How Star Entertainment Group circumvented China’s cross-border gambling crackdown – IAG

Australia’s Star Entertainment Group disguised customer deposits with a major Macau bank as deposits made by the company, and then used a Macau travel operator’s bank account after its own accounts were closed, as part of its efforts to circumvent a crackdown by mainland China. on capital outflow for gambling purposes.

Details of Star’s practices regarding its customers in Macau were set out in a report released on Tuesday in which the Australian casino giant was deemed unable to retain its casino license for The Star Sydney, pending a ruling. final from the New South Wales casino regulator. .

According to Adam Bell SC’s report on the findings of the recent review of The Star Pty Ltd, Star held a number of bank accounts with the Bank of China, Macau Branch (BOC Macau) between November 2013 and January 2018. , which it used for player deposits. However, in order to disguise these deposits as being made by the company rather than by customers for gambling purposes, Star’s office in Macau adopted a process of providing bogus documents to BOC Macau. This process involved a Star Entertainment staff member attending BOC Macau when a customer deposit was made and providing bank representatives with various letters on letterhead from The Star and other affiliates, “this which deliberately gave the false impression that the deposit was made by The Star rather than a patron,” the Bell report states.

About HK$1.2 billion ($153 million) was deposited into Star’s BOC Macau accounts during this period.

In late 2017, as Macau banks grew increasingly reluctant to work with foreign casinos due to mainland China’s crackdown on cross-border gambling, Star was told by BOC Macau that its accounts had to be closed.

According to the Bell report, “This has raised serious concerns at Star Entertainment because without being able to receive cash deposits, it has made it more difficult for customers to repay check cashing facility (CCF) debts and ‘make payments before playing’ It was estimated that this would have an annual EBITDA impact of A$21.5 million (US$14.8 million), unless rectified.

In response, Star struck a deal with Macau junket operator Kuan Koi in January 2018, under which Koi would collect payments from Macau customers and deposit them into its casino account. The funds would then be applied to settle those customers’ CCF debts to Star. About a month after this initial arrangement was agreed, it was extended to include pre-money deposits by customers before play.

The deal with Koi was eventually usurped following the activation of a company called EEI Services (Hong Kong) Limited (EEIS) – a wholly owned subsidiary of Star Entertainment which was incorporated in Hong Kong in 2013 and approved in as a “close associate” of The Star. in 2014, but lay dormant for several years.

“EEIS was the long-term solution to deal with the closure of BOC Macau accounts,” the Bell report explains.

“EEIS was an attractive solution, in part because it was not a casino operator, and could therefore accept payments from customers who were unwilling to have a casino appear on their bank statements. Additionally, it was attractive as it was anticipated that EEIS could offer direct credit to customers in a way that casino operators (and their employees and agents) were not permitted to do under the Casino Act. casino control.

Later, when BOC Macau became suspicious and blocked transactions on Koi’s account, the agreement changed again to incorporate third-party senders who would make payments to various EEIS accounts held with National Australia Bank. Star would then refund the service fees paid by customers through separate payments to Koi.

“In this way, the Kuan Koi and EEIS payment channels have merged,” the report said.

The Bell report is highly critical of Star’s decision to use Koi, as well as its characterization of the associated AML/CTF risk level as low.

“An arrangement of this nature with a junket operator is somewhat surprising,” he said. “The arrangement obviously obscured the true source of the funds deposited at the casino.

“Furthermore, the risk assessment relied on the fact that customers transferring money through this system mostly held CCFs. Once the agreements were extended to include forward money deposits, the risk calculation changed because Star Entertainment did not perform the same level of due diligence on customers who did not hold CCFs Increased risk was not appropriately factored into the assessment ML / FT risks.

According to the Bell report, at least A$150 million (US$103 million) was transferred through Star’s agreements with Koi between January 2018 and August 2019, while EEIS provides loans totaling A$213 million ( US$147 million) to customers or junket operators. . Those issued to junket operators were then “reissued” to a number of individual Star Sydney customers.

In summarizing its findings, the Bell report points to a culture failure at Star that ultimately led to the payment channels used by its former BOC Macau customers in Asia spiraling out of control.

“To manage and contain the risks of money laundering and criminal infiltration, a casino operator’s culture must be risk averse,” he says.

Instead, “the culture [at Star]What was particularly problematic in the international VIP sector, where the risks were most acute, was where business objectives took precedence over compliance objectives.

Star has since ceased many of its Asian transactions with the closure of its Macau office on June 29, 2021 and its offices in Hong Kong and Singapore in January 2022.

About Kristina McManus

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