Money laundering – Crown – Wider Implications for International Business – February 2021

An inquiry into the Australian casino company, Crown Resorts Limited, has condemned the company’s anti-money laundering efforts, criticised its links to Macau junket promoters and triad societies, and branded the company “unsuitable” to hold a gaming licence.

The formal report thus highlighted how a reliance on junkets has rendered casino companies and affiliates deeply vulnerable to regulatory, reputational and criminal risks – about all of which SVA’s CEO Steve Vickers gave formal evidence to the Inquiry.

Crown Resorts

The Inquiry under the Casino Control Act 1992, led by Judge Patricia Bergin, published its report (“the Bergin Report”) on 9 February 2021, which outlined a series of failings by Crown Resorts, and seemingly rendered the company “quite unsuitable” to hold a gambling licence in New South Wales.

In particular, the report detailed an anti-money laundering (“AML”) “debacle”, owing to the storage of large sums of cash in lockers on premises in Melbourne, the questionable movement of funds through partner company bank accounts, and the risks of dealing with Macau-based junket operators.

The role of triad societies

The most egregious AML failures related to activities in a gaming room in the Melbourne casino, which was operated by Suncity Group, one of Macau’s biggest junkets – so highlighting the risks long posed by junket promoters.

The Bergin Report noted: how Suncity Group has faced claims of links to the 14K triad society; how other junkets, such as Neptune Group, faced comparable claims of ties to other triad societies; and how triad links have proven identifiable in the past, through examination of guarantors.

Indeed, it is in this context that SVA’s CEO Steve Vickers gave evidence to the Inquiry in August 2020, setting out how some junkets rely on triads to carry out “extra-legal services”, such as gaming promotion, evasion of Chinese capital controls, and debt collection.

Implications for Crown Resorts

The report has already had serious implications for Crown Resorts and its investors.

Several directors have resigned their posts, including CEO Ken Burton, and the company may have to reform shareholding arrangements, so as to scale back the influence of tycoon James Packer (whose Consolidated Press Holdings holds about 37% of shares).

A big doubt now looms over the USD1.7 billion Crown Resorts’ tower and casino in Barangaroo in Sydney, which was already at risk owing to the lack of Chinese gamers travelling to Australia. Much will rest on rapid sale of the apartments.

The Bergin Report will also reverberate more widely, given Crown Resorts’ casinos in Melbourne and Perth. The Western Australia state government on 17 February 2021 announced plans for its own inquiry; and other investigations are reportedly under way in Victoria.

Wider lessons for business

Of course, the report offers lessons not only to Crown Resorts, but also to any businesses involved in the gaming sector, in Macau – or further afield.

After all, many gaming companies have hitherto relied on Macau’s junkets to find VIP gamers, and, in some cases, have downplayed the risks of indirectly dealing with triad societies when doing so. This report makes clear that they must change tack, however, and should refresh due diligence assessments of junket partners.

A further lesson comes from how Crown Resorts’ serious misreading of the Chinese government’s determination to act against gaming promotion, blithely disregarding the meaning of the arrest of 13 Korean gaming promoters on 14 October 2015. Rather, Crown Resorts, and its advisers, saw the risks as manageable – at least until the arrest of 19 of its own employees on 13 October 2016.

The report thus revealed how political and national security concerns predominate in the end; and, in this case, a desire in Beijing to curtail graft gelled neatly with concerns about maintaining the integrity of China’s capital account. Crown Resorts erred in not responding to these clear signals.

The implications for international business

These lessons do not apply only to the casino companies. After all, Macau’s casinos have long functioned as the centrepiece of a broader financial eco-system, meaning that other financial and trading businesses, which transfer funds or settle payments, are also vulnerable.

So, too, are real estate, hotels and leisure businesses, many of which have benefitted from Macau’s gaming boom (and which are now suffering due to the pandemic) – as are other companies linked to the sprawling interests of the bigger junkets, be they in racing, yachts or entertainment.

Investors should thus think holistically about the report. Many other cross-border businesses with activities in Macau, Hong Kong and mainland China could yet find themselves in a comparable plight.

The political risks

Finally, the report captures neatly how political risks have spiked in recent years. Crown Resorts’ junket ties were arguably of minimal concern in the years before 2015, when relations between Australia and China were sturdy, and when the Macau gaming industry was booming.

Now, by contrast, geopolitical tensions are acute, with relevant authorities no longer willing to overlook questionable practices, and capital flows and visitors to Macau have dried up; Macau’s gaming revenues fell 80% in the year to November 2020, to USD6.58 billion.

Looking forward, this situation will pose intense challenges to Macau’s foreign casino concessionaires, given the looming end of concessions in 2022. US gaming operators which do not enjoy close ties to the new Biden administration are particularly exposed. So too, though, are other businesses that operate in the broader financial eco-system – and investors should not disregard this risk.

What should businesses do?

Companies must evaluate these growing strategic risks, so as to mitigate any impact on their investments. SVA advises that companies should:

  • Re-examine relationships with key junkets, or otherwise exposed businesses, to take account not only of the existing risks, but also of legacy issues that may require attention, given the changing climate.
  • Strengthen AML and other compliance mechanisms, to ensure that protections cannot be criticised.
  • Monitor closely for changes to regulatory regimes, to identify prospective vulnerabilities early, and to respond quickly to any heightened compliance burden.
  • Evaluate the geopolitical exposure of a business, with attention to issues such as capital outflows from China, so as to identify those companies most at risk – and those likely to benefit.
  • Examine the exposure of particular businesses to sudden changes in the broader market, taking into account recent steep declines, the exposure of business operations, and the structure of the investment/s in question.
  • Take stock of the risks presented by counterparties, such as major banks, casino companies or junket promoters, so as to brace for any systemic shocks, and to prepare for any frauds or payment risks.

SVA ( is a specialist risk mitigation, corporate intelligence and risk consulting company. The firm serves financial institutions, private equity funds, corporations, high net-worth individuals and insurance companies and underwriters around the world.

SVA has particular expertise in Macau and its gaming sector, with attention to its reliance on capital outflows from mainland China, the junket market, the role of triad societies, and broader geopolitical risks.

CEO Steve Vickers has given expert evidence to formal inquiries and court actions related these issues, in many jurisdictions, including Hong Kong, the United States, and Australia, repeatedly over the last 15 years.

SVA also has a dedicated crisis management team which, for our retained clients, stands ready to assist companies during crisis situations. Retained clients pay an annual fee for a 24-hour response capability.

SVA is based in Hong Kong and is the only firm with the local and senior expertise drawn from Intelligence, Operations and research functions of the former Royal Hong Kong Police Force.