesses from Crown:
      • Mr Steven Blackburn: Crown’s recently appointed Group Chief Compliance and Financial Crime Officer
      • Mr Nicholas Stokes: Crown’s then Group General Manager of AML and AML/CTF Compliance Officer
      • Mr Alan McGregor: CFO of Crown Melbourne and Crown Resorts
    • two law enforcement officials.
68. After the close of evidence, Crown notified the Commission that it had created a number of new executive-level roles related to its Financial Crime and Compliance Change Program (FCCCP). As a result of those changes, Mr Stokes’ role became redundant and he left Crown effective on 30 September 2021.⁸⁸
69. The Commission also reviewed substantial volumes of documentary evidence obtained under compulsory processes.
70. The evidence paints a profoundly unsatisfactory picture. It reveals:
    • a litany of failings on the part of Crown Melbourne and Crown Resorts to appropriately identify, mitigate and manage the risk that Crown Melbourne’s provision of gambling services might involve or facilitate money laundering; including failures to report as required to AUSTRAC⁸⁹
    • that Crown Melbourne has not acted with rigour, candour or haste in addressing allegations and revelations of money laundering made in 2019 and 2020⁹⁰
    • that despite Crown Melbourne having operated the Melbourne Casino since 1994 and it having been subject to AML obligations for the entirety of that time, its ability to manage money laundering risks is presently at only an ‘early stage of maturity’⁹¹
    • that Crown Melbourne does not have in place robust and sustainable systems to detect and deter money laundering; rather it has significant, current vulnerabilities to financial crime and only a basic or preliminary state of preparedness to counter money laundering and financial crime more generally.⁹²
71. It bears briefly mentioning some evidence from Victoria Police about likely money laundering on the gambling floors of the Melbourne Casino.
72. A Victoria Police officer in the Organised Crime Intelligence Unit gave evidence that every day, Victoria Police sees young Asian males taking cash in shoeboxes and plastic bags into the casino.⁹³ The officer said there would be money laundering at the casino on a daily basis and that, in junkets, it is ‘rife’.⁹⁴ As previously mentioned, the officer told the Commission that Victoria Police officers were seeing money that they highly suspected was illicit flooding into junket accounts on a daily basis.⁹⁵
73. The Police Officer also said that outside the junket programs, Victoria Police observed, or had intelligence as to, a lot of lower-level suspected money laundering.⁹⁶ They explained:

    The casino is the biggest cash business in this state, and the criminals that want to launder money love cash businesses. So to walk into the casino as an individual that wants to turn illicit cash into legal cash, the simplest way of doing that is putting it into your account, or running dirty money in there, getting chips, playing for a very small period of time and then cashing that in for a Crown cheque. You go to the bank and you tell the bank ‘I won it at the casino.’ That is the most basic kind of money laundering and I would suggest that would nearly happen on a daily basis, yes.⁹⁷

74. When asked whether the problem was as true today as it was 10 years ago, the officer’s answer was that it was ‘happening constantly’.⁹⁸
75. In contrast with that disturbing evidence, the Commission also heard evidence that, largely as a result of findings made in the Bergin Report and revelations made during the course of the Bergin Inquiry hearings, Crown has embarked on a program of significant reform in the way in which it tackles financial crime, including money laundering. Many Crown witnesses gave evidence about this program of AML reform. Its existence is relied upon as an indicator of Crown Melbourne’s present suitability, notwithstanding Crown’s acknowledged failings and deficiencies in this area.⁹⁹
76. The reform program is both ambitious and a work in progress. It is also long overdue. At best, it will take considerable time to implement and embed. At worst, its implementation is subject to various contingencies and may fail.
77. Crown stands condemned that such a program of AML reform was not commenced much earlier. There is no acceptable reason for why that is so.
78. The remainder of this chapter considers:
    • the findings of the Bergin Inquiry with respect to money laundering
    • an alternative lens through which the facts underpinning the Bergin Inquiry’s findings about Crown’s knowledge of money laundering might be viewed, known as ‘systems intentionality’
    • actions taken by Crown Melbourne in response to external scrutiny and allegations of money laundering
    • the present state of Crown Melbourne’s preparedness to combat money laundering, together with the status of proposed reforms and risks to their successful implementation
    • consequent conclusions open to be drawn about Crown Melbourne’s present suitability to continue to hold a casino licence
    • recommendations.

The findings of the Bergin Inquiry

79. One of the key issues examined by the Bergin Inquiry was whether, as the media had alleged, Crown Resorts facilitated or turned a blind eye to money laundering through the bank accounts of its subsidiaries, Southbank and Riverbank, at the Melbourne and Perth casinos, respectively.¹⁰⁰
80. The allegations and evidence before the Bergin Inquiry about these matters is set out at length in Chapter 3, and in the Bergin Report itself.¹⁰¹
81. The Bergin Inquiry’s findings were damning. It concluded that Crown had facilitated money laundering, likely worth hundreds of millions of dollars, over many years.¹⁰²
82. More particularly, it concluded:
    • The processes adopted by Crown Resorts enabled or facilitated money laundering through its Southbank and Riverbank accounts, despite warnings from its bankers over many years.¹⁰³
    • Crown Resorts failed to ensure that the operation of its casinos was protected from criminal exploitation.¹⁰⁴
    • Crown Resorts did not turn a blind eye to such money laundering, but rather:
      • made decisions and took steps in connection with potential money laundering that were ‘infected by extraordinarily poor judgment’; and
      • was impeded in its ability to identify potential money laundering through the accounts because of an ‘aggregation problem’.¹⁰⁵
83. Both Crown Resorts and Crown Melbourne accept the accuracy of the Bergin Inquiry’s conclusions.¹⁰⁶ In Crown’s own words, it:

    accepts the findings in the Bergin Report that third parties engaged in apparent money laundering through the Riverbank and Southbank accounts, and that Crown inadvertently facilitated or enabled this activity despite concerns being raised by its bankers.¹⁰⁷

84. Crown also recognises and accepts that the Bergin Inquiry exposed ‘significant deficiencies in its response to the risk of money laundering in the casino’.¹⁰⁸

85. Before turning to other matters, it is instructive first to consider why the Bergin Inquiry concluded that Crown Resorts did not turn a blind eye to money laundering and how a different conclusion might be reached by analysing Crown’s conduct through the lens of what is known as ‘systems intentionality’.¹⁰⁹
86. Viewing Crown’s conduct through this different lens provides a basis to challenge the proposition that Crown’s facilitation of money laundering was ‘inadvertent’.

Systems intentionality

87. In determining whether Crown turned a blind eye to the money laundering activity occurring through its Southbank and Riverbank accounts, having ignored repeated warnings, the Bergin Report posited the relevant question to be ‘whether the evidence establishes that Crown knew of money laundering and did nothing about it. That is, that Crown saw it and then intentionally looked away making itself “blind” to such activity’.¹¹⁰
88. The Bergin Inquiry’s focus was directed primarily to the state of knowledge of Crown’s directors and officers, whose knowledge could be attributed to Crown.¹¹¹ This is consistent with the traditional legal position that a corporation’s directing mind and will is found in its board of directors.¹¹²
89. In reaching the conclusion that Crown was not knowingly or intentionally involved in money laundering through its Southbank and Riverbank accounts,¹¹³ the Bergin Inquiry concluded:
    • No Crown officers were aware that money laundering was occurring through the relevant accounts—indeed, the majority of the Crown board was unaware of even the existence of those accounts.¹¹⁴
    • Key Crown employees and officers repeatedly failed to ask relevant questions and read relevant documents relating to the accounts that would have revealed the problem, and did not identify or report available warning signs further up the chain.¹¹⁵
    • By reason of the ‘aggregation problem’ and the manner in which Crown’s AML system operated, while Crown’s AML Team were looking for indicators of money laundering, those indicia were not capable of being identified: ‘[t]he Crown team were looking. They were not looking away. It was just that they could not see’.¹¹⁶
90. The aggregation problem was a practice where, in the main, when entering details of deposits made into the Southbank and Riverbank accounts to be credited to a single patron account in a Crown database known as SYCO, Cage staff aggregated multiple individual deposits into a single SYCO entry, rather than creating a separate entry for each individual deposit.¹¹⁷
91. As the Bergin Report remarked, ‘the process of aggregation at the cage obscured the number and nature of the deposits which constituted the aggregated amount’. Therefore, the SYCO system ‘did not give a complete picture of what was occurring in the underlying bank accounts. Important information which could be seen in the bank statements was lost in the process of data entry into the SYCO system’.¹¹⁸
92. In performing their AML functions, the AML Teams at Crown Melbourne and Crown Perth only reviewed extracts of the SYCO system, rather than the underlying Southbank and Riverbank bank statements.¹¹⁹ In consequence, transaction patterns, suspicious transactions and instances of structuring in those accounts were rendered undetectable to Crown’s AML Teams. This can be described as a systems error. One consequence was that, by reason of an inability to identify potential instances or patterns of structuring, Crown’s AML Teams were denied the ability to identify suspicious behaviour and form the suspicion required to trigger SMR reporting obligations.
93. The consequences of this were twofold. First, AUSTRAC did not receive timely reports of objectively suspicious financial conduct, which it therefore could not investigate as appropriate. Second, criminals could continue to launder money through the Southbank and Riverbank accounts unidentified and undeterred by any Crown scrutiny.
94. In a public submission to the Commission, Dr Elise Bant, a Professor at the University of Western Australia Law School, details a model by which to assess corporate culpability, referred to as ‘systems intentionality’.¹²⁰ This model represents a departure from the traditional approach to corporate responsibility, which is assessed by reference to the knowledge and conduct of those who lead the company.¹²¹ The systems intentionality model considers that corporate character and state of mind is manifested in a company’s systems, policies and patterns of behaviour (as opposed to through the individual directors and officers who lead it).¹²² It is premised on the notion that ‘a corporation’s internal structures, methods and processes articulate systems that are inherently purposeful in their nature’ (emphasis in original).¹²³
95. Applied in this instance, a systems intentionality model recognises that while Cage staff— whose data entry practices contributed to the aggregation problem—may have been individually honest, they were ‘nonetheless cogs in a corporate process that was inherently apt to break the law’.¹²⁴
96. Dr Bant’s submission made the following observations, which bear setting out in full:

