Misleading transactions

The Star Entertainment Group allegedly hid AU$900m (US$660.5m) worth of Chinese gambling transactions from banks, an inquiry into the Australian casino company has heard. The operator disguised the money coming from the debit cards of Chinese gamblers as hotel expenses, lying to banks to hide the fraud.

These allegations were made during the first day of public hearings for an inquiry into the company’s Sydney casino license. The Star’s chief financial officer Harry Theodore and general counsel Oliver White both allegedly misled China UnionPay and National Australia Bank (NAB) about the transactions back in 2019.

allowing patrons to get around the tight capital controls of China

The Star’s casinos in Brisbane, the Gold Coast, and Sydney would accept UnionPay debit card transactions at the attached hotels. Employees then transferred the funds to the gambling accounts of the patrons. The inquiry heard that the actions increased the risk of money laundering, as well as breaking the company’s agreement with its bank, and possibly allowing patrons to get around the tight capital controls of China.

Identifying the scheme

NAB, The Star’s bank, first flagged concerns to the casino company in June 2019. It had noticed a significant amount of gambling transactions processed using a merchant code that categorized them as hotel expenses.

The Star eventually told NAB towards the end of 2019 that it could lower the max transaction size through UnionPay to AU$50,000 (US$36,695) per day per patron due to the concerns. After receiving a warning letter from UnionPay and NAB in March 2020, the company stopped accepting these cards completely.

Other issues already flagged in the hearing include deficiencies in how The Star managed money laundering risks. Investigators also questioned its relationship with VIP junket tour operators that have links to organized crime in Asia.

Widespread issues in Australia

The New South Wales (NSW) Independent Liquor & Gaming Authority began its The Star review last year. It wanted to assess the firm’s suitability to hold its Sydney casino license. Prior to this, allegations had surfaced in local media regarding criminal infiltration, extensive fraud, and money laundering taking place at The Star casino. ?

Crown Resorts did something similar at its casino

It was not just The Star that was operating the UnionPay scheme at its casinos. The company’s rival in Australia Crown Resorts did something similar at its casino in Melbourne. A royal commission in Victoria last year uncovered that Crown disguised over AU$160m (US$117.4m) worth of gambling transactions as hotel expenses.

Following extensive investigations into Crown, officials ultimately deemed the operator unfit to run its casinos in Melbourne and Sydney. Turmoil within the company followed the decision, including a clearout of senior management and the board. It is now on track for a US$3.6bn takeover by US private equity firm Blackstone Group.