Money Laundering in Perth & Melbourne Casinos – The Chinese Connection

Money Laundering in Perth & Melbourne Casinos

Australia is generally considered to be a first-world nation with a stable democracy, a developed economy, and high standards of living. Millions of people flock to the country to visit its famous beaches, amazing wildlife, and vibrant culture. 

Unfortunately, Australia is also an international hub for financial crime, particularly money laundering. This is pretty serious since it is on a list of major money laundering countries by the US State Department. 

Prominent Australian banks like WestPac and Commonwealth Bank have been fined close to AU$2 billion for failing to prevent money laundering through their accounts in recent years. The WestPac case created shockwaves in 2020 with its record breaking fine of AU$1.3 billion.

The Crown Casino case was equally damaging – the only difference was that it involved the gambling industry. Long considered a magnet for money launderers, the thriving Australian casino sector faces the biggest crisis of its kind in 2020. 

What is the Crown Money-laundering Scandal?

With an estimated worth of over AU$8 billion, Crown Resorts is the biggest gambling and entertainment company in Australia. The group owns casinos in Melbourne and Perth, and is in the process of constructing a massive resort in Sydney. 

That AU$1.6 billion project is now in serious jeopardy due to the ongoing investigations into allegations of money laundering at the Perth and Melbourne casino. The story of irregularities at Crown first broke in 2019 in the media. 

The Australian gambling regulators and financial crime agencies like Austrac soon followed suit, resulting in an acknowledgment by the company that money laundering may have taken place at some of its casinos. 

What is the “Chinese Connection” in This Case? 

In money laundering, geography often plays a key role. For example, European banks in countries like Sweden and Denmark get a lot of illegal money transfers from criminals in Eastern Europe, particularly Russia. 

In Australia’s case, a lot of money laundering transactions originate in China. This is especially true in the case of gambling. Both nations have a massive gambling culture – it is a shared popular pastime among the Chinese and Australians. 

And to make matters worse, mainland China does not have legal gambling resorts – the only legitimate option for Chinese gamblers is in Macau – the Vegas of the East. This makes Australia, with its many high-class gambling resorts, a very attractive destination close to home for Chinese high rollers. 

In fact, there are many junket operators ferrying VIP gamblers from China to Australian casinos. Junkets are special luxury travel operators that connect high rollers with casinos – offering free travel, accommodation, and other VIP services – originally centred on Macau. 

They offer ways for gamblers to traffic vast sums of money into casinos, in violation of strict Chinese laws. With deep ties to the Chinese “triads” – criminal organizations involved in drugs, human trafficking, and worse, most junkets operate in a shady side of the gambling business. 

The Crown casino case involved several such junket operators. It has been accused of allowing money laundering to occur through its accounts, using a technique called “cuckoo smurfing” – splitting larger sums of money into small ones using casinos. 

What is the Impact on the Australia Gambling Industry? 

Crown is a major player in the Australian casino industry. And it is in big trouble now – facing massive fines and even a potential cancellation of its license. The company has already had its gambling license suspended as a result of this scandal. 

As a result, the Sydney resort will not be able to operate as a casino on its unveiling in December 2020. This is a major blow to the company as well as the industry, which is facing an unprecedented crisis due to COVID. 

Since it is a publicly-traded company, Crown also suffered a huge loss of value in the share market. Angry investors have even started a lawsuit against the company. But the case is bound to have wider ramifications for the Australian gambling industry as well. 

It has the potential to weaken the stranglehold enjoyed by the casino industry. Unlike the UK, where both online and offline casinos co-exist, Australia favours offline industries. Online casinos are not legal under the law and even sports-betting is affected. For example, in-play betting has been banned in Australia.

Increased concerns about money laundering by big casinos might nudge the authorities to take a more favourable attitude towards online gambling. Since all transactions are digital in the online arena, money laundering is easier to track and control. 

In fact, according to many experts, one of the reasons why big casinos managed to get away with money laundering for so long is due to the difficulties in tracking financial crimes in the offline market. For years, AUSTRAC was too busy going after pubs and smaller gambling businesses.

Gambling machines or “pokies” are omnipresent in pubs across the country. An estimated AU$75 billion dirty money is laundered through pokies in Australia each year. Busy policing at this end, agencies like Austrac have ignored the bigger players for far too long. 

All this should work in the favor of the online gambling and betting industry in the long term. The segment is already benefiting a lot from the pandemic. The EU and UK examples indicate that it is possible to regulate online gambling effectively, keeping an eye on money laundering. Maybe it is time Australia followed suit.