FEDERAL COURT OF AUSTRALIA

Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v The Star Pty Limited [2026] FCA 1606

ORDERS

THE COURT DECLARES THAT:

The AML/CTF Program contraventions

1.    The first respondent (Star Sydney) contravened s 81(1) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (Act) on each occasion that it commenced to provide a designated service to a customer on and from 30 November 2016 to 30 November 2022 in circumstances where:

(a)    Part A of its joint AML/CTF program did not comply with s 85(2)(c) of the Act, which required that Part A of a joint AML/CTF program comply with the requirements specified in Chs 9 and 15 of the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No 1) (Cth) (Rules); and

(b)    Part B of its joint AML/CTF program did not comply with s 85(3)(b) of the Act, which required that Part B of a joint AML/CTF program comply with the requirements specified in Ch 4 of the Rules.

2.    The second respondent (Star Queensland) contravened s 81(1) of the Act on each occasion that it commenced to provide a designated service to a customer on and from 30 November 2016 to 30 November 2022 in circumstances where:

(a)    Part A of its joint AML/CTF program did not comply with s 85(2)(c) of the Act, which required that Part A of a joint AML/CTF program comply with the requirements specified in Chs 9 and 15 of the Rules; and

(b)    Part B of its joint AML/CTF program did not comply with s 85(3)(b) of the Act, which required that Part B of a joint AML/CTF program comply with the requirements specified in Ch 4 of the Rules.

Ongoing customer due diligence contraventions

3.    Star Sydney contravened s 36(1) of the Act on 1,190 occasions between 30 November 2016 and 30 November 2022 by:

(a)    failing to monitor 102 “high risk” customers in relation to the provision of designated services:

(i)    with a view to identifying, mitigating and managing the risk that Star Sydney reasonably faced that the provision of the designated service might (whether inadvertently or otherwise) involve or facilitate money laundering (ML) or terrorism financing (TF); and

(ii)    in accordance with Ch 15 of the Rules; and

(b)    failing to monitor 1,088 customers in relation to the provision of designated services with a view to identifying, mitigating and managing the risk that Star Sydney reasonably faced that the provision of the designated service might (whether inadvertently or otherwise) involve or facilitate ML or TF.

4.    Star Queensland contravened s 36(1) of the Act on 327 occasions between 30 November 2016 and 30 November 2022 by:

(a)    failing to monitor 77 “high risk” customers in relation to the provision of designated services:

(i)    with a view to identifying, mitigating and managing the risk that Star Queensland reasonably faced that the provision of the designated service might (whether inadvertently or otherwise) involve or facilitate ML or TF; and

(ii)    in accordance with Ch 15 of the Rules; and

(b)    failing to monitor 250 customers in relation to the provision of designated services with a view to identifying, mitigating and managing the risk that Star Queensland reasonably faced that the provision of the designated service might (whether inadvertently or otherwise) involve or facilitate ML or TF.

AND THE COURT ORDERS THAT:

Penalty

5.    Star Sydney pay to the Commonwealth of Australia a pecuniary penalty in the amount of $195 million pursuant to s 175(1) of the Act, payable in the following instalments:

(a)    $48.75 million by 25 November 2026;

(b)    a further $48.75 million by 25 May 2027;

(c)    a further $48.75 million by 25 November 2027; and

(d)    a further $48.75 million by 25 May 2028.

6.    Star Queensland pay to the Commonwealth of Australia a pecuniary penalty in the amount of $65 million pursuant to s 175(1) of the Act, payable in the following instalments:

(a)    $16.25 million by 25 November 2026;

(b)    a further $16.25 million by 25 May 2027;

(c)    a further $16.25 million by 25 November 2027; and

(d)    a further $16.25 million by 25 May 2028.

Costs

7.    Star Sydney and Star Queensland pay the costs of the applicant.

Confidentiality

8.    The confidential version of these reasons be suppressed and not be published or otherwise disclosed to any person other than the parties (including any officer of the applicant), the parties’ legal representatives or any Judge or employee of the Federal Court of Australia, for a period of 4 years.

9.    By 4:00 pm on 13 November 2026, the parties are to confer and provide to the Court their joint position as to, or otherwise provide their competing submissions and any supporting affidavits as to, whether additional matters that are currently redacted in the public version of these reasons can be unredacted.

10.    The parties have liberty to apply in relation to the issue of confidentiality.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MOORE J:

1.    INTRODUCTION

1    This proceeding concerns alleged contraventions by The Star Pty Limited (Star Sydney) and The Star Entertainment Qld Limited (Star Queensland) (together, Star) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act). The proceeding was commenced on 30 November 2022 by the Chief Executive Officer of the Australian Transaction Reports and Analysis Centre (AUSTRAC), who seeks declarations of contravention and pecuniary penalties pursuant to s 175 of the AML/CTF Act. For simplicity and brevity, I will refer to the case as being advanced by AUSTRAC rather than the Chief Executive Officer of AUSTRAC.

2    During the period from 30 November 2016 to 30 November 2022 (Relevant Period), Star provided gaming and financial designated services within the meaning of the AML/CTF Act. Star operated three casino businesses. Casinos are particularly vulnerable to money laundering (ML), including because the nature of their business involves significant transactions in cash, because they provide a range of services to facilitate the ready movement of funds into and out of the casino (including international funds without the need for a cross-border transfer), because they provide dedicated services to customers who involve higher ML risk (such as customers transacting through junkets or rebate programs, customers from foreign jurisdictions, and politically exposed persons (PEPs)), and because winnings from a casino can provide a credible explanation for otherwise unexplained wealth. Casino transactions can also disguise the source of money for terrorism financing (TF).

3    As reporting entities, Star Sydney and Star Queensland were required to adopt and maintain anti-money laundering (AML) and counter-terrorism financing (CTF) programs and to undertake ongoing customer due diligence in accordance with the AML/CTF Act and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No 1) (Cth) (AML/CTF Rules).

4    Many of the facts the subject of these proceedings are not in dispute. After the proceedings were commenced, by a series of steps and over a lengthy period of time (and no doubt with much effort), the parties reached agreement on many of the relevant factual matters the subject of the proceedings. On 31 March 2025, the parties filed a Statement of Agreed Facts and Admissions known as the Key Admissions Document (KAD), which contains a series of admissions for the purpose of this proceeding only. The KAD is a very detailed document and runs to 437 pages including its schedules. Further, the admitted facts are not limited to the KAD. AUSTRAC also relies on other admissions made by Star.

5    By the KAD, Star admits that, throughout the Relevant Period:

(a)    Part A of its Joint AML/CTF Program (discussed further at Section 2.5 below) failed to comply with various requirements of the AML/CTF Rules and therefore did not comply with s 85(2)(c) of the AML/CTF Act;

(b)    Part B of its Joint AML/CTF Program (discussed further at Section 2.5 below) failed to comply with certain requirements of Ch 4 of the AML/CTF Rules and therefore did not comply with s 85(3)(b) of the AML/CTF Act; and

(c)    it contravened s 36(1) of the AML/CTF Act by failing to monitor certain customers with a view to identifying, mitigating and managing the ML/TF risks it reasonably faced, and by failing to monitor certain customers in accordance with Ch 15 of the AML/CTF Rules.

6    Those admissions substantially resolve liability. However, there are still some disputed issues as to liability. The disputed issues are confined to whether Part A of the Joint AML/CTF Program had the “primary purpose” required by s 85(2)(a) of the AML/CTF Act, and the proper characterisation and number of contraventions arising under s 36(1) of the AML/CTF Act.

7    I note that the AML/CTF Act has been materially amended since the Relevant Period. This proceeding concerns the form of legislation in effect during the Relevant Period. I will nevertheless use present tense when discussing the legislation.

8    There is also a significant dispute as to the consequences that should follow from the admitted contraventions. There are no joint submissions and no agreed penalty. Instead, there is a dispute as to the pecuniary penalties that should be imposed pursuant to s 175 of the AML/CTF Act.

9    Star submits that the penalty should be no more than $100 million and that it is unable to pay any penalty greater than this amount. It submits that such a penalty, payable in four instalments over two years, is appropriate for the admitted contraventions. Star submits that this amount would reflect the gravity of the contravening conduct, demonstrate that the contraventions are serious and unacceptable, achieve general and specific deterrence and not risk the ongoing viability of the operation of Star.

10    AUSTRAC submits that the net present value (NPV) of Star’s proposed penalty payable in six-monthly instalments is $88.6 million, when applying an interest rate of 10.35% per annum, being the default post-judgment interest rate as at the time of the hearing: Federal Court of Australia Act 1976 (Cth) s 52; Federal Court Rules 2011 (Cth) r 39.06.

