AUSTRAC confirms casinos, not regulators, need to control junkets

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In the wake of the massive scandal centered on Australia’s Crown Resorts, the country’s gambling operators – as well as those around the world – should start preparing now to see changes in how the activity is regulated. Crown’s future is in doubt as it has been dubbed “unsuitable” to hold a gaming license and more fallout is expected to come. In the meantime, until those new regulations are implemented, Australia’s financial watchdog, the Australian Transaction Reports and Analysis Centre (AUSTRAC), is clearing the air over some details. When it comes to managing junkets that work with casinos, the casino operators, not regulators, are responsible for keeping them in line.

The ongoing investigation into Crown, which is accused of facilitating massive money laundering as it turned a blind eye, has caused government officials and regulators to spend an exorbitant amount of time sifting through mountains of information to figure out who went wrong and where. This subject came up during a recent Senate hearing attended by the CEO of AUSTRAC, Nicole Rose, who made it clear that casino operators are expected to manage all aspects of their operations, including junkets.

Rose asserted during the hearing, “AUSTRAC does not regulate junket tour operators. The onus is on industry to ensure it complies with its AML/CTF obligations. The Federal Court has also reiterated this view.” She added, when asked about possible voids in junket regulations, that “domestic regulation won’t address the issues” and that “the industry was well placed to manage and assess its own risks.”

AUSTRAC has long believed that casino operators have been lax in their oversight of junkets, possibly because these are responsible for bringing millions of dollars each year to the properties. The watchdog determined three years ago that operators were more than willing to let certain activities slide and that they weren’t performing due diligence properly on the companies to ensure that they were living up to Australia’s financial standards.

The watchdog concluded at the time, “This means that all reporting on these transactions occurs only under the junket tour operator’s name and not the financial activity of the individual participants. This is a significant vulnerability for junket operations. While there was a theoretical acceptance that junkets may be exploited, it was AUSTRAC’s view that this possibility was not taken seriously.”

Now that Crown has been exposed for what could only be called egregious breaches of regulatory and ethical rules and policies, the truth is surfacing. While junkets are a legitimate business with a definite purpose, casino operators shouldn’t have to be required to keep them in line. They are similar to how any business might interact with a subcontractor, but still be responsible for the final results.

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