    [T]he Bergin Report does not suggest that Crown’s SYCO data entry (in particular, the aggregation) practices or [AML] compliance processes evolved by accident. Although there were some inconsistencies, it concluded that cage staff adopted an aggregated process ‘in the main’. Any claim of accident by Crown would have to explain how these accidents were replicated over long periods, as individual employees were replaced by new employees trained in carrying out the requisite processes. It is open to conclude that this data entry pattern and practice evidenced a system of conduct adopted and maintained by Crown. The AML Team, by contrast, clearly adopted and carried out Crown’s system of compliance checks, one predicated upon the (fatally flawed) SYCO database entries.

    The next step [in the systems intentionality process] is to consider how, and why, the data entry and AML systems were set up, maintained and operated independently of one another notwithstanding that the data entry task was critical to the effective functioning of the AML system. The Bergin Report does not identify why the systems were separated in this way. What is clear is that, over many years, there appear to have been no audits or checks carried out of the data entry (including aggregation) process in light of its (again) inherently and obviously, critical role to the effective functioning of the compliance system. This failure continued notwithstanding repeated warnings and ‘red flags’ raised by third parties banks (ANZ, ASB and CB[A]) about the aggregation process. Crown was an entity with very significant gaming experience and, indeed, expertise. The systems were of central importance in countering the endemic and notorious risk of criminal money laundering activity. Here, it is open to consider that their ongoing separation need not be understood as a matter of accident or remarkable incompetence on the part of Crown. These were longstanding systems that were, arguably, inherently purposive and necessarily related. In this light, it may and should be asked whether, seen as functionally dependent and critically important compliance systems, their continued separation was intentional (emphasis in original).¹²⁵

97. Relevant to Dr Bant’s observations, it should be noted that Crown has not undertaken any meaningful root cause analysis of the aggregation problem and why instances of structuring on the Southbank and Riverbank bank accounts were not identified and escalated, in the face of repeated warnings. This is notwithstanding that Initialism was originally tasked with conducting a root cause analysis,¹²⁶ and that Crown informed AUSTRAC that such an analysis would be undertaken with Initialism’s assistance.¹²⁷

98. Instead, in October 2020, Crown Resorts undertook an internal audit assessment of transaction monitoring on the Southbank and Riverbank accounts and produced a cursory three-page draft report.¹²⁸ Two paragraphs were dedicated to ‘root cause’. They reflect an obvious self-interest and a lack of critical analysis and reflection. They read:

    The work conducted by Internal Audit revealed that Crown’s historical practice of aggregating deposits in the Southbank and Riverbank bank accounts upon entering them into SYCO, was done so [sic] with the purpose of optimising process efficiencies and customer service, and done so [sic] with no intended malice or desire to avoid AML requirements.

    The control breakdowns that led to these transactions not being identified from an AML perspective were due to a lack of designated responsibility/accountability and sufficient knowledge and understanding amongst relevant staff to recognise structuring as suspicious activity and the potential AML implications. This includes a design deficiency/oversight in the AML Program to identify and monitor all bank account transactions and subsequent aggregation in SYCO.¹²⁹

99. From the features described in the Bergin Report, Dr Bant submitted that the following conclusions could be drawn:

    • Crown’s adoption and implementation of data entry and AML systems were purposive, in the sense that Crown intended generally to act through those systems of conduct.¹³⁰
    • Crown must be taken to know what is inherent in those systems: namely, that they were critical to guarding against the notorious and ongoing risk of money laundering and were necessarily interdependent.¹³¹
    • Crown’s level of corporate culpability can be judged by reference to its systems. In this case, its systems were maintained over a very long period of time, without audit, in circumstances where there were no inherent adjustment mechanisms in either system to address their faults. These deficiencies had the consequence that the very conduct that the systems (seen together) were supposed to avoid was actively facilitated.¹³²
    • By repeatedly ignoring and failing to act upon warnings and red flags raised by expert third parties, Crown manifested a highly reckless attitude towards money laundering, if not a level of culpability beyond recklessness. Viewed through the lens of systems intentionality, ‘Crown must be taken to understand the inherent incidents of the systems it adopts and carries out. In this case, the unchecked, intentional and longstanding aggregation process, on which the AML system depended, actively and necessarily facilitated money laundering’.¹³³
    • From an integrated systems perspective, the compliance checks carried out by the AML Team were guaranteed to fail. Where systems that are inherently liable to cause harm (for example, by facilitating criminal behaviour) are adopted and operative over a prolonged period of time, with no mechanism for review or adjustment, it becomes possible to see Crown as knowingly facilitating that risk through its intended (not accidental) conduct. This is open to being construed as dishonest conduct.¹³⁴
    • While individual (or even all) directors and senior managers may have been oblivious of the systems in play, that is not the key question for this Commission. The key question for this Commission is whether the corporation is a ‘suitable person’. That inquiry ‘cannot, and must not, stop with its human figureheads’.¹³⁵
100. There is considerable force in Dr Bant’s submission. It provides a compelling challenge to the proposition that Crown’s facilitation of money laundering through its Southbank and Riverbank accounts was inadvertent. It also makes plain that mere ‘board renewal’ at various Crown entities, including Crown Melbourne, is not enough to render a company that is otherwise unsuitable to hold a casino licence, suitable. So, too, the mere adoption of new policies and processes apt to produce lawful conduct, is insufficient unless enacted on the ground.¹³⁶
101. Systemic and sustained change is needed for a culpable corporation to reform its character, as revealed through its systems, policies and processes.¹³⁷
102. While Crown Melbourne has embarked on a reformation process, that process remains ongoing and its outcomes are yet to be seen.

Actions taken in response to money laundering allegations

103. On 5 and 6 August 2019, the media published an explosive article alleging that drug traffickers had used the Southbank and Riverbank accounts to bank suspected proceeds of crime,¹³⁸ and suggesting that Crown had facilitated and turned a blind eye to significant money laundering through those accounts.¹³⁹
104. The articles followed years of warnings and red flags from various of Crown’s bankers about potential money laundering in those accounts, which were repeatedly ignored.¹⁴⁰
105. On 14 August 2019, the Bergin Inquiry was established. It was tasked, under Part B (Suitability Review) of its Terms of Reference, with inquiring into and reporting upon whether Crown Sydney remained a suitable person to hold a restricted gaming licence for the purposes of the Casino Control Act 1992 (NSW) (and whether Crown Resorts is a suitable person to be a close associate of Crown Sydney) in light of the media allegations.¹⁴¹
106. A significant part of the Bergin Inquiry’s work was directed to ascertaining the veracity of the media allegations surrounding the Southbank and Riverbank accounts.
107. For reasons that are explored in the Bergin Report, Crown itself did not see fit to engage external assistance to investigate whether there were indications of money laundering in those accounts until October 2020. This was:¹⁴²
     • some 14 months after the media allegations were first made
     • despite Mr Jeans of Initialism, who at the time was providing discrete AML services to Crown, suggesting on 20 August 2019 that Crown ought investigate whether money laundering was occurring through its bank accounts generally, and introducing Ms Shamai of Grant Thornton to Crown with a view to Grant Thornton undertaking the requisite forensic account analysis¹⁴³
     • despite Ms Shamai standing ready and able to assist¹⁴⁴
     • despite Mr Jeans repeating his recommendation to Crown (via Mr Joshua Preston, then Chief Legal Officer of Crown) a second time, approximately one year later¹⁴⁵
     • despite Mr Jeans repeating his recommendation to Crown (via Mr Ken Barton, then CEO and Managing Director of Crown Resorts) a third time, in early to mid-September 2020.¹⁴⁶
108. This failure to act is unacceptable. It displays a disturbing lack of haste and a disregard for, or indifference to, Crown’s AML obligations.

