The inquiry also found Crown engaged with junket operators with alleged connections to organised crime without undertaking proper due diligence. Furthermore, it put employees at risk of harm in its promotion of gambling in Mainland China.
The report cited Crown’s “unjustified belief in itself” and “corporate arrogance” among its failings. This led to a lack of thorough investigation of serious claims against its business and an assumption that the claims must have been deceitful.
However, it may still be able to operate the resort if it makes certain changes, including compliance and financial audits and an end to its dealings with junkets.
The New South Wales Independent Liquor & Gaming Authority formed the inquiry, led by former judge Patricia Bergin, in August 2019.
This followed Asian gaming giant Melco agreeing to purchase a 19.99% stake in CPH Crown Holdings in May 2019 for approximately AUD$1.76bn (£981.9m/€1.06bn/US$1.19bn).
The announcement gave rise to allegations about the businesses in the Australian press, which led to the Authority launching the inquiry.
The inquiry was intended to examine whether Crown was a “suitable” licensee for a new integrated resort at Barangaroo in Sydney, and if not, what changes would be required to make it suitable. It also looked into whether Melco was suitable for its status as a close associate and whether the deal was a breach of the Barangaroo licence.
After the inquiry began, Melco delayed purchasing the second tranche of shares in Crown, then ultimately pulled out, selling the tranche it had already acquired to private equity group Blackstone.
However, in June 2020, the Authority announced that the inquiry would continue regardless, but would no longer examine Melco’s suitability as a close associate.
The inquiry found evidence of money laundering, both through the accounts of subsidiaries owned by Crown and at Crown’s own facilities.
These cases included multiple deposits of just under the $10,000 reporting threshold in one day, and a customer for whom ASB bank requested more information regarding transactions worth $15m, which Crown failed to provide.
In addition, Crown had worked with seven different junket operators whose owners or financiers had been accused of links to organised crime. The inquiry found Crown’s due diligence of these junket operators lacking.
Owner James Packer was also found to have undue influence on the business given that he was not a director. This included Packer personally agreeing and executing the sale to Melco without approval from the board.
The operators’ directors were then unable to ensure the deal was not in breach of Crown’s Barangaroo licence.
The inquiry concluded that the evidence regarding money laundering alone was enough to determine that Crown was not a suitable holder of the Barangaroo licence.
Having determined that Crown was not a suitable licensee, the inquiry said its problems “stem[med] from poor corporate governance, deficient risk management structures and processes and a poor corporate culture”.
However, it may still be permitted to operate the venue if it institutes certain changes.
“Crown recognises that there is a need for cultural change,” it said. “However this must come from within Crown rather than from some proposal to the Authority.”
It said that Crown must complete a full audit of accounts, as well as a compliance audit. In addition, any Barangaroo licensee “must provide certification of the completion of appropriate AML/CTF education, supplemented annually”.
The inquiry also recommended that Crown continue to avoid dealing with junkets unless they are licensed by the Authority.
Packer must also stop “remote maneuvering”, referring to his practice of effectively running the company despite not sitting on the Crown board. Crown’s board must also be restructured.
Additionally, the inquiry produced 19 recommendations for the New South Wales casino system as a whole.
The first of these was that the New South Wales Casino Control Act be amended to include an additional object of preventing money laundering. It also recommended the Act be amended to stop casino operators from dealing with junket operators.
The inquiry also recommended the creation of an independent, dedicated, stand-alone, specialist casino regulator: The Independent Casino Commission (ICC). ICC approval will also be required for any holder of a 10% stake in a casino.
Each casino operator must also have an “appropriately qualified” compliance auditor.