Posted on: November 1, 2022, 06:50h.
Last updated on: November 1, 2022, 01:19h.
SkyCity Entertainment Group, the New Zealand-based casino operator, is preparing for the worst. It’s facing two investigations linked to its casino in Adelaide, Australia, and is setting aside a significant amount of cash in anticipation of having to pay huge fines.
Australia’s Transaction Reports and Analysis Center (AUSTRAC) and South Australia’s (SA) Office of the Liquor and Gambling Commissioner (OLGC) are both looking into SkyCity. They’re responding to concerns that the Adelaide casino failed to adhere to anti-money laundering (AML) procedures on multiple occasions.
The scrutiny is reminiscent of the still-hot scandals involving Crown Resorts and Star Entertainment. Based on the record fines both of those casino operators faced across Australia, SkyCity has an idea of what might be coming.
The Writing on the Wall
Glenn Davis, the recently-appointed chairman of SkyCity Adelaide, told shareholders last Friday that the company has been making preparations for the worst. In the event that AUSTRAC and the gaming regulator determine that breaches warranting financial penalties occurred, SkyCity is making sure it has enough liquidity to cover them.
The OLGC launched an informal inquiry this past July. It followed the investigations into Crown and Star, both of which violated AML policies in New South Wales (NSW), Queensland, and other states. The regulator stated recently that it will report the results of the inquiry next February.
AUSTRAC’s investigation has been in play since June 2021. It has also been more thorough, with SkyCity Entertainment chair Julian Cook telling shareholders that the financial watchdog has come back nine times to request more documentation.
AUSTRAC conducted a review of the Adelaide casino in 2016, which didn’t find any issues, according to Cook. After it began taking a closer look in 2019, it uncovered concerns dating back to that time.
There were other questions about some “serious con-compliance” that may have occurred between 2018 and 2019 as well. These concerns made it virtually impossible for SkyCity to make a play for a casino license in NSW when the Crown debacle was coming to a head.
Behind the Eight Ball
One of SkyCity’s shareholders spoke up during the meeting last Friday, accusing company staff of being “behind the eight ball” in terms of AML compliance. The unidentified investor showed frustration with SkyCity’s apathetic approach toward legislation instead of proactively ensuring it was playing by the rules.
Cook fielded the question, acknowledging that there were issues and calling the situation “disappointing.” He stated that SkyCity is now taking a “singular focus” to address the shortcomings.
Among these responses are the creation of a dedicated compliance team, an increase in staffing for compliance, and investments in infrastructure. Because these developments are reactive and not proactive, there is still the chance that SkyCity will be hit financially by regulators.
Star paid well over AU$100 million (US$62.3 million) for its egregious pattern of policy failures. It isn’t likely that SkyCity would have to pay close to that, but the company’s ready, just in case.
CEO Michael Ahearne said that its “liquidity headroom” is more than three times what the company expects to maintain under normal operating conditions. Only time will tell if it’s enough.