Internal investigation of bank accounts

109. Whether due to Mr Jeans’ repeated recommendations or otherwise as a result of probing by the Bergin Inquiry, in around September 2020 Crown commenced an internal investigation into cash deposits made between 2013 and 2019 into the bank accounts of Southbank and Riverbank.¹⁴⁷
110. The internal investigation revealed 102 instances (comprising 609 individual deposits with a total value of $5,223,401) of potentially structured cash deposits in the Southbank and Riverbank accounts, based on a 72-hour deposit window.¹⁴⁸ The investigation also revealed that in each of these instances, the multiple deposits were aggregated when details of them were entered into SYCO.¹⁴⁹
111. Mr Claude Marais, Crown’s General Manager, Legal and Compliance, prepared a memorandum dated 29 September 2020 for Mr Barton setting out the results of the internal investigation.¹⁵⁰ The memorandum recorded that the investigation was continuing and would include a ‘corresponding review of the other casino bank accounts for Crown Melbourne and Crown Perth into which patron funds are deposited’.¹⁵¹
112. The internal investigation did indeed proceed to examine transactions on the Crown Melbourne and Crown Perth bank accounts.¹⁵² On 15 October 2020, Mr McGregor prepared a memorandum providing an update on Crown’s internal investigation into cash deposits, potential structuring activity and suspicious deposit descriptors used through ‘our various bank accounts’ from 2013 to December 2019, including the Crown Melbourne and Crown Perth bank accounts.¹⁵³
113. The 15 October 2020 memorandum recorded that Crown’s investigation further revealed that the total value of cash deposits under the $10,000 threshold made into the following accounts over the 2013–19 period was:
     • Southbank CBA account: $2,463,696
     • Riverbank ANZ account: $2,452,009
     • Riverbank CBA account: $762,899
     • Crown Melbourne ANZ account: $2,463,380
     • Crown Perth ANZ account: $300,791.¹⁵⁴
114. It will be observed that the value of cash deposits under the $10,000 threshold was roughly the same in the Crown Melbourne account, the Southbank (CBA) account and Riverbank (ANZ) account over that period.
115. This was a very significant revelation, because, while the media allegations were focused on the Southbank and Riverbank accounts, Crown now had data analysis that revealed equivalent activity of cash deposits under the $10,000 threshold on the Crown Melbourne account.¹⁵⁵
116. This data analysis should have, and may well have, rung alarm bells. It gave Crown grounds to suspect that money laundering through its bank accounts extended beyond the Southbank and Riverbank accounts, and into:
     • the Crown Melbourne bank account, at potentially equivalent levels
     • the Crown Perth bank account, at lower levels.

Engagement of Grant Thornton and Initialism

117. Against this backdrop, in October 2020 Crown engaged Grant Thornton and Initialism to look for evidence of money laundering in the Southbank and Riverbank accounts alone.¹⁵⁶ The engagement was for the express purpose of providing their reports to the Bergin Inquiry.¹⁵⁷
118. The limitation on the scope of the Grant Thornton and Initialism investigations (to the Southbank and Riverbank accounts alone), the results of which were to be presented to the Bergin Inquiry, suggests a lack of candour on the part of Crown regarding the Bergin Inquiry and, through it, ILGA. An open conclusion is that Crown sought to limit the damage that might be inflicted on it by revelations of money laundering through bank accounts beyond the Southbank and Riverbank accounts.
119. Crown contends that the Crown Melbourne and Crown Perth bank accounts were not excluded from review at the time.¹⁵⁸ Rather, according to Crown, and indeed this was the evidence given by both Ms Shamai and Mr Jeans, the review of the Southbank and Riverbank accounts was ‘prioritised’ (emphasis in original), with the broader review to be undertaken subsequently.¹⁵⁹ Crown said that the prioritisation of the review of the Southbank and Riverbank accounts ‘makes sense’ as they were the accounts the subject of extensive examination at the Bergin Inquiry.¹⁶⁰
120. While it is true enough that the review of the Southbank and Riverbank accounts was prioritised, that observation does not address the issue of candour. Crown did not inform the Bergin Inquiry that a preliminary internal analysis had revealed equivalent volumes of transactions under the $10,000 threshold on the Crown Melbourne account;¹⁶¹ or that a subsequent investigation into those additional accounts was proposed.
121. Instead, the Bergin Inquiry was informed that Crown ‘brought forward’ the Grant Thornton Report because Crown considered that it was the right thing to do, and that Crown wanted to ensure that the Bergin Inquiry had ‘complete and up-to-date information’.¹⁶²
122. Crown’s submission also overlooks the relevance to the Bergin Inquiry of what was known about the other accounts. Although the Southbank and Riverbank accounts had been a focus of the hearings, Part B of the Bergin Inquiry Terms of Reference concerned a suitability review into Crown Sydney and Crown Resorts by reference to allegations of engaging in money laundering.¹⁶³ The result of any investigation into suspected money laundering on the Crown Melbourne and Crown Perth accounts was directly relevant to the Bergin Inquiry’s Terms of Reference.
123. Finally on this point, Crown also says the prioritisation of the Southbank and Riverbank investigation enabled a report to be produced in relation to the Riverbank and Southbank accounts before the close of the Bergin hearings.¹⁶⁴ It points to the length of time required by Deloitte to complete its current patron account review as evidence that it would not have been possible to produce a report for the Bergin Inquiry if all the accounts were investigated at once.¹⁶⁵
124. The problem with this submission is that it ignores the fact that the media allegations about money laundering were made in early August 2019 and the Bergin Inquiry was announced on 14 August 2019. Crown had plenty of time to conduct a comprehensive investigation to put to the Bergin Inquiry.
125. Crown’s desire to limit the damage it suffered, and its associated lack of candour, was also evident in other limitations imposed on the investigation by Grant Thornton that was to be presented to the Bergin Inquiry.
126. Those limitations, a function of the instructions provided by Crown, were:
     • First, Grant Thornton and Initialism looked only at Southbank and Riverbank’s Australian dollar bank accounts and not foreign currency accounts held by those entities.¹⁶⁶
     • Second, the Grant Thornton work examined the Southbank and Riverbank accounts in isolation from each other, notwithstanding the plausible scenario that a money launderer might structure deposits across the two accounts.¹⁶⁷
     • Third, the Grant Thornton analysis looked for only three of nine structuring scenarios identified by Initialism.¹⁶⁸
127. In consequence, it is likely that the volume of structuring activity identified by Grant Thornton in the Southbank and Riverbank accounts is understated.¹⁶⁹
128. As to the exclusion of the foreign currency accounts from the investigation, Crown:
     • relies on the evidence given by Mr McGregor to the effect that the foreign currency accounts were set up for telegraphic transfers only (not cash) and a submission that they were therefore not suitable for review for structuring¹⁷⁰
     • submits that, in any event, Deloitte will consider the foreign currency accounts in the course of its current review.¹⁷¹
129. Those arguments overlook the fact that structuring is but one money laundering technique. Similarly, that Deloitte will consider the foreign currency accounts does not address Crown’s conduct in presenting only part of the picture to the Bergin Inquiry. The same can be said about Crown’s submission that Deloitte also will consider money laundering across accounts.¹⁷²
130. As to the structuring scenarios to be searched for, Ms Shamai said that if Crown was genuinely interested in uncovering the full extent of structuring on the Southbank and Riverbank accounts, she could not think of any defensible reason to exclude the additional six structuring scenarios from analysis.¹⁷³ She also said that it would have been quite straightforward to add the other six structuring scenarios to the forensic tool used to analyse the bank transaction data; and that it would not have materially increased the cost.¹⁷⁴
131. Mr Jeans said that Crown’s decision to limit the structuring scenarios to be identified from nine to three¹⁷⁵ was:
     • contrary to his recommendation
     • the bare minimum level of scenarios that should be undertaken
     • not what was proper or appropriate or sensible; but doing less would not have been acceptable.¹⁷⁶
132. Mr Jeans also gave the somewhat contradictory evidence that the three scenarios used would best and most directly identify structuring in the Southbank and Riverbank accounts.¹⁷⁷
133. In response to the proposition that Crown curbed the scope of the Southbank and Riverbank investigation by limiting the structuring scenarios to be searched for to three, Crown relies again on the issue of timing. Crown submits that Initialism’s existing analysis was already a time-consuming and detailed exercise and that ‘self-evidently’, the wider the net is cast (in terms of scenarios) and the greater the temporal gap between transactions being examined, the more extensive the data-collection and analysis exercise would be.¹⁷⁸ It also points to the prospect of the wider net generating false positives.¹⁷⁹
134. This fails to take into account that the timing problem was of Crown’s own making. If it had commenced the investigation in August 2019 in response to either the media allegations or the commencement of the Bergin Inquiry, there would have been ample time to conduct a full analysis. If the nine scenarios had produced false positives, they could have been eliminated by the Initialism analysis.
135. Further, Crown did not inform the Bergin Inquiry of the constraints on the scope of the review undertaken by Grant Thornton and Initialism.
136. Initialism’s Southbank and Riverbank investigation also suffered from the first two constraints faced by Grant Thornton (foreign currency accounts were not reviewed nor were deposits across accounts).¹⁸⁰ In addition:
     • Initialism relied on Grant Thornton’s limited data analysis, save to the extent that Initialism carried out any broader investigation¹⁸¹ (which it did only on a sample basis).¹⁸²
     • Initialism did not assess Crown’s handling of the suspect transactions from an AML perspective (that is, whether Crown itself identified, reported and acted to mitigate the matters), although it could well have.¹⁸³
     • It was outside Initialism’s scope of work to make any recommendations in light of its findings.¹⁸⁴
137. The imposition of the limitations on Grant Thornton and Initialism’s engagement can be read as an attempt to limit the extent of any adverse findings.
138. The Initialism analysis concluded:
     • Crown’s operation of the Southbank and Riverbank accounts rendered them vulnerable to being used to launder money.¹⁸⁵
     • There were transactions indicative of the money laundering techniques of structuring, smurfing and cuckoo smurfing in the accounts.¹⁸⁶
     • There was activity indicative of cuckoo smurfing via the quick cash deposit channel.¹⁸⁷
     • There were international transfers in the hundreds of thousands and millions of dollars that were indicative of cuckoo smurfing.¹⁸⁸
     • There were payments in the hundreds of thousands of dollars, and one in the millions of dollars, that had payment descriptors that were inconsistent with the underlying purpose of the payment to Crown, which was indicative of money laundering.¹⁸⁹
     • There were 117 instances indicative of structuring through the Riverbank account to avoid the TTR threshold.¹⁹⁰
     • There were 53 instances indicative of such structuring through the Southbank account.¹⁹¹
139. Mr Jeans estimated that Initialism identified indicators of money laundering in the multiples of millions of dollars.¹⁹²
140. By way of summary, the following points can be made at this stage:
     • Money laundering via established and well-known money laundering techniques was facilitated and allowed to go undetected on the Southbank and Riverbank accounts for years.
     • Once the media allegations were published, Crown did nothing to investigate the allegations for over a year. It acted only when it became untenable to continue to do nothing. Then, it did the bare minimum.
     • Despite the suggestion by the AML expert to review all its bank accounts, Crown did not do that and, as a result, did not present the full picture to the Bergin Inquiry. This failing is particularly problematic because once the Southbank and Riverbank accounts closed, it was probable that money laundering continued in other Crown bank accounts.¹⁹³

