Financial regulator AUSTRAC has launched an investigation and filed serious charges against clubs giant Mounties, alleging “systemic” AML non-compliance as it warns money laundering is shifting from the now highly regulated casinos to clubs and pubs.
In late July the currency exchange watchdog announced the start of civil penalty proceedings against Mount Pritchard District and Community Club, better known as Mounties, alleging the group failed in its management of the risk of money laundering through gaming machines.
Mounties is one of the largest club groups in Australia, operating 10 NSW venues, with a total of around 1,400 EGMs.
AUSTRAC has begun its promised focus on criminals exploiting gambling in gaming venues, following moves against casinos and bookmakers, including online platforms.
It suggests the tightening of operations in casinos is displacing illicit activity into pubs and clubs, and while it concedes some of the increase may be arising from regular punters, some clubs hold vast numbers of machines and the regulator feels there is growing evidence of illicit activity.
“We know in certain parts of Australia that when casinos have tightened up their controls, their clientele has dropped and there’s been a corresponding increase in clients in pubs and clubs,” said AUSTRAC chief executive Brendan Thomas.
“We are worried that there’s displacement activity happening from casinos into pubs and clubs in Australia.”
In 2023 the NSW Crime Commission concluded that a large share of the $95 billion that passed through the roughly 87K EGMs in NSW pubs and clubs during FY23 was money being ‘washed’ by criminals, as opposed to the claim the money came from people struggling with gambling problems. The sensation triggered the former Liberal state government to mandate mandatory cashless play across the state, which became an election issue.
The resulting Labor government toned down the rhetoric, instead announcing a comprehensive test of the technology, which subsequently saw the majority of the initial volunteer venues drop out and only a handful of actual users continue with the bug-laden system.
Premier Chris Minns has since conceded the challenges were high and that they would not be adopting the recommendation of the gambling reform panel. Minns says that despite best intentions to roll out cashless, “it’s largely proved to be ineffective” and hasn’t achieved its goal to reduce problem gambling, while adoption has been low and the cost of compliance “astronomical”.
AUSTRAC reports the risk of money laundering is higher in businesses dealing with large amounts of cash, particularly in the absence of AML practices, and says the ML/CTF program at Mounties was inadequate, without the right staff awareness training, transaction monitoring or due diligence processes.
“A business operating at this scale, in a cash-intensive sector, is exposed to a high degree of money laundering risk,” boded Thomas.
Looking at a four-year period, where patrons at Mounties put circa $4 billion through the machines and the club group took revenue of $459 million, the group has become AUSTRAC’s first target in the clubs industry.
A ‘concise statement of facts’ has been released alleging Mounties served countless customers without exercising the proper controls, perpetuating “longstanding, systemic deficiencies” in its AML policies and failing to monitor specific individuals appropriately – despite the risk they represented.
In 2023 Crown was fined $450 million, and Star Entertainment faces a $400 million fine over hosting known organised crime figures. Both casinos have had strict new regulations imposed, required to only offer poker machines through a mandatory carded system, with lower cash input limits, and to do stringent background checks on customers.
Star announced a 17 per cent reduction in its average daily revenue in a recent report, and is asking for clemency on the penalty.
But ramping up its presence in clubs, AUSTRAC has announced bringing civil penalty proceedings against Mounties in the Federal Court, claiming non-compliance on AML and CTF laws, having identified 10 “suspicious customers” from a sample considered, who it suggests should have received ‘enhanced’ customer due diligence.
Despite the fact that Mounties had identified suspicious activity in eight of these individuals and notified AUSTRAC, the group’s enhanced customer due diligence program was labelled “vague” and reportedly lacked sufficient detail.
Players identified were seen playing frequently, gambling amounts said to be ‘at odds’ with their employment, feeding in high amounts but doing little playing and getting large payouts by cheque.
It’s said that over a period from 2019 to 2023, the 10 subjects withdrew total payouts of $10 million, having fed somewhat more than that into the machines. A figure of $139 million in total bets has been claimed in some accounts, but if correct this would not appear indicative of criminal behaviour, sacrificing 86 per cent to launder the cash.
Poker machines are seen as a particularly high risk for money laundering due to their use of cash, which is also the primary vehicle for criminal wealth.
The case against Mounties will have ramifications for venues throughout the state and potentially across the country, especially if the non-compliance being claimed by AUSTRAC at Mounties, with the “high risk of ML/TF [money-laundering/terrorism financing] … not addressed adequately or at all,” is found to be taking place beyond one of the biggest, most successful groups.
“Australian community and Australia’s financial systems have been exposed to systemic ML/TF risk over many years,” said the AUSTRAC statement.
The claims have added significance for the many clubs – including Panthers, Dooleys, Cabravale Club and Norths group – also using BetSafe for their responsible gambling program. AUSTRAC alleges the program did not enable Mounties to understand, recognise, identify, mitigate or manage the compliance risks it faced dealing in vast quantities of cash.
Mounties has issued a statement proffering that it takes its AML obligations seriously, and that it has been co-operating with AUSTRAC throughout its investigation and has “been dedicating significant investment and resources” to improving its methods since it was notified by the regulator.
“As a Club and a profit-for-purpose organisation, we are focused on acting in the best interests of our member communities. We will do everything we can to ensure any impact is minimised,” provided a spokesperson.
ClubsNSW offers that the industry is proactive about management of its regulatory risk controls.
“ClubsNSW is committed to promoting AML/CTF best practice and looks forward to hosting AUSTRAC CEO Brendan Thomas as a guest speaker at its annual conference later this year.”
The decision on whether or not Mounties was in breach of the laws will come from the Federal Court, along with any penalties.