11    AUSTRAC says that it is the NPV of the penalty that must be taken into account, citing Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Crown Melbourne Ltd (2023) 168 ACSR 421; [2023] FCA 782 (Crown) at [18] (Lee J):

The significance of this, among other things, is that the net present value (NPV) of the proposed penalty today is not $450 million. It is common ground that at the usual and default post-judgment interest rate, assuming no discount, the NPV of the proposed penalty is approximately $405 million. As I noted to the parties at the hearing, one must compare “apples with apples”. In other regulatory proceedings involving AUSTRAC, penal orders were made without a deferred payment plan.

12    AUSTRAC submits that a penalty of $88.6 million is wholly inadequate, saying that this would be no more than Star’s cost of doing business. Instead, it says that the total penalty should be $400 million, payable within 28 days, apportioned as follows:

(a)    Star Sydney: $300 million; and

(b)    Star Queensland: $100 million.

13    It notes that in Crown the NPV of the penalty was approximately $405 million and in CEO of AUSTRAC v SkyCity Adelaide Pty Ltd [2024] FCA 664 (SkyCity) the penalty was $67 million.

14    With one exception, involving a penalty at a very different level (Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Castra Licensee Pty Ltd [2026] FCA 709, concerning a $50,000 penalty), it appears that the present proceeding is the first case involving a disputed penalty for contraventions of the AML/CTF Act. There have been previous penalty proceedings, but they have involved agreed penalties. Some agreed penalties have been very large indeed and larger than penalties under other statutory regimes: e.g. Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Westpac Banking Corporation (2020) 148 ACSR 247; [2020] FCA 1538 (Westpac) ($1.3 billion); Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Commonwealth Bank of Australia Ltd [2018] FCA 930 ($700 million); and Crown ($450 million). As discussed in Section 6.2 below, such cases provide little assistance in determining a penalty in the present circumstances. It is perhaps inevitable that members of the public may compare the penalty awarded against Star with the penalty awarded against Star’s competitor, Crown. However, that comparison is not of assistance for present purposes.

15    There is a significant disputed issue of fact concerning the financial position of Star and whether it is unable to afford to pay the penalty sought by AUSTRAC, or indeed any penalty greater than the amount proposed by Star.

16    That is not the limit of the factual disputes. Even with the extremely large KAD and the other admissions, AUSTRAC seeks numerous additional factual findings relevant to the assessment of penalty based on contemporaneous documents and upon inferences which it says are able to be drawn from the contemporaneous documents or the admitted facts (or both). The present proceedings cannot therefore be characterised as a dispute about a penalty on agreed facts. It involves contested factual matters as well as a dispute about an appropriate penalty. In oral submissions, senior counsel for AUSTRAC described the KAD as “liability-focussed” rather than penalty-focussed, and observed that the KAD did not descend into “meaningful” detail about the knowledge and involvement of senior management in the contraventions.

17    Further, even in respect of the facts that are agreed, the parties addressed me at some length on the proper characterisation of the conduct in light of those agreed facts. The Court received extensive written submissions (over 300 pages), and the hearing occupied five days.

18    Before turning to the issues in the proceedings, it is relevant to describe Star’s business, the statutory framework and the AML/CTF Program that operated during the Relevant Period.

2.    BACKGROUND

2.1    The parties

19    AUSTRAC is charged with enforcing compliance with the AML/CTF Act and subordinate legislation, including the AML/CTF Rules. AUSTRAC brings this proceeding in that capacity.

20    During the Relevant Period, Star Sydney and Star Queensland were subsidiaries of The Star Entertainment Group Ltd (SEG), an ASX-listed company. Star Sydney and Star Queensland were:

(a)    reporting entities within the meaning of s 5 of the AML/CTF Act;

(b)    providers of designated services to customers within the meaning of s 6 of the AML/CTF Act; and

(c)    carrying on activities or business through permanent establishments in Australia for the purposes of the AML/CTF Act.

21    From time to time, it is necessary to refer to the Star corporate group, which I will define as the Star Group.

22    Star operated three casino businesses (together, the Star Casinos) pursuant to state gaming licences granted under the Casino Control Act 1992 (NSW) and the Casino Control Act 1982 (Qld), namely:

(a)    The Star Sydney, which was operated by Star Sydney;

(b)    Treasury Brisbane, which was operated by Star Queensland; and

(c)    The Star Gold Coast (formerly Jupiters Casino), which was operated by Star Queensland.

2.2    Personnel at Star

23    The following sets out relevant personnel employed by Star as part of its executive team or senior management during the Relevant Period, and their respective positions.

24    Mr Bekier was also a director from 2 March 2011 to 28 March 2022.

25    Of these roles, Star admits that the following are “senior management” positions for the purposes of the AML/CTF Rules:

(a)    Chief Executive Officer;

(b)    Chief Financial Officer;

(c)    Group General Counsel and Company Secretary;

(d)    Chief Legal and Risk Officer;

(e)    Chief Risk Officer;

(f)    Chief Casino Officer;

(g)    Managing Director;

(h)    President, International Marketing; and

(i)    AML/CTF Compliance Officer.

2.3    Services provided by Star

26    The Star Casinos offered a range of services during the Relevant Period. The services were provided to customers either as members or non-members of the Star Casinos.

2.3.1    Gaming types and locations

27    During the Relevant Period, Star offered traditional table games, including roulette, baccarat, blackjack and poker, together with electronic table games (ETGs) and electronic gaming machines (EGMs). ETGs involved traditional table games in either a semi-automated format or fully automated format, and EGMs were computerised gaming devices that usually contained a video screen which displayed symbols on simulated reels. Gaming was conducted both on the main gaming floors and, for eligible customers, in private gaming areas with restricted access. At various times during the Relevant Period, Star provided junkets (explained below in Section 2.3.8) with exclusive and non-exclusive use of private gaming rooms.

2.3.2    Gaming services

28    The gaming services provided by Star included both ordinary mass market play and rebate play. Ordinary mass market play predominantly refers to play at EGMs or ETGs or play which took place on the main gaming floors where customers exchanged money for chips at either gaming tables or the cashier’s desk (otherwise known as the Cage). Rebate play refers to play on specific types of programs offered by the Star Casinos to eligible customers that took place in private gaming areas under which Star paid rebates to either customers or parties facilitating rebate play, often by reference to gaming turnover or losses. Of particular significance were junket programs, through which junket operators (primarily based in mainland China, Macau and Hong Kong) identified and introduced international patrons (primarily based in mainland China) to gamble at the Star Casinos in return for commissions and other incentives provided by Star for facilitating this type of activity.

2.3.3    Financial services and funding of gaming activity

29    In connection with gaming activities, Star also provided a range of financial services through which customers could deposit, transfer, withdraw and otherwise access funds for gaming purposes. The principal services and products offered by Star included cashier services conducted through the Cage, buy-ins and payouts at traditional table games, remittance services involving Star Patron Accounts (described further at Section 2.3.6 below), front money accounts (FMAs) and safekeeping accounts (SKAs) (described further at Section 2.3.7 below), cashless wagering accounts (CWAs), casino value instruments (CVIs), cheque cashing facilities (CCFs), foreign exchange services and safe deposit boxes. In conducting those activities, Star facilitated the movement of funds into, out of and within the casino environment, including funds transferred across international borders. Many international customers wanting to transfer money to Star preferred to do so in cash.

2.3.4    The Cage

30    Central to Star’s gaming operations was the Cage, which effectively operated as the casino’s banking facility and managed financial transactions between customers and the casino in connection with gaming activity.

31    Customers used the Cage to open gaming accounts, deposit and withdraw funds, transfer money between accounts, access and repay credit facilities, exchange currency, and purchase or redeem chips and other CVIs. Each Star Casino maintained a Cage on the main gaming floor, with additional Cage facilities available in certain premium gaming areas during parts of the Relevant Period.

2.3.5    Membership program

32    During the Relevant Period, customers could join Star’s loyalty program, known as The Star Club, through which members accrued points and earned rewards based on their spending and play at the Star Casinos and Star Group resort activities. Membership was required for customers wishing to access certain products and services, including establishing an FMA, CWA or CCF, participating as a player in a rebate program or entering into private gaming areas, tournaments and promotions.