Analysis of Crown Melbourne and Crown Perth patron accounts

141. On 20 November 2020, Crown provided the Grant Thornton and Initialism reports to the VCGLR and indicated that it had instructed those firms to undertake equivalent analyses of the bank accounts operated by Crown Melbourne and Crown Perth.¹⁹⁴
142. For the analysis to be undertaken, Crown provided Grant Thornton with most of the bank statements it required. By the end of February 2021, the work was nearly complete.¹⁹⁵ Nonetheless, Grant Thornton was instructed to down tools by Crown’s solicitors because another firm (which transpired to be Deloitte) was to be engaged to perform the analysis.¹⁹⁶
143. The effect was to delay unduly the disclosure of any money laundering through Crown Melbourne’s other bank accounts.

Investigation of money laundering through other Crown accounts at large

144. In February 2021, in response to suggestions made in the Bergin Report as to a ‘pathway to suitability’ for Crown Sydney, Crown engaged Deloitte to conduct a forensic review of its bank accounts to ensure that the criminal elements the Bergin Inquiry found had infiltrated the Southbank and Riverbank accounts had not infiltrated other accounts.¹⁹⁷
145. This work is known as the Deloitte Phase 2 Forensic Review. Once complete, it will comprise the results of Deloitte’s forensic investigation into activity on Crown’s patron accounts over a seven-year period and will reveal whether there are indicia of money laundering in those accounts.¹⁹⁸ A ‘patron account’ is a bank account maintained by Crown and into which patrons can deposit money. There are at least 44 patron accounts.¹⁹⁹
146. The evidence is that the Phase 2 Forensic Review is unlikely to be complete until late September 2021.²⁰⁰ In this respect, the Commission finds itself in the same position as did the Bergin Inquiry in relation to the Grant Thornton and Initialism reports. That is, the Commission may be in receipt of a critical report that it cannot test or meaningfully consider. This is quite unsatisfactory.
147. Ms Dobbin said:
     • If Deloitte had started its work in November 2020 (when Crown informed the VCGLR that Grant Thornton and Initialism had been instructed to undertake analysis of the Crown Melbourne and Crown Perth bank accounts), the results of its work would likely have been available to the Commission.²⁰¹
     • There was no impediment to Crown engaging Deloitte to perform the task earlier, including when allegations of money laundering through the Southbank and Riverbank accounts were first made in early August 2019.²⁰²
     • Crown could have done a similar review at any point in time since the Melbourne Casino opened in 1994.²⁰³
148. Anticipating the difficulty in timing, the Commission examined some provisional or preliminary findings of Deloitte’s Phase 2 work.²⁰⁴ The provisional findings were that there exists ‘initial indicators’ of money laundering on 14 of Crown’s patron accounts, but given the incomplete state of Deloitte’s analysis it is too early to draw conclusions.²⁰⁵
149. A forensic review of Crown’s patron accounts for the period 1 July 2019 to 22 February 2021 undertaken by McGrathNicol at the request of the Commission did not identify any indications of structuring (using a 72-hour deposit window) in that period.²⁰⁶ It should be borne in mind, however, that:
     • a large part of the period the subject of McGrathNicol’s review was affected by the COVID-19 pandemic, during which there were periods of lockdown and restrictions on international travel
     • the McGrathNicol Report had certain limitations that the Deloitte Phase 2 Report will not have.²⁰⁷
150. The following observations should be made about Deloitte’s Phase 2 Forensic Review:
     • First, the review is being undertaken as a step on the pathway to suitability for Crown Sydney. It is not a proactive initiative on the part of Crown. The formulation of Deloitte’s scope of work was developed in the context of a draft letter to ILGA.²⁰⁸
     • Second, Crown unsuccessfully attempted to limit Deloitte’s review to three years of bank transactions rather than seven, as is appropriate and usual, with a longer period providing a better opportunity to identify money laundering.²⁰⁹
     • Third, Crown’s deposit account balance (DAB) accounts (ledger accounts used by Crown to account for money deposited by patrons) are excluded from Deloitte’s review,²¹⁰ except where there are related transactions in the patron accounts, notwithstanding that transaction activity on those accounts is, according to Ms Dobbin, a significant area of potential money laundering activity.²¹¹
151. Crown submits that it was the apparent money laundering in the Southbank and Riverbank accounts that caused Crown to commission a comprehensive audit of its bank accounts.²¹² The evidence does not support that submission. The evidence establishes that it was only subsequent to the Bergin Inquiry setting out a minimum requirement for suitability that Crown acted to engage Deloitte to conduct a comprehensive audit.²¹³
152. Moreover, the Bergin Report states:

