SkyCity Entertainment Faces Significant Fine in AUSTRAC's Civil Lawsuit Alleging AML and CTF Breaches at Adelaide Casino

SkyCity Entertainment, a prominent casino operator, is grappling with potential financial setbacks as it navigates a complex legal battle against allegations of breaching anti-money laundering (AML) and counter-terrorism financing (CTF) laws at its Adelaide Casino. The company's future is shrouded in uncertainty as it faces the prospect of a substantial penalty imposed by the Australian Transaction Reports and Analysis Centre (AUSTRAC).

The gambling giant has disclosed that it may need to prepare for a penalty that could reach AU$45 million, but has underscored that AUSTRAC might pursue an even larger civil penalty. In a regulatory filing issued today, SkyCity explained that the exact size of the penalty could vary significantly based on several factors, including the current provision and ongoing uncertainties. The timing of the civil penalty payment also remains uncertain, adding to the company's challenges.

As part of its response, SkyCity has taken a preemptive measure by reducing the value of its casino license in Adelaide by AU$45.6 million.

Despite these financial uncertainties, SkyCity remains hopeful, revealing projections for normalised EBITDA (earnings before interest, taxes, depreciation, and amortisation) ranging from NZ$300 million to NZ$310 million for the fiscal year ending in June.

The predicament facing SkyCity emanates from civil penalty proceedings initiated by AUSTRAC in Australia's Federal Court in December 2022. The regulatory body alleged that SkyCity Entertainment had violated the nation's AML and CTF legislation, with each potential breach carrying a maximum penalty ranging between AU$18 million and AU$22.2 million.

The lawsuit follows an investigation launched in June 2021, scrutinizing the casino's adherence to Australia's Anti-Money Laundering and Counter-Terrorism Financing Act. AUSTRAC contends that SkyCity failed to conduct necessary due diligence on casino patrons in 124 instances from December 2016 onward. Furthermore, the regulator asserts that the casino operator repeatedly breached its own AML and CTF program.

A recent filing by SkyCity on August 14th underscores the complexity of the situation. The company highlighted that estimating potential exposure remains challenging due to the early stage of proceedings. Both parties are currently working to establish facts and potential admissions, while the court determines a process for addressing contested issues and determining the final monetary penalty.

The recent record-setting AU$450-million fine imposed on Crown Resorts, a local competitor of SkyCity, serves as a reminder of the gravity of the situation. The fine was a result of serious and repeated AML and CTF violations in Crown's casino operations in Melbourne and Perth. Meanwhile, SkyCity remains under the scrutiny of the Liquor and Gambling Commissioner of South Australia, with an ongoing independent investigation temporarily on hold pending the outcome of the AUSTRAC civil proceedings.

SkyCity Entertainment's future hangs in the balance as it navigates a challenging legal landscape, grappling with potential financial penalties and working to address allegations of AML and CTF breaches at its Adelaide Casino. The outcome of this high-stakes legal battle will have significant implications for both the company and the broader gambling industry in Australia.