2.3.6    Star Patron Accounts

33    Star and EEI Services (Hong Kong) Limited (EEIS), a wholly owned subsidiary of SEG, maintained a number of bank accounts in Australia and overseas in Australian and foreign currencies (together, Star Patron Accounts). The Star Patron Accounts facilitated the transfer of funds into the casino environment and, in the case of EEIS, provided an alternative payment channel for international customers who preferred not to transact directly with bank accounts in the name of a Star Casino.

34    Customers could deposit funds into Star Patron Accounts by a variety of means, including cash deposits, cheques, telegraphic transfers and foreign currency transactions. Deposits could be made both domestically and internationally. Until November 2021, Star also permitted third parties, including junket-related entities and remittance providers, to deposit funds into those accounts on behalf of customers without a signed third-party authority form. Deposited funds could then be credited to gaming accounts or applied towards liabilities owed to Star.

2.3.7    FMAs and SKAs

35    Star provided customers with FMAs and SKAs. FMAs operated as gaming accounts through which customers could deposit, withdraw and transfer funds for the purpose of obtaining designated services. SKAs were automatically created when an FMA was opened and were generally used to hold uncleared cheques or funds kept separate from gaming-related balances.

36    Funds could be moved into and out of FMAs and SKAs through several channels, including Star Patron Accounts, transactions conducted at the Cage and transfers between other gaming accounts. Customers could also transfer funds between accounts maintained at different Star Casinos. During most of the Relevant Period, third-party deposits into FMAs and SKAs were permitted.

37    FMAs and SKAs also functioned as a mechanism through which other designated services were provided, including chip purchases, chip deposits and foreign currency exchanges.

2.3.8    Junkets

38    A junket refers to a rebate program arranged by a junket operator for one or more high-value players at a chosen casino, in conjunction with the relevant casino operator, on terms agreed between them, including as to the duration of the program (as each junket program could not run indefinitely). Junket agreements are typically based upon the junket operator bringing a certain volume of play into the casino.

39    The person or entity arranging the junket, known as the junket operator or junket promoter, identifies potential customers and arranges for them to travel to gamble in particular casinos, often offering incentives such as free travel and accommodation. In return, the casino operator pays the junket operator or junket promoter a commission based upon the collective gambling activity of participants on the junket or other incentives for bringing players to wager at the casino.

40    During the Relevant Period, Star Sydney entered into junket arrangements with both individuals and companies, while Star Queensland only entered into junket arrangements with individuals. Participants in these junkets were mainly patrons from mainland China. The junket operators were primarily based in mainland China, Macau and Hong Kong.

2.4    ML/TF risks faced by Star

41    It was common ground between the parties that casino operations give rise to substantial ML/TF risks. As outlined in the KAD, casinos are particularly vulnerable to money laundering because their operations involve significant volumes of cash and permit customers to move funds through a variety of different products, accounts and transaction channels. Those features may make it difficult to identify the source or ownership of funds, or the purpose of particular transactions.

42    The risks were heightened by aspects of Star’s business that included dealings with customers from foreign jurisdictions, relationships involving junkets and rebate programs, and dealings with customers assessed as posing elevated ML/TF risks, including PEPs. During the Relevant Period, Star also used a number of channels which posed a higher ML/TF risk, including international remittance arrangements and other cross-border transfer mechanisms.

2.5    Star’s AML/CTF Program

43    Throughout the Relevant Period, Star maintained a joint AML/CTF program comprising a Part A and Part B within the meaning of s 85(1)(b) of the AML/CTF Act (Joint AML/CTF Program or Program).

44    The Joint AML/CTF Program included a document titled:

(a)    between 30 November 2016 and 31 October 2019, “The Star Entertainment Group Designated Business Group AML/CTF Program”; and

(b)    between 1 November 2019 and 30 November 2022, “Joint AML/CTF Program – The Star Entertainment Group Australian Designated Business Group Program”,

(each the Program Document). The Program Document was updated eight times over the Relevant Period.

45    The Program Document also incorporated and operated alongside a substantial body of supporting material, some of which had various iterations across the Relevant Period. The supporting material included:

(a)    Framework Documents, consisting of:

(i)    “The Star AML/CTF Risk Management and Assessment Framework” (AML/CTF Risk Management Framework);

(ii)    “Risk Management Policy and Framework”;

(iii)    “Risk Management Policy”; and

(iv)    “Risk Management Framework”;

(b)    Standard Documents, consisting of:

(i)    “The Star Enhanced Customer Due Diligence Standard”;

(ii)    “The Star Entertainment Group Transaction Monitoring and AUSTRAC Reporting Standard”;

(iii)    “The Star AML Transaction Monitoring Process Version 1.04” (dated 15 July 2021), which was updated and replaced by “The Star AML/CTF Transaction Monitoring Program Version 1.05” (dated 20 April 2022); and

(iv)    “The Star Entertainment Group Know Your Customer Standard” (KYC Standard).

46    Broadly stated, Part A of the Program included processes for assessing ML/TF risks associated with designated services, transaction monitoring arrangements, enhanced customer due diligence measures, governance and oversight arrangements, independent review mechanisms, and reporting obligations. Following revisions introduced on 1 November 2019, Part A also incorporated more formalised risk assessment methodologies directed to customer, product, channel and jurisdictional risk.

47    The relevant statutory provisions with respect to Star’s Part A Program obligations are set out below.

2.6    Evidence

48    AUSTRAC relied on the affidavits of Michael Warwick Powis, Gilbert Laverdure and Paulina Meliame Fusitu’a.

49    Mr Powis, Director of Enforcement at AUSTRAC, affirmed an affidavit dated 30 April 2025. He gave evidence that described AUSTRAC’s investigation into Star, relevantly setting out the lead-up to and the commencement of the formal enforcement investigation (Enforcement Investigation), which commenced on 4 June 2021. He described Star’s compliance with s 167 notices (discussed further in Section 9.4.1), Star’s conduct prior to and during the Enforcement Investigation and reports made by Star to AUSTRAC (in the form of suspicious matter reports (SMRs), threshold transaction reports (TTRs) or international funds transfer instructions (IFTIs)).

50    Mr Laverdure, Detective Inspector of the New South Wales Police Force, affirmed an affidavit dated 30 April 2025. He gave evidence as to the management and impact of money laundering.

51    Ms Fusitu’a, Senior Executive Lawyer with the Australian Government Solicitor, affirmed two affidavits dated 30 April and 28 May 2025. In her affidavits, she described Star’s compliance with s 167 notices and the evidence that resulted from them.

52    Star relied on the affidavits of Frank Robert Krile and Jeannie Oi-Yu Mok.

53    Mr Krile, Chief Financial Officer of SEG, swore an affidavit dated 21 May 2025. He gave evidence that went to SEG’s financial performance and liquidity.

54    Ms Mok, Group Chief Operating Officer of SEG, affirmed an affidavit dated 21 May 2025. She gave evidence concerning the steps that Star had taken in the course of its remediation process during and following the Relevant Period.

3.    LEGAL FRAMEWORK

55    The AML/CTF Act establishes a risk-based regulatory framework directed to the detection, deterrence and disruption of ML/TF risks and other serious financial crime. One of the objects of the AML/CTF Act is to require reporting entities to implement measures directed to identifying, mitigating and managing ML/TF risks.

56    The AML/CTF Act does not require ML/TF risks to be eliminated, nor does it prescribe exhaustively how reporting entities are to manage those risks. Rather, it requires reporting entities to assess the ML/TF risks reasonably faced by their businesses and to implement risk-based procedures, systems and controls that are appropriate having regard to the nature, size and complexity of the business, the designated services provided, the customers to whom those services are provided, the channels through which they are provided, and the foreign jurisdictions with which the reporting entity deals.

3.1    Sections 80–85 of the AML/CTF Act

57    The simplified outline in s 80 of the AML/CTF Act provides that a reporting entity must have and comply with an AML/CTF program, divided into Part A (general) and Part B (customer identification). Part A of the AML/CTF program is designed to identify, mitigate and manage the risk a reporting entity may reasonably face that its provision of designated services may involve or facilitate ML/TF, and Part B sets out applicable customer identification procedures.

58    Such a program may be a ‘standard’, ‘joint’ or ‘special’ AML and CTF program: s 83(1) of the AML/CTF Act. Where a reporting entity seeks to have a program which applies to more than one reporting entity across a business group, it may have a ‘joint anti-money laundering and counter-terrorism financing program’ as defined by s 85(1): s 5 of the AML/CTF Act.

59    In the present case, the relevant type of program is a joint program, and I will therefore focus on the provisions concerned with such a program.