     The [ILGA] could have no confidence that either [Crown Sydney or Crown Resorts] could be rendered suitable without a full and wide-ranging forensic audit of all of their accounts to ensure that the criminal elements that infiltrated Southbank and Riverbank have not infiltrated any other accounts … Any audit must be on the premise that the main aim is to ensure that the casino operations are free from criminal influence and exploitation.²¹⁴

153. Crown submits that the exclusion of the DAB accounts from the Deloitte Phase 2 work (save for where there are related transactions in the patron accounts) was justified because:
     • Crown fairly and correctly interpreted the recommendation of the Bergin Inquiry relating to bank accounts²¹⁵
     • there is ‘no evidence’ before the Commission on which it is open to find that money laundering is occurring, or has occurred, through Crown’s DAB accounts.²¹⁶
154. These are not helpful submissions. First, there is nothing in the text of the Bergin Report’s suggestion that limits it to bank accounts. Second, if Crown were seeking to show bona fides or exhibit full transparency in light of past, admitted instances of money laundering on the Southbank and Riverbank accounts, it would surely include all its accounts, including the DAB accounts, in the Deloitte Phase 2 Forensic Review. Third, McGrathNicol’s work, albeit preliminary and requiring further investigation, reveals potential structuring and parking on the DAB accounts.²¹⁷
155. The evidence given by Ms Dobbin is significant:

     Q: Am I right to assume that when you get to the end of this project you are not going to be able to say to anyone, whether that be Crown or the ILGA, that there is no money laundering on the DAB accounts?

     A: No, we won’t be able to say that.

     Q: You won’t be able to say one way or the other, that there is or isn’t money laundering on the DAB accounts; is that right?

     A: Correct.

     Q: And do you see transactions on the DAB accounts to be a significant area of potential money laundering activity which could be the subject of a review?

     A: I would see them as accounts that will have relevant transactions or relevant behavioural patterns that will help us to understand what we are seeing in the bank accounts.

     Q: Yes, I do accept that they are going to be relevant but my question was slightly different. I will ask it again. Do you see that the transaction activity on the DAB accounts, in and of itself, is a significant area of potential money laundering activity that could be the subject of a review?

     A: Yes, I would agree with that.²¹⁸

156. McGrathNicol’s forensic analysis revealed 1,914 individual transactions associated with 272 unique patrons that appeared to be structuring, although more analysis is required to determine whether the transactions relate to genuine gaming behaviour or are indicative of money laundering. The most recent of those transactions identified in the McGrathNichol analysis is 25 May 2021 for Crown Melbourne and 16 June 2021 for Crown Perth.²¹⁹
157. McGrathNicol recommends further investigation to determine whether these transactions are in fact indicative of money laundering.²²⁰ The Commission is not aware of any proposal by Crown to undertake that investigation, except for a proposed sample-based review by Crown, the results of which it will assess to determine whether it considers a ‘full review of all transactions identified by McGrathNicol is required’.²²¹

Response to the Grant Thornton and Initialism Southbank and Riverbank reports

158. Grant Thornton’s reports on the Southbank and Riverbank accounts identified a total of 52 individual patrons involved in potential structured transactions in the Riverbank account and 30 patrons in the Southbank account.²²²
159. On 18 March 2021, the VCGLR wrote to Crown Melbourne, referring to the patrons identified in the Grant Thornton and Initialism reports, and queried whether Crown Melbourne’s ‘Significant Player Review’ had regard to the reports, in particular, when considering the ‘suitability of the patrons identified in those reports to continue to be customers of Crown’.²²³
160. On 24 March 2021, Crown Melbourne replied. Its reply revealed that the process being undertaken to address the observations in the Grant Thornton and Initialism Southbank and Riverbank reports involved undertaking a ‘historical “look-back” of transactions’ to determine whether any ‘retroactive reporting’ to AUSTRAC was required.²²⁴ The letter also indicated that to the extent suspicious matters were identified, Crown would undertake enhanced customer due diligence (which includes a requirement to consider whether to continue to have a business relationship with the patron).²²⁵ Crown Melbourne explained that it did not deem it necessary to expand or amend the Significant Player Review to consider the suitability of patrons referred to in the reports.²²⁶
161. It is evident that Crown Melbourne did not move quickly to investigate whether it should cease dealing with patrons on whose accounts there were indications of money laundering. Indeed, the ‘look-back’ was still ongoing as at late March 2021.²²⁷
162. Ms Shamai of Grant Thornton was asked whether this was an appropriate response. She said that the next step (following revelation of the structuring activity) is to investigate whether the structuring is being done with the knowledge of the patron in order to determine the root cause of it and whether the patron is an appropriate person with whom Crown Melbourne should be dealing. Ms Shamai said she would expect that investigation to commence immediately after the evidence of the structuring came to light.²²⁸
163. Critically, Ms Shamai said the danger in delaying the commencement of that type of investigation is that it allows the behaviour to continue.²²⁹ She agreed that a reporting entity whose facilities were knowingly being used for money laundering would be expected to act with reasonable haste.²³⁰
164. In May 2021, Crown had a change of heart and decided to subject the patrons to its Significant Player Review process. That process remains ongoing.²³¹

Introduction of new patron account controls

165. A second, more encouraging aspect of Crown’s response to the Grant Thornton and Initialism revelations was the introduction of new policies and controls over its patron accounts. The new controls have largely been operational since 1 December 2020.²³² They are designed to ensure that the conduct that occurred on the Southbank and Riverbank accounts cannot be repeated. They comprise:
     • a third party transfers and money remitters policy statement²³³
     • a return of funds policy statement²³⁴
     • a bank transfer notification.²³⁵
166. To assess the efficacy of the new policies and controls, Crown:
     • engaged Initialism to review transactions on its Crown Melbourne and Crown Perth bank accounts to assess whether prohibitions relating to cash payments and third party transfers were being observed by customers and enforced by Crown²³⁶
     • engaged Deloitte to conduct a controls assessment, looking at the design and operational effectiveness of the new controls. This work is known as the Deloitte Phase 1 work.²³⁷
167. A draft Initialism report identified a series of cash deposits that may have been in breach of the prohibition on cash deposits.²³⁸ It also identified several potential telegraphic transfer deposits from third parties, including money remitters, that did not appear to have been returned as required by the new controls.²³⁹
168. Initialism required further data before it could reach definitive conclusions.²⁴⁰ That data has not yet been provided and Initialism has been unable to finalise its work.²⁴¹
169. Deloitte’s Phase 1 Report assessing the effectiveness of the new patron account controls reached the following conclusions:
     • As to design effectiveness, the controls were aligned with industry practice and effective in addressing cash structuring and cuckoo smurfing.²⁴² However, the controls are not yet sufficiently mature to be effective on a sustainable basis and significant enhancement is required from a design perspective.²⁴³
     • As to operational effectiveness, Crown staff’s process in accepting deposits was largely in line with policy.²⁴⁴
170. Ms Dobbin conceded that Deloitte had ‘serious concerns’ about the design of the new controls and had identified deficiencies in both the design and the sustainability of those controls.²⁴⁵
171. The issue of sustainability identified by Deloitte was that the review period considered by Deloitte (1 December 2020–22 February 2021) was not reflective of either normal transactional volumes or AML/CTF risk exposures due to COVID-19 restrictions. Because the controls were entirely manual, Deloitte expressed the view that the patron account controls are ‘unlikely to be sustainably effective in a normal volume environment’.²⁴⁶
172. Deloitte also made a number of incidental observations, including that training was largely ‘on the job’, that there were instances of a lack of formal or consistent documentation, and there were instances of inconsistency in the application of certain controls.²⁴⁷
173. This is broadly consistent with the opinion of McGrathNicol. It found that, if effectively implemented, Crown’s new patron account controls will prevent and deter certain types of money laundering, but that they have the hallmarks of being implemented at speed and in an ad hoc manner, and are immature, manual and at risk of being unsustainable.²⁴⁸
174. Deloitte made a series of recommendations in its Phase 1 Report, to which Crown responded.²⁴⁹ Deloitte then assessed Crown’s response.²⁵⁰
175. Deloitte’s assessment of the response indicates the large scope of work that must be undertaken to implement its recommendations.
176. Ms Dobbin agreed that ‘there is a lot to do’ and that it would take many months, perhaps six, to bed down the relevant processes despite only being a small part of Crown’s overall AML Program.²⁵¹
177. Importantly, Deloitte’s assessment of Crown’s response:
     • was limited to the ‘words on paper’
     • assumes the implementation will be delivered effectively and to a high standard
     • did not evaluate the capability of the staff who will implement the reforms.²⁵²

