What did Crown Casino teach us about money laundering?

2 March 2021

Crown Casino has provided a masterclass in money laundering for all who were willing to take note.Some would have paid attention to prevent a repeat of such events, others would have been watching for much more nefarious reasons.

The Bergin Report

When James Packer obtained the licence for a casino in Sydney, he advised the NSW government that this was to be a casino for Asian high-rollers, principally Chinese, and that it would generate hundreds of millions in tax revenue for the State. This was an offer so attractive to the then Premier that no tender was called and almost no due diligence conducted on the business model Mr Packer was proposing.

There are lessons in the findings of the Independent Liquor and Gaming Authority report, handed down by Patricia Bergin on the 9^th of February.

The key takeaway is: if you want to get away with industrial-scale money laundering in Australia, do it behind a corporate veil and share the blame around.

It goes without saying, casinos make profits off the back of player losses, and, even the most superficial digging by the NSW government would have revealed an ugly problem – those Chinese ‘high-rollers’ that Mr Packer was talking about, would only legally be able to bring with them $50,000 per year. High-rollers, as everyone knew by then were more likely to be gambling millions, if not tens of millions – so Mr Packer was clearly thinking that China’s exchange controls were going to be circumvented. And, there was one other issue – the enforcement of gambling debts is illegal in China and this is where junkets, and those that enforce the payments of debts in mainland China, the Triads, come in.

If Crown was going to make such large profits they certainly weren’t going to be doing it without breaking a few laws. But precisely the fact that Crown has been able to operate this business model for so long, and with so many allegations around their methods, provides salutary lessons for law enforcement and, unfortunately, those who wish to emulate Crown’s methods.

Patricia Bergin’s report noted that hundreds of millions of dollars were channelled into Crown Casinos’ accounts through bank accounts – one of them held by a shell company directed by Crown Chief Executive Ken Barton. Ms Bergin found that these accounts were infiltrated and exploited by criminal elements, probably including international criminal organisations, and had been since at least 2014, and that Crown enabled or facilitated money laundering.

This begs the question: how can a major corporation, and its executives, enable and facilitate money laundering for so long, amidst so many allegations, without getting prosecuted?

It’s all in the Laws

Australia has some of the most comprehensive and far-reaching anti-money laundering legislation in the world – along with one of the lowest evidentiary bars for the prosecution of any type of offence. In fact, the evidentiary burden of proof for a money laundering offence in Australia is merely that one deal with property valued at $100,000 or more that is “reasonably suspected of being proceeds of crime”. And yet, it would appear that despite two banks closing their accounts and Australia’s AML regulator being aware of hundreds of millions of suspect funds flowing through those accounts, no law enforcement agency has been able to act.

And this is where the first lesson for money launderers lies. If you want to launder hundreds of millions of dodgy dollars, use a corporate entity.

Corporations are not like real people

Unlike ‘real people’ – who get prosecuted for money laundering all the time – corporations in Australia never do.

Why this is so is an interesting question – made even more interesting perhaps in light of the enormous fines levied on Commonwealth Bank and Westpac in recent times for offences related to anti-money laundering failures – technical failures that were related to failing to report transactions – not actually related to money laundering by the entity being fined.

Ironically, Westpac and Commonwealth Bank would have been vastly less likely to suffer a penalty if they had been actively and enthusiastically money laundering – for reasons explained below.

Corporate money laundering offences

If a corporate entity in Australia were to be prosecuted for money laundering, the primary agency responsible would be the Commonwealth Director of Public Prosecutions (CDPP). The CDPP has exhibited a particular reluctance to prosecute corporate entities for money laundering. This is not necessarily the fault of the CDPP. While it is possible for a corporate entity to be convicted of money laundering in Australia, the maximum monetary penalty that could be applied for knowingly dealing proceeds of crime to the value of $1 million or more is 1500 penalty units – currently equivalent to $333,000 – an amount so paltry that it clearly would provide no meaningful deterrent to an entity like Crown, and represent somewhat of a pyrrhic victory for authorities given the cost of litigating corporate offenders. Hence the CDPP’s reluctance.

One way to address this issue might be to amend the Criminal Code to allow meaningful monetary penalties to be levied against corporate entities for money laundering offences. Another might be to prosecute corporate executives for money laundering committed by the corporation, but this is where Crown’s second lesson in money laundering is delivered.

The Crown Casino report exposes the difficulty assigning individual criminal responsibility for decisions made collectively. For example, the company used by Crown Resorts for money laundering, Riverbank Investments Pty Ltd, had Ken Barton as the sole director. But the lack of a criminal charge against Mr Barton for money laundering perhaps speaks to the fact that Mr Barton most likely knew little of the actual transactions flowing through the bank accounts held by Riverbank Investments. In fact, he may never have seen the bank accounts in question and perhaps only knew in general terms what the accounts were to be used for.

This ability of corporate entities to deliberately structure their operations so as to prevent any one single individual being criminally culpable is the second major lesson to flow from this matter.

If you want your business – be it a bank, casino, tattoo parlour, nightclub, hedge-fund, property development company, winery or some other business – to handle large bags full of dodgy cash from shady characters without risking going to gaol, all you need to do is ensure that no one person is responsible for the entire process. Distributed responsibility currently provides protection from criminal culpability to everyone- from the teller, to the manager, to the CEO.

These challenges are not insurmountable. Other areas of law in Australia have addressed similar issues. Workplace safety laws, for example, include methods of assigning criminal culpability to decision-makers in corporations. In other countries anti-money laundering legislation assigns criminal responsibility to particular roles within financial institutions. Still other jurisdictions have assigned criminal culpability to all executives of a corporate entity convicted of money laundering.

Some of these legislative changes are perhaps unpalatable in the current environment. However, Australia would do well to at least amend the Criminal Code – to provide meaningful monetary penalties for corporate entities convicted of money laundering – and so encourage the CDPP to go after them.

Whatever happens, Australian authorities should take careful note of the findings of the Bergin Inquiry and act swiftly. Crown’s masterclass in money laundering has undoubtedly been attended by those on both sides of the money laundering divide – those who want to stop it, and those who want to profit from it. And sadly, the ‘profiteers’ are almost certainly going to able to apply their new-found knowledge more swiftly than the agencies working to stop them.

John Chevis
About the Author

John Chevis is a senior adviser for TIA. He spent 12 years working on fraud and corruption cases for the Australian Federal Police and is an occasional adviser on anti-money laundering for the United Nations.