60    Section 81(1) provides that:

81 Reporting entity must have an anti-money laundering and counter-terrorism financing program

(1)    A reporting entity must not commence to provide a designated service to a customer if the reporting entity:

(a)    has not adopted; and

(b)    does not maintain;

an anti-money laundering and counter-terrorism financing program that applies to the reporting entity.

61    At all relevant times, compliance with the adopted program was mandated by s 82(1). That provision is not directly relevant in this case, but is potentially relevant to the proper construction of the AML/CTF Act. That provision relevantly provided that:

82 Compliance with Part A of an anti-money laundering and counter-terrorism financing program

Compliance with program

(1)    If a reporting entity has adopted:

…

(b)    a joint anti-money laundering and counter-terrorism financing program;

that applies to the reporting entity, the reporting entity must comply with:

(c)    Part A of the program; or

(d)    if the program has been varied on one or more occasions—Part A of the program as varied.

62    Both s 81 and s 82 are civil penalty provisions: ss 81(2), 82(2) AML/CTF Act.

63    Section 85 of the AML/CTF Act then defines a joint AML/CTF program. It relevantly provides as follows (emphasis in original):

85 Joint anti-money laundering and counter-terrorism financing program

(1)    A joint anti-money laundering and counter-terrorism financing program is a written program that:

(a)    applies to each reporting entity that from time to time belongs to a particular designated business group; and

(b)    is divided into the following parts:

(i)    Part A (general);

(ii)    Part B (customer identification).

…

Part A (general)

(2)    Part A of a joint anti-money laundering and counter-terrorism financing program is a part:

(a)    the primary purpose of which is to:

(i)    identify; and

(ii)    mitigate; and

(iii)    manage;

the risk each of those reporting entities may reasonably face that the provision by the relevant reporting entity of designated services at or through a permanent establishment of the relevant reporting entity in Australia might (whether inadvertently or otherwise) involve or facilitate:

(iv)    money laundering; or

(v)    financing of terrorism; and

(b)    if any of those reporting entities provides designated services at or through a permanent establishment of the relevant reporting entity in a foreign country—another purpose of which is to ensure that the relevant reporting entity takes such action (if any) as is specified in the AML/CTF Rules in relation to the provision by the relevant reporting entity of designated services at or through a permanent establishment of the relevant reporting entity in a foreign country; and

(c)    that complies with such requirements (if any) as are specified in the AML/CTF Rules.

Part B (customer identification)

(3)    Part B of a joint anti-money laundering and counter-terrorism financing program is a part:

(a)    the sole or primary purpose of which is to set out the applicable customer identification procedures for the purposes of the application of this Act to customers of each of those reporting entities; and

(b)    that complies with such requirements (if any) as are specified in the AML/CTF Rules.

…

64    In relation to s 85(2)(c), which requires Part A of the Program to comply with the requirements specified in the AML/CTF Rules, those rules prescribe detailed requirements concerning matters such as transaction monitoring, enhanced customer due diligence, governance and reporting.

65    As explained by Perram J in Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v TAB Ltd (No 3) [2017] FCA 1296 (TAB (No 3)) at [25]–[29], the combined effect of ss 81 and 85 is that if a joint AML/CTF program is not compliant with the requirements specified in s 85 then there is no program as defined, with the consequence that if the reporting entity has supplied a designated service to a customer then it has done so without adopting or maintaining (as the case may be) an AML/CTF program, in contravention of s 81.

3.2    Section 36(1)

66    Section 36 of the AML/CTF Act creates an obligation for a reporting entity to conduct ongoing customer due diligence in respect of its customers in relation to the provision by the reporting entity of designated services. Section 36(1) states:

36 Ongoing customer due diligence

(1)    A reporting entity must:

(a)    monitor the reporting entity’s customers in relation to the provision by the reporting entity of designated services at or through a permanent establishment of the reporting entity in Australia, with a view to:

(i)    identifying; and

(ii)    mitigating; and

(iii)    managing;

the risk the reporting entity may reasonably face that the provision by the reporting entity of a designated service at or through a permanent establishment of the reporting entity in Australia might (whether inadvertently or otherwise) involve or facilitate:

(iv)    money laundering; or

(v)    financing of terrorism; and

(b)    do so in accordance with the AML/CTF Rules.

…

67    Section 36 is a civil penalty provision: s 36(2) AML/CTF Act.

68    As is apparent from the structure of s 36(1), paragraphs (a) and (b) provide two alternative bases for a contravention of s 36(1). For the purposes of s 36(1)(b), the parties identified the relevant requirements of the AML/CTF Rules as being the requirements of Ch 15, which sets out requirements for reporting entities to engage in ongoing customer due diligence.

4.    SECTION 81

4.1    What is admitted and what is disputed

69    Star admits that, during the Relevant Period, Part A of its Joint AML/CTF Program did not comply with s 85(2)(c) of the AML/CTF Act and Chs 9 and 15 of the AML/CTF Rules in certain respects. Star also admits that, during the Relevant Period, Part B of the Program did not comply with s 85(3)(b) of the AML/CTF Act and Ch 4 of the AML/CTF Rules. I will discuss issues concerning these contraventions in more detail in Section 7 below.

70    Star Sydney and Star Queensland admit that they contravened s 81(1) of the AML/CTF Act on each occasion that they each provided a designated service to a customer in circumstances where they had failed to adopt and maintain a Part A of their Joint AML/CTF Program and a Part B of their Joint AML/CTF Program that complied with the AML/CTF Act and AML/CTF Rules.

71    However, Star disputes AUSTRAC’s allegation that Part A of the Program did not have the primary purpose required by s 85(2)(a) of the AML/CTF Act. That issue requires consideration of the proper construction of s 85(2)(a). This issue does not affect the number of contraventions, because it is common ground that the relevant contravention of s 81 is the provision of a designated service to a customer in circumstances where the Program was deficient. Star admits that the Program was deficient on other grounds. However, the issue could affect the assessment of the seriousness of the conduct, in the sense that if there is another basis of contravention by Star – namely, that the Program did not have the purpose required for Part A – that could increase the relevant seriousness.

72    Understandably, given the nature of the designated services provided by Star, the number of potential contraventions of s 81(1) of the AML/CTF Act is incalculable. In financial year (FY) 2019, Star had more than 21 million visitors across all three Star properties. Star provides a number of different designated services and it is not unreasonable to assume that many patrons may have obtained multiple designated services in the one visit. For example, exchanging money for a CVI, placing multiple bets and being paid out on these bets may each constitute a different designated service under the definition of “gambling services” within s 6 of the AML/CTF Act. Neither party suggests an approximate number of s 81(1) contraventions, both suggesting that it is other factors that should determine the penalty to be applied.

4.2    The construction of s 85(2)(a)

4.2.1    The submissions of the parties

73    AUSTRAC submits that the concept of “purpose” in s 85(2)(a) of the AML/CTF Act requires an objective assessment of whether the Part A program was, “by its design”, capable of identifying, mitigating and managing the ML/TF risks that the reporting entity might reasonably face in providing designated services. It submits that whether a Part A program has the purpose of addressing a reporting entity’s ML/TF risks is assessed by “whether it is appropriately designed to address those risks”.

74    AUSTRAC submits that this assessment is directed to the purpose of the Part A program itself and not to the purpose, subjective intentions or motivations of the reporting entity or its directors. AUSTRAC emphasises the references in s 80 and the Explanatory Memorandum to a Part A program being “designed” to address those risks, and submits that the relevant inquiry concerns the program’s objective aptitude or capacity to do so, rather than whether the program documents merely evince an intention to achieve that outcome.

75    AUSTRAC submits as follows (emphasis added):

[T]he inquiry also requires the Court to have regard to the context and circumstances of the reporting entity (including the circumstances in which the designated services were provided) in order to reveal the risks which the entity reasonably faced during the relevant period which might involve or facilitate money laundering through the provision of designated services. Without this inquiry, it is not possible to determine whether the Part A program was designed to meet such risks. For example, where there were known ML/TF risks facing a reporting entity (including where those risks were known to the entity’s board or senior management) and the entity adopted or maintained an AML/CTF program which failed to identify and address those risks then, by its design, the Part A program failed to have the purpose of identifying and further, potentially mitigating and managing the risks the reporting entity reasonably faced in the relevant period.