Crown’s present state of preparedness and the status of the proposed reforms

178. The Commission heard a good deal of evidence about Crown’s present state of preparedness to combat money laundering; from Crown’s own internal financial crime staff and from several third party experts, including those engaged by Crown (Promontory, Deloitte, Initialism) and one engaged by the Commission (McGrathNicol).²⁵³
179. The preponderance of the evidence is that Crown has significant, current vulnerabilities to financial crime and only a basic or preliminary state of preparedness to counter money laundering and financial crime generally.
180. Mr Blackburn assesses Crown as being at a ‘foundational’ level or ‘early stage of maturity’ in its management of financial crime risk.²⁵⁴
181. In describing Crown’s management of financial crime risk as foundational, Mr Blackburn had regard to the fact that it has a compliant joint AML/CTF Program, that most processes are documented, that foundational resources and capabilities are in place and that largely manual processes are deployed and basic controls and systems operating. He considered that of the elements within an overall financial crime program, the majority were foundational and the others were either in an initial stage or transitioning to foundational.²⁵⁵
182. Mr Stokes said that Crown has ‘the foundations of a robust framework from an AML/CTF control perspective’, but that operational staff thought that some AML framework matters and tools that should exist were absent.²⁵⁶
183. Promontory completed two reports for Crown. The first assessed Crown’s present vulnerability to AML (Phase 1).²⁵⁷ The second concerned what capabilities Crown would need to have to maintain an effective AML/CTF compliance program (Phase 2).²⁵⁸
184. The Promontory Phase 1 Report provides a detailed and sobering assessment of Crown’s present vulnerabilities to financial crime. It catalogues each of those vulnerabilities and contains a host of recommendations about how Crown can best address them and improve its policies, procedures and systems.
185. The Phase 1 Report assessed that some controls were only partially effective and required attention.²⁵⁹ When asked whether there were any aspects of Crown’s overall AML control framework that could be described as ‘mature’ or ‘optimal’, the most that Mr Carmichael (from Promontory) could say was that some individual elements were ‘consistent with the industry practices’.²⁶⁰
186. The Phase 1 Report observed that Crown’s AML/CTF control environment was undergoing a period of significant change and enhancement. It noted that, based on its experience working with organisations implementing major change, some foundational elements are required for effective and sustained transformation, including a transformation strategy and plan and a change management process. In Promontory’s view, both of those elements were underdeveloped. The risks of proceeding with change without those two elements included inefficiencies, ineffectiveness, the introduction of new problems, data loss and the loss of process integrity.²⁶¹
187. McGrathNicol’s assessment was similarly concerning. It found that Crown’s approach to the management of money laundering and terrorism financing risk is a work in progress and far less advanced than could reasonably be expected of an entity that has been providing gambling services for approximately 30 years, and has been subject to obligations to operate a risk based AML/CTF program for the last 15 of those years.²⁶²
188. McGrathNicol’s assessment as at July 2021 was that, if Crown’s overall financial crime maturity is foundational, it is only ‘barely and recently so’.²⁶³

Future plans

189. In recognition of some of its past and present failings and informed by various reports, Crown has plans to uplift its AML capability in future. Crown’s proposals in this respect are set out in a number of documents, including:
     • a ‘Financial Crime & Compliance Board Pack’ dated 24 May 2021, which:
       • details Mr Blackburn’s assessment of the current state of maturity of Crown’s financial crime and compliance programs
       • sets out his proposals for enhancement and uplift through the FCCCP²⁶⁴
     • a memorandum dated 7 June 2021 setting out a road map and proposed timeframe to implement recommendations in the Deloitte Phase 1 Report and Promontory Phase 1 Vulnerability Assessment.²⁶⁵
190. McGrathNicol has reviewed the FCCCP plan and concluded that it is comprehensive and appropriately prioritised.²⁶⁶ The Commission accepts this. It is, however, only at the early stages of design and implementation.
191. Significant aspects of the proposed FCCCP are either yet to be completed or only just underway.²⁶⁷ For example, the critically important enterprise-wide risk assessment is not yet complete.²⁶⁸ The replacement of the AML/CTF Committee with the Financial Crime Oversight Committee and the Financial Crime Working Group is only just underway.²⁶⁹ Mr Blackburn is ‘in the process of’ engaging a firm to perform an independent review of Crown’s formal AML Program,²⁷⁰ which is expected to commence in late 2021.²⁷¹

Consideration as to present and future state

192. Notwithstanding the past failings and the present early stage of the implementation of its reforms, Crown contends that its AML Program or framework is ‘presently appropriate, adequately resourced and compliant’,²⁷² and that the ‘significant reforms already implemented mean that Crown has the systems and capability to be suitable, and is suitable, from an AML/CTF perspective now’.²⁷³
193. It also submits that while its AML Program is necessarily ongoing, it expects to have reached an advanced state of AML maturity by December 2022.²⁷⁴
194. The Commission does not accept these submissions.
195. The evidence establishes that Crown’s AML Program is not presently adequately resourced. Mr Blackburn acknowledged that Crown’s Group Financial Crime Team and program is only appropriately resourced ‘[g]iven its current maturity level’ to meet ‘minimum’ standards,²⁷⁵ and that the financial crime program ‘must evolve through considerable enhancements, thus requiring further material investment in both FTE [full-time equivalent positions] and systems’.²⁷⁶
196. Crown proposes to recruit a further 55 permanent full-time equivalent positions and 10 further temporary full-time equivalent positions in financial crime and compliance.²⁷⁷ Based on the role descriptions, the work to be performed by the 65 additional full-time equivalent positions is neither superfluous nor unnecessary.²⁷⁸
197. Further, Mr Blackburn has assessed elements of Crown’s ‘financial crime ecosystem’ as being at either an ‘initial’ or transitioning from ‘initial’ to ‘foundational’ stage of maturity,²⁷⁹ where:
     • ‘initial’ maturity refers to an entity with inadequate resources, inadequate governance, minimal processes and limited awareness of risk
     • ‘foundational’ maturity refers to an entity with a compliant AML/CTF program, most of its processes documented, foundational resources and capability, largely manual processes and basic systems and controls, which has initiated ‘assurance’.²⁸⁰
198. The elements that Mr Blackburn assessed as ‘initial’ include:
     • Procedures
     • Enterprise-wide risk assessment
     • Product risk assessment
     • Board oversight—roles and responsibilities
     • Board oversight—assurance.²⁸¹
199. The elements that Mr Blackburn assessed as transitioning from ‘initial’ to ‘foundational’ include:
     • Customer risk rating
     • Third party due diligence
     • Supporting infrastructure and data readiness
     • Compliance and breach reporting.²⁸²
200. By way of further example, Mr Blackburn made the following comments about the limitations of Crown’s current key financial crime and compliance systems:
     • Manual records: prone to data entry error; no direct feedback into Crown systems or risk registers
     • SYCO: not intuitive and there is no scope to upload documents
     • Sentinel (Crown’s new automated transaction monitoring system): no case management; relies on input from other systems
     • CURA (the AML Customer Risk Register): no integration with other Crown systems
     • Unifii (the unusual activity reporting and AML Investigation Portal): currently no integration with Crown systems; not suitable for end-to-end case management
     • Dow Jones/Factiva (the customer screening and news search tool): limited ability to customise and calibrate screening preferences
     • Surveillance: significant deficiencies in the way the security and surveillance operations are conducted in each of the properties.²⁸³
201. As to the claim of ‘compliance’ with the AML/CTF Act and Rules,²⁸⁴ Crown overstates what the evidence discloses. There is no evidence that Crown presently complies with each of the requirements of the AML/CTF Act and Rules. The only evidence of compliance is in respect of one aspect of Crown’s overall AML framework; namely, the joint AML/CTF Program. Mr Blackburn said that the joint AML/CTF Program was compliant.²⁸⁵ Mr Jeans’ opinion was that Part A of the Program complies with the AML/CTF Rules and is appropriately designed.²⁸⁶
202. Just because the joint AML/CTF Program on paper is compliant does not mean that the program is being carried out. One example will suffice.
203. Crown made the following observation about the joint AML/CTF Program:

     The [Crown joint AML/CTF Program] provides for a ‘Three Lines of Defence’ Model in respect of money laundering and terrorism financing (ML/TF) risk. Under this model, the first line of defence, comprising Crown’s business units, owns the ML/TF risk. As the same parts of the business own both the ML/TF risk and the commercial business risk, this ensures that the commercial motivations are appropriately balanced with ML/TF risks. The second line of defence performs an oversight function and ensures the effective design and implementation of internal controls. The third line of defence provides independent assurance to the Crown Board and Crown Senior Management on the effectiveness of the first and second lines of defence through a risk-based approach. The second and third lines of defence have been significantly expanded and bolstered already, with further increases to the second line of defence being implemented under Mr Blackburn’s plan (emphasis added).²⁸⁷

