SkyCity Entertainment Group has factored in an approximately A$90m financial hit that could stem from ongoing AUSTRAC civil penalty proceedings.
The Auckland-based operator, in addition to its Crown Resorts and Star Entertainment Group counterparts, became the subject of enforcement action from the financial watchdog in September 2019.
This is due to alleged serious and systemic non-compliance with Australia’s anti-money laundering and counter-terrorism financing laws.
Subsequently, SkyCity has set aside a A$45m provision for a potential AUSTRAC civil penalty and associated legal costs, as well as writing down the value of its Adelaide casino licence by A$45.6m.
Each of the numerous alleged contraventions could attract a maximum civil penalty of between A$18m and A$22.2m each, with SkyCity noting that any eventual maximum financial hit “may be significantly higher or lower than the provision”.
“The proceedings remain at a relatively early stage with AUSTRAC and SkyCity Adelaide currently working towards agreeing facts and potential admissions before the court identifies a process for any remaining disputed issues and any potential penalty to be determined,” a company update read.
“Estimating the potential exposure to penalties with any degree of accuracy at this stage of that ongoing process remains challenging, particularly given the outcome is highly dependent on a range of factors which are not yet known.
“The size of any penalty SkyCity Adelaide is exposed to could vary materially from the amount of the provision and significant uncertainties remain.
“Any eventual civil penalty applied to SkyCity Adelaide in relation to the proceedings may be significantly higher or lower than the provision. The timing of any civil penalty to be paid by SkyCity Adelaide is also uncertain.”
Among the allegations are that the company failed to appropriately assess the money laundering and terrorism financing risks it faced, including the likelihood and impact of those risks, and to identify and respond to changes in risk over time
Furthermore, it is said that it failed to establish an appropriate framework for board and senior management oversight of the AML/CTF programs, did not have a transaction monitoring program to monitor transactions and identify suspicious activity, and had a lack of appropriate enhanced customer due diligence program to carry out additional consumer checks.
It is added that the company did not include in its AML/CTF programs appropriate risk-based systems and controls to mitigate and manage risks, in addition to not conducting appropriate ongoing customer due diligence on those that presented higher money laundering risks.
Despite the provisions, the group is confident that this will not normalised earnings for the year’s financial statements, with normalised EBITDA still expected to come in at $300m-$310m. The group will release its group financial statements for the year ended June 30, 2023, later this month.
Earlier in the year, A A$450m financial penalty was imposed on Crown Resorts by the Federal Court of Australia after AUSTRAC filed civil proceedings for breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act. Similar action against Star Entertainment Group is ongoing.