76    AUSTRAC therefore submits that a program which failed to identify and address known risks (i.e. failed to have that effect) is a program that, by design, failed to have the purpose of identifying and managing the risks ultimately found. As discussed further below, that appears to elide the distinction between purpose and effect. AUSTRAC also submits that the language of the statute reveals that the relevant purpose is that of the program and not that of the reporting entity. It submits that the significant latitude afforded by Parliament to the reporting entity to bind itself to a program of its own design would be too easily abused if the reporting entity could simply depose to the good intentions of its directors notwithstanding the manifest inadequacy of the program it adopted.

77    AUSTRAC relies on Chief Executive Officer of Australian Transaction Reports and Analysis Centre v TAB Ltd [2016] FCA 122 (TAB (No 1)), Crown and SkyCity to support its construction. In particular, it submits that the construction for which AUSTRAC contends finds support in the observations of Perram J in TAB (No 1) at [39] as follows:

[Section 85(2)(a)] calls for an inquiry into the purpose of a document. It seems to me legitimate to say that a program does not have the requisite purpose under s 85(2)(a) if no risk assessment was carried out in formulating the program, or if any process of risk assessment was manifestly inadequate. If the risk assessment process which led to the formulation of the program was devoid of merit or merely formulaic then it is at least arguable that it will be possible to contend that the ensuing program lacks the purpose required by s 85(2)(a). Indeed, a purely formulaic assessment process may well lead to the conclusion that a program derived from it is not intended to identify and manage relevant risks.

78    AUSTRAC submits that Crown and SkyCity further demonstrate that a Part A program may lack the requisite primary purpose where it suffers from fundamental deficiencies, including the absence of an adequate risk assessment methodology, insufficient alignment between the program and the ML/TF risks reasonably faced by the reporting entity, inadequate governance and oversight arrangements, and risk-based controls that are not appropriately directed to those risks. AUSTRAC acknowledges that there has been no contested final hearing determining the proper construction of “primary purpose” in s 85(2)(a), but submits that those authorities nevertheless support the construction for which it contends.

79    AUSTRAC submits that, for the reasons agreed between the parties and identified above, Part A of Star’s Joint AML/CTF Program was deficient. In particular, it did not establish an appropriate methodology by which Star could identify and assess the ML/TF risks that it reasonably faced. AUSTRAC submits that the controls adopted to mitigate and manage those risks were inadequate, and that deficiencies in oversight both caused and compounded those shortcomings. According to AUSTRAC, the absence of adequate oversight means that Part A of the Program was not updated to address the risks as they became apparent or, in some instances, materialised. For those reasons, AUSTRAC submits that Star’s Part A Program was not, by its design, capable of appropriately identifying, mitigating and managing the ML/TF risks that Star Sydney and Star Queensland reasonably faced in their provision of designated services during the Relevant Period.

80    Star accepts that its AML/CTF Program was significantly deficient and that it committed extensive and material contraventions of the AML/CTF Rules and therefore of s 81 of the AML/CTF Act. However, it submits that those deficiencies do not establish that Part A lacked the requisite primary purpose under s 85(2)(a). Star contends that the “purpose” of a program refers to the end sought to be achieved by the program, rather than whether the program was capable, by its design, of achieving that end in practice. It submits that purpose is to be distinguished from both effect and motive. Further, Star submits that while “purpose” is likely to be a question of objective fact, evidence of subjective motivation may be relevant.

81    In support of that construction, Star relies on authorities distinguishing purpose from effect, including Newton v Federal Commissioner of Taxation (1958) 98 CLR 1; [1958] AC 450 (Newton) and News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563; [2003] HCA 45 (News v South Sydney).

82    Star further submits that the statutory context supports its construction. It emphasises that s 85(1) sets out requirements as to the content and structure of the program, but it does not prescribe the form of the program or precisely delineate which documents form part of it and which are merely supportive of the program. Against that background, it submits that the function of the word “primary” in s 85(2)(a) is to ensure that the identification, mitigation and management of ML/TF risk is the dominant objective of Part A, rather than merely one aspect of a broader risk management framework.

83    Star also relies on the requirement in s 81 that a reporting entity “adopt” an AML/CTF program. It submits that the language of adoption imports an element of formality and suggests that the inquiry under s 85(2)(a) is directed to those written documents specifically selected and approved by the reporting entity as comprising the program. Star contends that the purpose of the program must be assessed objectively by reference to those documents.

84    Star disputes AUSTRAC’s contention that its construction would deprive ss 81 and 85 of substantive operation. It submits that the AML/CTF Act separately imposes detailed and mandatory obligations through the AML/CTF Rules, non-compliance with which gives rise to contraventions of s 85(2)(c). According to Star, AUSTRAC’s contention that the admitted breaches of the AML/CTF Rules necessarily establish that Part A lacked the requisite primary purpose improperly conflates the distinct requirements imposed by ss 85(2)(a) and 85(2)(c).

85    Pursuant to the above construction, Star submits that, notwithstanding its admitted contravention of s 85(2)(c), the purpose of Part A of its AML/CTF Program satisfied s 85(2)(a). It contends that the Program Documents, including the standard operating procedures, the AML/CTF Risk Management Framework and, from November 2019, the Standard Documents (other than the KYC Standard), objectively demonstrated that the principal objective of the Program was to identify, mitigate and manage the ML/TF risks reasonably faced by Star. Star submits that this purpose was not displaced by the fact that the Program may not have in fact identified, mitigated and managed those risks appropriately and thus contravened s 85(2)(c).

4.2.2    Consideration

86    The distinction sought to be drawn by AUSTRAC between an objective assessment of the design of the program (and whether it is apt to meet the relevant ML/TF risks) and the subjective intentions of the directors is something of a false dichotomy. Star does not contend that the provision only concerns the subjective intention of the directors. I agree with AUSTRAC (and Star) that the relevant purpose is the purpose of the document comprising the program. The question is whether purpose can be construed as AUSTRAC suggests.

87    The distinction between purpose and effect is well recognised. The purpose of a document is the end sought to be achieved: Newton at 8; News v South Sydney at [18] per Gleeson CJ. The purpose of a program is not the same as the subjective intentions or purposes of the directors of the company, although the process of ascertaining the purpose of a program may well require consideration of the subjective purposes of those who formulated the program in question or adopted it.

88    The approach of AUSTRAC moves beyond purpose and, by asking whether by design the program has the capability to address the relevant risks, requires an objective assessment of the appropriateness of the program to reduce ML/TF risk. However, the purpose of a document is distinct from whether it is apt to achieve a particular objective. A program could have the purpose of managing ML without necessarily adopting the most appropriate, or even an appropriate, means of achieving that objective.

89    A consideration of the structure of Pt 7, Div 1 of the AML/CTF Act does not support any departure from the conventional construction of “purpose”. As set out in the simplified outline in s 80, a reporting entity must “have” and must “comply” with an AML/CTF program. It provides that the program “is divided” into two parts: Part A (general) and Part B (customer identification). It provides that Part A is “designed” to identify, mitigate and manage the risk a reporting entity may reasonably face, but merely provides that Part B “sets out the applicable customer identification procedures”. Although AUSTRAC emphasises the word “designed” in connection with Part A, that term is not used in connection with Part B, and yet it could not sensibly be suggested that the word “purpose” in s 85 has a different meaning in connection with Part A from its meaning in connection with Part B. Rather, the structure of the provisions supports a conclusion that “purpose”, which is undefined, has its ordinary meaning, and that the words “designed to identify, mitigate and manage the risk” in s 80 involve the use of “designed” in the sense of “intended”: i.e. “is intended to identify…” / “has the purpose of identifying…”.

90    Section 81 then provides that a reporting entity must not commence to provide a designated service to a customer if the reporting entity has not adopted and does not maintain a program that applies to the reporting entity. Thus the relevant requirement is to adopt and maintain a program that bears a certain description, including having two parts, including a part (Part B) that is not said to be apt or appropriate to achieve any objective, but rather “sets out” the identification procedures. Section 82 then provides that the reporting entity must comply with Part A of the program.

91    Section 85 defines the program. Section 85(1) says that it must be divided into the two parts: Part A (general) and Part B (customer identification). Section 85(2) provides that Part A is a part “the primary purpose of which” is to identify, mitigate and manage the risk that the services may involve or facilitate ML or TF. The reference to the “primary purpose” recognises that Part A may have other purposes. One of those purposes is expressly identified in s 85(2)(b), which provides that if any of the reporting entities provides designated services at or through a permanent establishment of the reporting entity in a foreign country, then another purpose of the program “is to ensure that the relevant reporting entity takes such action (if any) as is specified in the AML/CTF Rules”. Section 85(3) provides that Part B of a joint program is a part “the sole or primary purpose of which” is to set out the applicable customer identification procedures.