204. However, in his FCCCP board pack presentation, Mr Blackburn noted that ‘Crown doesn’t currently have a second line of defence assurance function’.²⁸⁸ He said:

     The second line of defence must apply risk-based assurance to assess and test compliance with policy and program obligations across Crown in respect of compliance, financial crime and responsible gaming. Where issues are identified, the second line must then apply deficiency management to ensure that those issues are addressed in a timely and effective manner. As Crown does not currently have a second line assurance function, one is proposed under the [FCCCP] (emphasis added).²⁸⁹

205. Further, as to compliance:
     • The results of AUSTRAC’s formal enforcement investigation into the compliance of Crown Melbourne with the AML/CTF Act over the period 31 October 2014 to 16 October 2020 are not yet known; but Crown concedes that it may have breached:
       • the obligation in section 36 of the AML/CTF Act relating to the conduct of ongoing customer due diligence, by not complying with all the requirements in Chapter 15 of the AML/CTF Rules
       • section 81 of the AML/CTF Act, by not adopting and maintaining an AML/CTF program that complied with all of the requirements set out in Chapters 8 and 15 of the AML/CTF Rules
       • section 82, by not complying with the requirements set out in its AML/CTF Program.²⁹⁰
     • Crown may have provided a registrable designated remittance service in contravention of section 74(1A) by way of the paid-out process.²⁹¹

Timeliness of implementation of Crown’s changes

206. Change takes time.
207. It is apparent that Crown’s present state of preparedness to fight financial crime is wanting. It has only recently begun to action a reform agenda to remedy deficiencies in its AML policies, practices and systems. Crown itself acknowledges that the program of reform required to address its deficiencies is ‘necessarily ongoing’,²⁹² and that it is under no illusion as to the dimension of the challenge it faces on AML reform.²⁹³
208. Precisely how long the reform program will take to fully implement, and whether it will be successful, remain to be seen.
209. Ms Dobbin, in assessing the time required to implement Deloitte’s recommendations about patron accounts (being a ‘very small’ part of the overall AML Program),²⁹⁴ thought that task alone would take many months, and that a further six to 12 months would then be required from the date the recommendations ‘went live’ to test and determine whether they were working as intended.²⁹⁵
210. Mr Carmichael, when asked to estimate how long it would take to implement all of the recommendations in Promontory’s Phase 1 Vulnerability Assessment, said that some recommendations could be actioned reasonably quickly, whereas others would ‘take years’.²⁹⁶
211. Mr Blackburn has not forecast how long he thinks the reform agenda will take to complete, but has set an aspiration date of 31 December 2022 to deliver Crown to its target maturity state.²⁹⁷ Other documents reveal some target dates stretching into 2023 where the reforms require technology or systems changes.²⁹⁸
212. McGrathNicol observed that:
     • the financial crime projects involved in the FCCCP are at a very preliminary stage and some are not yet scoped or costed
     • there is a significant amount of work for Crown to do
     • there is a considerable risk associated with achieving an advanced stage of maturity within Crown’s proposed timeframe, the key risks being funding, technology and people.²⁹⁹
213. In order to achieve its reform agenda, Crown will need to attract skilled employees in significant numbers, absorbing them and having them quickly scale the learning curve, noting that they are unlikely to bring casino experience.³⁰⁰
214. Whether this is achievable, and sustainable over the long term, remains to be seen. There is cause for hope, and for doubt.
215. Crown Melbourne appears to accept that there is at least some risk that, left to its own devices, it might not stay the course on AML and other reform. This concession is implicit in Crown Melbourne’s submission that it is appropriate to appoint an independent monitor or supervisor with extensive powers and functions to oversee and scrutinise the implementation of its reform program.³⁰¹

Conclusion

216. This Commission must assess the suitability of Crown Melbourne to continue to hold the casino licence now. As matters stand, Crown Melbourne is not suitable. This is because Crown:
     • facilitated money laundering through the Southbank bank account
     • failed to investigate warnings about potential money laundering through that account over many years
     • failed to investigate media allegations of money laundering through that account until 14 months after they were levelled, the Bergin Inquiry was established and it had become entirely untenable for Crown to continue to do nothing
     • was slow to take reasonably available steps having regard to the conclusions of the Grant Thornton and Initialism reports with respect to Southbank and Riverbank including to review, promptly, whether to continue to provide services to those patrons whose accounts contained transactions indicative of money laundering
     • provided many of its experts with limited sets of instructions with a view to them producing reports that looked better for Crown, but that did not analyse the full picture
     • did not display candour to the Bergin Inquiry in respect of the review performed by Grant Thornton and Initialism of transactions on the Southbank and Riverbank bank accounts
     • does not presently have sufficiently robust systems to detect and deter money laundering and other forms of financial crime and is uncertain whether and when it will have such systems.
217. The Commission has examined Crown’s program of financial crime reform. That program, although nascent, is appropriate and Crown should continue to develop, pursue and implement it, with regular progress reporting to the regulator and the proposed Special Manager (see Chapter 16).
218. The Commission also heard evidence from a number of third party experts who had examined parts of Crown’s overall AML framework and made recommendations as to reform and improvement. Crown Melbourne should implement each of the recommendations set out in:
     • Promontory Phase 1 Report dated 24 May 2021 and titled ‘Phase 1: AML Vulnerability Assessment’³⁰²
     • Promontory Phase 2 Report dated 20 June 2021 and titled ‘Strategic Capability Assessment’³⁰³
     • Deloitte Phase 1 Report dated 26 March 2021 and titled ‘Assessment of Patron Account Controls’³⁰⁴
     • Initialism Transaction Monitoring Review dated June 2021³⁰⁵
     • McGrathNicol Report dated 5 July 2021 and titled ‘Forensic Review—AML/CTF’.³⁰⁶

Other evidence of reform measures to reduce money laundering and financial crime

219. The Commission heard evidence from two law enforcement witnesses about measures that could be introduced at the casino to increase verification and identification protocols and assist in law enforcement.
220. Commander Michael Frewen of Victoria Police Crime Command said that the Commission may wish to consider the following options to increase verification and identification protocols at the Melbourne Casino and assist in law enforcement:
     • All patrons attending Crown Casino Melbourne be required to produce identification, of minimum threshold, which is to be recorded on an internal Crown Casino Melbourne database. Patron gambling be monitored and recorded to ensure it is commensurate with legitimate gambling activity.
     • Information-sharing arrangements be established between Crown Melbourne, Victoria Police and the VCGLR, which prescribes the information Victoria Police needs to meet its law enforcement obligations, and the format and timeframes for the provision of that information to Victoria Police.³⁰⁷
221. A Police Officer in the Organised Crime Intelligence Unit gave evidence concerning reforms aimed to stop money laundering at the casino. When asked what they would do, short of closing the casino, to stop money laundering, the officer said:

     … I would say you need to be tighter around your betting accounts. I’m not sure whether the casino is a bank, but … they certainly operate like one. So I would first off make sure anybody who had an account, a betting account, or an offset account or a safety deposit box had to provide 100 points of ID to open that. If you want to have people that could access that account, being deposit or withdrawal, they also have to show 100 points of ID …

     The other thing I would stop is the casino should have an account which is in the name of the patron of that account, so any withdrawal, apart from a cheque, any withdrawal could only go into that patron’s bank account that they own. It cannot go into yours, can’t be directed to mine, has to be that. If that person wants to direct the money to you, then he does it out of his own account.³⁰⁸

222. The issue of increased or better identification procedures and requirements was echoed in the evidence given by Mr Jeans. Mr Jeans noted that one of the major enablers of money laundering was anonymity and therefore one of the first things to be considered to prevent money laundering is to reduce the level of anonymity by identifying or being in a position to identify people who are gaming or bringing money into the casino.³⁰⁹
223. By way of example, Mr Jeans referred to registered clubs legislation, where there is a requirement to be identified before entering a club. He said this usually requires the provision of a driver licence or other authoritative photo identification.³¹⁰
224. In Victoria, an example of a regime requiring the production of identification before entering a club is to be found in the Liquor Control Reform Act 1998 (Vic), which regulates the sale of liquor to club members, guests of members and non-members.
225. The identification requirement is found in schedule 1. By section 10(4) a club licence is granted subject to a condition that the rules of the club comply with schedule 1. Schedule 1 provides that the rules of a club must provide for the keeping of records of guests.³¹¹ In the case of a club that holds a venue operator’s licence, the rules of a club must provide that an ‘authorised gaming visitor’ must:
     • produce evidence of their residential address before being admitted to the licensed premises
     • carry identification at all times while on the licensed premises.³¹²