92    The potential for a multiplicity of purposes again supports the conclusion that “purpose” is used in its ordinary sense, rather than as being a requirement that the program be appropriate or apt to achieve an objective which is merely one of multiple purposes.

93    AUSTRAC relies upon the observations of Perram J in TAB (No 1) at [39] set out earlier. However, these observations by Perram J do not support the width of the construction advanced by AUSTRAC. Perram J was addressing the risk assessment process which led to the program and recognised the possibility that the process of formulating a Part A program is so deficient or flawed or formulaic that it could be concluded that the resulting program did not have the requisite purpose, because, risk having not been assessed, it might be said that the program cannot be intended to identify and manage risk. That is a conventional use of the process of formulation or preparation of a document in order to discern its “purpose” in its ordinary meaning, and whether it has a requisite purpose. His Honour was not saying that the mere identification of objective deficiencies in the program leads to a conclusion that the program does not have the requisite purpose, equating purpose with “apt to” or “appropriate for”.

94    The conduct of a person who appears to be not even trying to achieve an objective may suggest that the person does not have the intention or purpose of achieving that objective and that the resulting document does not have that purpose. That is quite different from an assessment that the means adopted by the person are not, objectively, likely to be effective in achieving a particular object. The latter is outside the purview of ss 81 and 85(2)(a).

95    The other decisions cited by AUSTRAC, being Crown and SkyCity, do not involve any meaningful consideration of this question of construction, as AUSTRAC quite properly acknowledges.

96    Contrary to the submission of AUSTRAC, this does not undermine the utility of the relevant provisions. The form of Pt 7 of the AML/CTF Act reflects a legislative choice to specify that a reporting entity must have, and must comply with, an AML/CTF program. A relevant program is defined by whether it has certain purposes, and the requirements for such a program are otherwise those requirements (if any) specified in the AML/CTF Rules. That provides the flexibility of having any objective requirements specified in the AML/CTF Rules rather than the AML/CTF Act. It otherwise specifies meaningful obligations to have and comply with a program with certain specified purposes.

97    If Parliament had intended the AML/CTF Act to provide that Part A of a relevant program must be effective to identify, mitigate and manage the risk that reporting entities may reasonably face, then it would have been a very simple matter to say so. The choice of the word “purpose” indicates that the statutory requirement is a different one. The requirement that the program have a particular purpose cannot be equated with a requirement that the program have a particular effect, or (to use the language of AUSTRAC) that it must be designed so as to be capable of achieving the requisite purpose.

4.3    Did Star’s Joint Part A Program fail to satisfy the statutory requirement in s 85(2)(a)?

98    AUSTRAC’s case on Part A of Star’s Joint AML/CTF Program is based on its preferred construction of the AML/CTF Act. AUSTRAC did not advance a fall-back case on Star’s construction. AUSTRAC seeks a conclusion that Star’s Part A Program was not, by its design, capable of appropriately identifying, mitigating and managing the ML/TF risks that Star Sydney and Star Queensland reasonably faced in their provision of designated services during the Relevant Period. On the correct construction, AUSTRAC does not contend, and has not established, that Star has contravened s 81 by reference to s 85(2)(a).

99    As noted above, this does not alter the number of contraventions in the present case but may be relevant to the seriousness of the conduct. It is also a point of differentiation from Crown.

4.4    Joint Part B Program

100    AUSTRAC did not contend that Part B of Star’s Joint AML/CTF Program did not have the sole or primary purpose prescribed by s 85(3)(a) of the AML/CTF Act. Rather, Star admits that Part B did not comply with the AML/CTF Rules in a number of respects and therefore did not satisfy the requirements in s 85(3)(b). Star admits that this amounts to a contravention of s 81 of the AML/CTF Act.

101    As noted above, Star Sydney and Star Queensland admit that they contravened s 81(1) of the AML/CTF Act on each occasion that they each provided a designated service to a customer in circumstances where they had failed to adopt and maintain a Part A and Part B of their Joint AML/CTF Program that complied with the AML/CTF Act and the AML/CTF Rules.

5.    SECTION 36

102    Throughout the Relevant Period, s 36(1) of the AML/CTF Act required a reporting entity to monitor its customers with a view to identifying, mitigating and managing the risks it might reasonably face where the provision of a designated service could involve or facilitate ML or TF: s 36(1)(a) of the AML/CTF Act. This monitoring also had to be conducted in accordance with the AML/CTF Rules: s 36(1)(b) of the AML/CTF Act.

5.1    What is admitted and what is disputed

103    Star has admitted to contraventions of s 36(1) of the AML/CTF Act during the Relevant Period in respect of three cohorts of customers:

(a)    First, Star admits that it failed to monitor 117 ‘high risk’ customers who presented high ML/TF risk indicators and engaged in transactions at Star Casinos (High Risk Customers) with a view to identifying, mitigating and managing ML risks it reasonably faced and in accordance with the requirements set out in Ch 15 of the AML/CTF Rules. The contraventions can be summarised as follows:

(i)    failing to recognise High Risk Customers as high-risk sooner than Star did and, in some circumstances, failing to recognise High Risk Customers as high-risk at all;

(ii)    failing to apply appropriate transaction monitoring to the transactions of each High Risk Customer and, where transaction monitoring was conducted, to include appropriate risk-based systems and controls to monitor the transactions;

(iii)    failing to make and keep complete and reliable records of designated services, to apply appropriate risk-based transaction monitoring to designated services provided through high ML/TF risk channels, and failing to have the ability to collate information where designated services were provided to a High Risk Customer through multiple accounts;

(iv)    failing to review, update and verify the KYC information of each High Risk Customer having regard to the high ML/TF risks posed; and

(v)    at various times, failing to carry out appropriate risk-based enhanced customer due diligence measures and, in respect of at least 46 High Risk Customers considered by the Joint Risk Assessment Meeting, the Chief Risk Officer, the AML/CTF Compliance Officer, the investigations team or other members of senior management, failing to appropriately consider one or more of the ML/TF risks posed by the customer, the provision of designated services to the customer, and whether the risks were within Star’s risk appetite;

(b)    Secondly, Star admits that it failed to monitor 1,221 customers who transacted through alleged higher ML/TF risk channels (such as third-party deposits through Star Patron Accounts) (Channel Customers) in relation to the provision of designated services with a view to identifying, mitigating and managing the money laundering risks that Star reasonably faced; and

(c)    Thirdly, Star admits that Star Queensland failed to monitor 15 customers of Star Queensland who were subject to exclusion orders issued by law enforcement in New South Wales (Excluded Customers), in relation to the provision of designated services with a view to identifying, mitigating and managing the money laundering risks that Star reasonably faced.

104    As is apparent, it is said that Star contravened s 36(1)(a) in respect of the Channel Customers and Excluded Customers, and ss 36(1)(a) and 36(1)(b) in respect of the High Risk Customers.

105    The parties’ principal dispute concerning s 36(1) relates to the number of contraventions arising from the admitted conduct. AUSTRAC contends that Star Sydney and Star Queensland contravened s 36(1) on each occasion a designated service was provided to a High Risk Customer, Channel Customer or Excluded Customer during the Relevant Period. AUSTRAC alleges that Star’s conduct amounts to at least 7,592 contraventions, being:

(a)    at least three contraventions for each of the 117 High Risk Customers;

(b)    at least one contravention for each of the 7,460 transactions specified in Schedules 3 to 8 of its written submissions in chief for the 1,221 Channel Customers; and

(c)    at least one contravention by Star Queensland for 12 of the 15 Excluded Customers (excluding the three Excluded Customers who were also High Risk Customers).

106    AUSTRAC also presented an alternative construction of s 36(1), being that Star contravened s 36(1) once in respect of each customer. On this construction, Star would have engaged in a total of 1,517 contraventions across both Star Sydney and Star Queensland. AUSTRAC submits that this construction is to be preferred to the construction advanced by Star, as discussed below.

107    By contrast, Star submits that its conduct amounts to 134 contraventions of s 36(1), comprising one contravention in respect of each High Risk Customer (117 contraventions), one contravention in respect of each Excluded Customer that was not also a High Risk Customer (12 contraventions), and five courses of conduct involving Channel Customers.

108    It was common ground that contraventions in respect of customers who fell into more than one of these cohorts should not be ‘double counted’.