Improved identification procedures

226. In considering any improvement to patron identification procedures, it is important to understand one particular aspect of the context in which the Melbourne Casino operates. That aspect is the AML/CTF regime that does deal with customer identification.
227. The default position under part 2 of the AML/CTF Act is that a reporting entity must verify a customer’s identity before providing a designated service to the customer. However, under part 10.1 of the AML/CTF Rules, casinos (as opposed to providers of gaming services) are exempted in respect of designated services of a certain kind.³¹³
228. In effect, those rules exempt casinos, where the gaming service in question involves an amount less than $10,000 (or an amount of $10,000 or more that involves the customer giving or receiving only gaming chips or tokens), from the requirement to verify the identity of a customer before providing a service to that customer.
229. Mr Jeans was aware of mandatory identification obligations under the AML/CTF Rules. Referring to the current identification level of $10,000, Mr Jeans said that it would be sensible to reduce that limit. He explained that there is a balance between casual low-value gambling and a person undertaking ‘nefarious activities’. His evidence was that identification at a lower level was worth considering.³¹⁴
230. There is both a practical and conceptual distinction between identifying customers at the point of, or prior to, the provision of services, and identifying customers as they enter or seek to enter the gaming floor.
231. There are also practical and conceptual distinctions between:
     • requiring customers to produce identification; and
     • requiring the casino to verify customer identification.
232. Commander Frewen’s evidence was directed to the point of entry onto the casino floor; and also referred to identification of a minimal threshold. The Promontory Phase 1 Report also made a number of observations and recommendations regarding the authentication of identification documents by Crown Melbourne. There is, nevertheless, merit in the obligation being on the casino to verify the customer’s identity.

Compulsory carded play

233. Carded play (as distinct from uncarded play) involves a patron using or swiping their Crown membership card prior to playing any game at the casino. Carded play has a number of benefits when it comes to the responsible service of gambling, including permitting the measurement of the time spent gambling (see further discussion in Chapter 8).
234. Mr Jeans gave evidence about mandatory carded play (which he prioritised over the issue of prohibiting cash) in terms of its AML/CTF benefits.³¹⁵ Those include: (a) providing the opportunity to monitor and audit the complete behaviour and activity of the patrons; (b) enabling better identification of unusual activity; and (c) providing more transparency.³¹⁶
235. Crown is presently considering system changes that enforce carded play (and therefore customer identification) via reduced cash thresholds across a range of services, which Crown observes will enable implementation of enhanced transaction monitoring rules across customer gaming activity.³¹⁷
236. Additionally, in June 2021, Crown introduced a table games and Cage uncarded play limit, where a card is required for transactions above $4,999.³¹⁸ Crown is also planning a feasibility study on implementing limits on uncarded play for EGMs and electronic table games for transactions above $1,999.³¹⁹

Cashless play

237. The question of cashless play (or a prohibition on the use of cash at the casino) raises different considerations, a number of which may pull in different directions.
238. To begin with, it is noted that:
     • because cash is an anonymous store of value and leaves no audit trail, it is a medium favoured by criminals
     • the cash-intensive nature of casinos is one reason why they are particularly vulnerable to money laundering³²⁰
     • as per the Victoria Police evidence, the Melbourne Casino is the biggest cash business in this state, and criminals who want to launder money love cash businesses.³²¹
239. The Victorian Responsible Gambling Foundation (VRGF) made submissions in respect of cashless gambling. It submitted that while a move to solely cashless gambling presents opportunities to assist monitoring gambling behaviour, with the dual benefit of providing data to track gambling behaviours (to support appropriate intervention) and assisting research into behaviour associated with gambling harm, it also carries a risk of increasing gambling harm due to the frictionless nature of the transaction. As a result, there is less likelihood of time for reflection, and the potential to make it difficult for people to track their spending during gambling.³²²
240. In its submission, the VRGF points out other risks identified by the research, including that: (a) cashless gambling encourages higher spending; (b) cash transactions are felt as more painful (and less associated with reward); and (c) ‘cashless methods can reduce the efficacy of existing harm reduction measures that make people take a physical break or have interpersonal contact, for example, to access cash’.³²³
241. The VRGF contends that unless structured properly, cashless gambling could put people at increased risk of gambling harm. It submits that any move towards cashless forms of gambling needs to be developed and viewed through a gambling harm reduction lens and implemented only in association with well-planned harm reduction measures that reduce the risk of continuous gambling.³²⁴ The VRGF suggests that such measures include:
     • a universal system that requires people who gamble to set limits and prevents use when those pre-set limits are reached
     • information and education about the time and money limits that are appropriate
     • enforced break periods of at least 15 minutes every three hours.³²⁵
242. The VRGF also recommends that ‘if cashless gambling or digital wallets are to be introduced or trialled in Victoria, a system with a harm prevention focus should first be developed and piloted in order to assess its effectiveness’.³²⁶
243. Many of the concerns identified by the VRGF will be addressed or mitigated if other recommendations in this Report are accepted. For example, in Chapter 8 there is a recommendation that the YourPlay pre-commitment system be made compulsory for EGMs with set time limits for gambling and limits for expenditure.
244. Another recommendation is for improvements to be made to Crown Melbourne’s Gambling Code to address harm minimisation measures at the Melbourne Casino.
245. Crown Melbourne’s submission on cashless gaming similarly refers to what it calls the ‘prominent harm minimisation strategy’ of limiting a patron’s access to cash, referring to legislation that restricts the location or availability of ATMs in the casino venue and also manages withdrawal limits.³²⁷
246. Crown Melbourne’s submissions state that it is considering cashless gaming initiatives to reduce the use of cash in its casinos, including the introduction of a digital wallet program that would allow patrons to transact digitally.³²⁸ Crown Melbourne also refers to section 68 of the Casino Control Act, which prohibits Crown Melbourne from providing money or chips as part of a transaction involving a credit card or a debit card.³²⁹ Crown Melbourne says:

     [S]ubject to the approval of the respective State governments, Crown intends to move to cashless gaming over time. The main way patrons will be able to fund gaming activity will be through a digital wallet for all games. A digital payment committee at Crown is currently considering this. A digital wallet has the potential to include enhanced Responsible Gambling functionality, including enhanced data analytics (e.g., real-time information on player deposit activity), self-imposed ‘top up’ limits and delayed payment timeframes to mirror existing ATM breaks in play. It would be a significant enhancement in relation to Responsible Gambling.³³⁰

247. Mr Jeans’ view is that prohibiting cash would not work particularly well because, in his words, ‘there are people who would want to come to the casino and use diminished levels’ of cash.³³¹
248. A transition to cashless gaming (or to cashless gaming above a nominal threshold of, say, $1,000) will be a matter where the devil is in the detail. For reasons that are explored elsewhere in this Report, Crown Melbourne should not be trusted to pursue such a course unsupervised.
249. In light of this, and in the circumstances, and conditional on:
     • the acceptance and implementation of all the recommendations in Chapter 8; and
     • due regard being paid to the VRGF’s concerns about cashless gambling,

the following recommendation is made regarding cashless play.

250. The issues dealt with in this chapter concern the prevention of criminal conduct. The prevention of criminal conduct will be aided if Crown Melbourne shares information with law enforcement agencies.

Single patron bank account

251. In respect of Crown Melbourne’s patron bank accounts, which are the bank accounts held by and in the name of various Crown entities into which patrons can make deposits, Ms Dobbin agreed in evidence that:
     • the ease of monitoring for money laundering is greatly enhanced by having a single patron account
     • there is a greater risk of failure in monitoring for money laundering where there are multiple patron accounts to monitor.³³²
252. Mr Blackburn indicated that he is looking to rationalise the number of patron accounts at Crown and would agree with a recommendation from this Commission that there be no more than a single patron account for each of the Melbourne, Perth and Sydney casinos.³³³

Retention of surveillance footage

253. Commander Frewen said that Victoria Police would be assisted in conducting its law enforcement duties if Crown Melbourne were to retain its security footage ‘for as long as possible’ given that Crown’s current practice is to ‘erase footage after a short period of time’.³³⁴
254. Mr Craig Walsh, Crown Melbourne’s Executive Director of Security and Surveillance, gave evidence that footage is only held for 14 days.³³⁵