5.2    The parties’ submissions on s 36 construction

109    AUSTRAC submits that s 36(1) of the AML/CTF Act is contravened each time a reporting entity provides a designated service to a customer without having undertaken the requisite ongoing customer due diligence. It submits that this construction follows from the text of s 36(1), which requires a reporting entity to monitor its customers “in relation to the provision ... of designated services”. According to AUSTRAC, the phrase “in relation to” indicates that the monitoring obligation is inextricably tied to the provision of designated services and the attendant risks that may arise from the provision of those services, rather than some general form of monitoring by a reporting entity of its customer base as a class. AUSTRAC says that different designated services are likely to involve different risks and therefore necessitate different assessments of those risks. AUSTRAC also observes that Star’s construction would produce the anomalous result that a reporting entity would be equally liable whether it provided a single designated service to one customer or many thousands of designated services to another customer.

110    AUSTRAC points to ss 36(3) and 39, which provide that certain designated services are exempted from the operation of s 36(1). For example, s 36(3) provides that the section does not apply “to a designated service covered by item 54 of table 1 in section 6”. AUSTRAC notes that the exemption applies “to a designated service”, not to a reporting entity or to a customer, requiring there to be a service-by-service analysis, and meaning that s 36 is contravened on each occasion a reporting entity provides a non-exempted service to a customer. AUSTRAC notes that, on Star’s construction, the exemptions would provide no practical relief where a reporting entity provided both exempt and non-exempt designated services.

111    AUSTRAC notes that other provisions of the AML/CTF Act apply obligations by reference to the provision of each service. AUSTRAC points to:

(a)    s 32, which provides that a reporting entity must not commence to provide a designated service to a customer unless the reporting entity has carried out the applicable customer identification procedure in respect of that customer;

(b)    s 34, which provides that if a reporting entity has commenced to provide a designated service to a customer and there were special circumstances pursuant to s 33 justifying the reporting entity carrying out the applicable customer identification procedures after commencement of provision of the service to the customer, then after the end of the requisite period, the reporting entity must not continue to provide, and must not commence to provide, any designated services to the customer until the reporting entity carries out the applicable customer identification procedure; and

(c)    s 81, which provides that a reporting entity must not commence to provide a designated service to a customer if the reporting entity has not adopted and does not maintain an AML and CTF program.

112    AUSTRAC submits that its construction of s 36(1) accords with Perram J’s approach to s 81 in TAB (No 3). Specifically, AUSTRAC relies upon Perram J’s observation that “I cannot see how the text of s 81 can be bent so that it can be read as involving only a single infringement when a program is said to be deficient” (TAB (No 3) at [28]). AUSTRAC submits that, similarly, s 36(1) lends itself to a construction whereby a contravention occurs each time a designated service is provided to a customer who has not been subject to the requisite ongoing customer due diligence.

113    AUSTRAC also submits that its approach is more consistent with the objects of the AML/CTF Act, in that the detection and disruption of ML and TF is best achieved by a construction which requires a reporting entity to effectively monitor the provision of designated services which give rise to those risks.

114    AUSTRAC makes the following submission (emphasis added):

AUSTRAC submits that in order for a reporting entity to determine what specific money laundering and terrorism financing risks it might face when providing designated services to a customer, s 36 requires a reporting entity to consider the ML/TF risk profile of each customer having regard to relevant designated services being provided to them. This does not mean that a reporting entity must conduct a review prior to the provision of each designated service, but it does mean that if a reporting entity fails to undertake ongoing due diligence having regard to the provision of designated services to customers, there will be a contravention of s 36(1) on each occasion that a designated service is provided to a customer.

115    Star submits that s 36(1) should not be construed by reference to s 81 without regard to the significant textual differences between the two provisions. Star submits that, in TAB (No 3), Perram J considered that s 81 is directed to the commencement of the provision of designated services and may therefore be contravened each time a reporting entity commences to provide a designated service while lacking a compliant AML/CTF program. Star contends that s 36(1) is materially different, being directed to the monitoring of customers rather than the provision of designated services, and that the approach to enumerating contraventions under s 81 should not be applied to s 36(1). Further, Star notes that Perram J described the conclusion that s 81 may be contravened each time a designated service is commenced in those circumstances as an “otherwise alarming conclusion”, which his Honour considered may be ameliorated by the course of conduct principle. Star submits that this qualification is significant in circumstances where it accepts that its contraventions of s 36 do not arise from the same course of conduct or a single transaction (subject to the exception discussed below).

116    Star further submits that the contraventions of s 36(1) concerning the Channel Customers should be treated as arising from a course of conduct in respect of each channel, rather than each individual Channel Customer. It submits that AUSTRAC’s allegations concerning each of the five channels are founded on the same underlying conduct. In particular, Star submits that the alleged failures to monitor customers transacting through a particular channel arose from the same deficiencies in risk assessment and transaction monitoring systems and controls. Accordingly, Star contends that the contraventions concerning each channel should be characterised as a single course of conduct.

5.3    Consideration

117    The resolution of this question is not without difficulty. For a civil penalty provision, s 36 is not overly clear as to what it actually requires a reporting entity to do.

118    Section 36 commences with a requirement for the reporting entity to monitor its customers. The monitoring of customers is required to be in relation to the provision by the reporting entity of designated services (plural) at or through the reporting entity’s premises, “with a view to” identifying, mitigating and managing certain risks. Up until that point in the text, the subject matter of the obligation is the monitoring of customers. However, the word “customers” does not subsequently appear anywhere in s 36. For example, in defining the relevant risk, the section does not say:

the risk the reporting entity may reasonably face that the provision to the relevant customer of a designated service at or through a permanent establishment…

but rather says:

the risk the reporting entity may reasonably face that the provision of a designated service at or through a permanent establishment…

119    On one view, that focusses attention on the risk posed by the provision of a particular designated service, rather than the risk posed by the provision of a service to a particular customer. That is reinforced by the use of the singular in relation to the service (“a designated service”) and the exemption in s 36(3), which provides that the section does not apply to “a designated service” set out in item 54 of table 1. As AUSTRAC points out, in order to give effect to the exemption, it is necessary to treat conduct in relation to an exempt service differently from conduct in relation to a non-exempt service.

120    However, it is necessary to read the section as a whole, including having regard to the primary statement of the obligation, being to monitor customers.

121    Section 36 appears in Pt 2 which deals with procedures in respect of customers. The simplified outline in s 27, to which the Court may have regard in construing the AML/CTF Act – per s 13 of the Acts Interpretation Act 1901 (Cth) – reveals that the focus of Pt 2 is on customer identification and due diligence. It specifies that a reporting entity must carry out a procedure to verify a customer’s identity before providing a designated service to the customer, that certain pre-commencement customers and certain low-risk customers are subject to modified identification procedures, and that a reporting entity must carry out ongoing customer due diligence.

122    In that context, the opening words of s 36 are of significance. The obligation is to monitor customers. Customers are being monitored in relation to the provision of designated services, but it is the customers who are monitored, not the services per se. A reporting entity contravenes s 36 if it fails to monitor a customer, or it fails to monitor a customer in the requisite way. The requisite way is with a view to identifying, mitigating and managing the risk which the reporting entity may reasonably face that the provision of a designated service at the premises might involve ML or TF. That the relevant risk is one flowing from the provision of a designated service to the customer arises from the structure of the provision and its opening words.

123    It may be, as AUSTRAC submits, that different services involve different risks, and that would have to be taken into account when monitoring each customer with a view to identifying, mitigating and managing relevant risks. The term “monitor” does not confine the relevant review or consideration to a once-only process. The monitoring would have to accommodate changes to the designated services provided to a particular customer. The process must also be undertaken in accordance with the AML/CTF Rules. However, the relevant obligation remains the obligation to monitor customers, or more precisely monitoring with a view to identifying, mitigating and managing the relevant risk.

124    AUSTRAC accepts that it is not a sensible construction of s 36 to say that a separate monitoring or review process must be conducted in respect of each service to be provided to each customer. However, AUSTRAC then says that there will be a contravention of s 36(1) on each occasion that a designated service is provided to a customer. This amounts to a contention that the contraventions do not need to match the obligations. However, a contravention is a failure to do that which the relevant statute requires to be done: the two concepts are different sides of the same coin. AUSTRAC’s concession is rightly made, but it is significant for the purposes of construing the section and calculating the number of contraventions.

125    In relation to AUSTRAC’s submission that Star’s approach would produce the anomalous result that a reporting entity would be equally liable whether it provided a single designated service to one customer or many thousands of designated services to another customer, that submission does not engage with the nature of the obligation. It may be easier to monitor a customer with a view to mitigating or managing a risk of ML or TF if the customer is only receiving a single service. It may be much more onerous if the customer is receiving many services, and that could more readily lead to a contravention.

126    In relation to AUSTRAC’s submission that, on Star’s approach, the exemption of certain designated services would provide no practical relief where a reporting entity provided both exempt and non-exempt designated services, that again does not recognise the nature of the obligation. If a customer is receiving exempt services, then the reporting entity does not need to monitor with a view to identifying, mitigating and managing the risk of ML or TF arising from the provision of those services. That reduces the burden on the reporting entity and removes the potential for liability in respect of the customer’s use of those services. Of course, a reporting entity needs to monitor customers in connection with non-exempt services.

127    In relation to AUSTRAC’s references to ss 32, 34 and 81, those sections employ different language and describe a different obligation. For example, s 32 commences with the words “A reporting entity must not commence to provide a designated service to a customer…”. That is an obligation to avoid commencing to provide a service unless certain conditions are satisfied. It is breached each time a reporting entity commences to provide a service without satisfying the relevant condition. Sections 34 and 81 are to similar effect. By contrast, the language in s 36 imposes an obligation to monitor customers.

128    In relation to AUSTRAC’s submission that its approach is more consistent with the objects of the AML/CTF Act, in that the detection and disruption of ML and TF is best achieved by a construction which requires a reporting entity to effectively monitor the provision of designated services which give rise to those risks, I note that it might equally be said that the objects are achieved by focussing on the customers who give rise to the relevant risk. Risk is a function of both services and customers. Consideration of the objects of the AML/CTF Act is therefore a neutral consideration for the purposes of this constructional debate.

129    It follows that the number of contraventions is a function of how many admitted failures there were to monitor customers. This is also AUSTRAC’s fall-back position (as discussed at [106] above). In respect of this alternative construction, AUSTRAC says that:

(a)    Star Sydney engaged in:

(i)    102 contraventions in respect of High Risk Customers; and

(ii)    1,088 contraventions in respect of Channel Customers;

for a total of 1,190 contraventions; and

(b)    Star Queensland engaged in:

(i)    77 contraventions in respect of High Risk Customers;

(ii)    238 contraventions in respect of Channel Customers; and

(iii)    12 contraventions in respect of Excluded Customers,

for a total of 327 contraventions.

130    The number of contraventions asserted by Star is different, for two reasons. The first is that Star combines the common customers across Star Sydney and Star Queensland, such that Star says there are 129 contraventions in respect of High Risk Customers and Excluded Customers in total. However, this is not the correct approach. Each of Star Sydney and Star Queensland committed contraventions in respect of whatever is the relevant number of its High Risk Customers or Excluded Customers. The AUSTRAC approach is correct in this regard.

131    The second reason relates to whether the contraventions in respect of the Channel Customers can be grouped as five courses of conduct (as Star submits) or should be treated as separate contraventions (as AUSTRAC submits).

132    The “course of conduct” or “one transaction” principle is drawn from the criminal law. As explained by Middleton and Gordon JJ (Moore J agreeing) in Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1; [2010] FCAFC 39 (CFMEU v Cahill) at [39] (emphasis in original):

The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry.

133    Another way of expressing the question is whether the conduct represents “two or more courses of criminal conduct that, reasonably characterized, are really separate invasions of the community’s right to peace and order, notwithstanding that they are historically interdependent”: per Wells J in Attorney-General v Tichy (1982) 30 SASR 84 at 92–93, cited with approval in Johnson v R (2004) 218 CLR 451; [2004] HCA 15 at [4] (Gleeson CJ) and CFMEU v Cahill at [41] (Middleton and Gordon JJ).

134    The application of the principle frequently involves consideration of whether the conduct was part of one sequence of events and whether there was a correspondence of time and subject matter, such as whether it was about the same thing and on the same day.

135    However, to treat something as a course of conduct is not the same as treating it as a single contravention. Nor is the Court required to treat a course of conduct as if it has a single maximum penalty. As was observed by Beach J in Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd (No 2) [2016] FCA 698 at [25]:

… the “course of conduct” principle does not have paramountcy in the process of assessing an appropriate penalty. It cannot of itself operate as a de facto limit on the penalty to be imposed for contraventions of the ACL. Further, its application and utility must be tailored to the circumstances. In some cases, the contravening conduct may involve many acts of contravention that affect a very large number of consumers and a large monetary value of commerce, but the conduct might be characterised as involving a single course of conduct. Contrastingly, in other cases, there may be a small number of contraventions, affecting few consumers and having small commercial significance, but the conduct might be characterised as involving several separate courses of conduct. It might be anomalous to apply the concept to the former scenario, yet be precluded from applying it to the latter scenario. The “course of conduct” principle cannot unduly fetter the proper application of s 224.

136    This statement has been approved in a number of Full Court decisions: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25; [2016] FCAFC 181 (Reckitt Benckiser) at [141] (Jagot, Yates and Bromwich JJ); Australian Competition and Consumer Commission v Cement Australia Pty Ltd (2017) 258 FCR 312; [2017] FCAFC 159 at [425]–[426] (Middleton, Beach and Moshinsky JJ); Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243; [2018] FCAFC 73 at [231]–[232] (Allsop CJ, Middleton and Robertson JJ).

137    Further, Beach J observed in Australian Competition and Consumer Commission v Murray Goulburn Co-Operative Co Limited [2018] FCA 1964 at [29] that the course of conduct principle (emphasis in original):

… does not convert the many separate contraventions into only one contravention, and nor does it constrain the available maximum penalty let alone necessarily constrain it to the maximum penalty for one contravention. And notwithstanding a grouping into a course(s) of conduct, one must ensure that any penalty imposed is of appropriate deterrent value, whether specific or general.

138    In the present case, Star submits that the contraventions of s 36 arise from the following failures by Star Sydney and Star Queensland in respect of each channel (i.e. in respect of the Hotel Card, EEIS, Star Patron Account, Bank of China (Macau) and Kuan Koi channels):

(a)    Star Sydney and Star Queensland did not appropriately assess the ML/TF risks of providing designated services through the channel;

(b)    Star Sydney and Star Queensland did not apply appropriate risk-based transaction monitoring or systems and controls in respect of transactions provided through the channel; and

(c)    Star Sydney and Star Queensland failed to monitor each of the customers who had transacted through those channels with a view to identifying, mitigating and managing the ML/TF risks they reasonably faced in relation to the provision of designated services, and that failure is said by Star to arise from the same deficiencies, namely failure to properly assess ML/TF risks and failure to apply appropriate risk-based transaction monitoring or systems and controls.

139    Put more succinctly, Star contends that the contraventions of s 36 in relation to the Channel Customers were failures to assess risk and apply risk management systems for each channel, rather than individually for each customer: i.e. the risk arises from the channel rather than the customer.

140    Star submits that its approach is supported by the observations of Perram J in TAB (No 3) at [29]. I do not think that Star can derive much comfort from that decision. In that case, the parties proposed an agreed penalty and reached agreement on a joint submission. The contraventions in question, being contraventions of s 81, resulted from a failure to have a proper joint AML/CTF program in place within the meaning of s 85. The parties contended that this amounted to a single contravention of s 81. Perram J disagreed, observing that s 81 is contravened each time a designated service commences to be provided. However, his Honour remarked, without expansion, that he was prepared to treat the conduct as a single course of conduct. That brief remark, in the context of an approval of an agreed penalty that had been formulated on the basis of a single contravention, does not assist overly in determining the essentially factual question in the present case.

141    I do not consider that the circumstances in the present case give rise to a relevant course of conduct. The obligation under s 36 is an obligation to monitor customers, not an obligation to monitor the risk inherent in a particular service. For example, if Star failed to monitor customers at all, then I do not think that could properly be regarded as a single course of conduct, and the situation is not relevantly different if Star fails to monitor customers adequately. Different customers may have different services, and the assessment may differ from customer to customer. It may be that a failure to appropriately identify the risk inherent in a particular service or to apply risk-based monitoring or controls in respect of a particular service or channel could have implications for the monitoring of each customer that uses that service or channel. However, that would depend on the circumstances, including what is known about the customer (for example, Star might have a detailed understanding of a particular customer and his or her source of funds, such that it is satisfied (and appropriately so) that the risk for that customer is minimal), or whether the customer is using other services (which might enhance risk). Although the particular contraventions might have a common cause, they are separate contraventions, rather than (for example) being steps connected in time and nature in one overall contravention.

142    That does not mean that I should not take into account, when considering an appropriate penalty, that there are common causes for the contraventions of s 36 linked to failures relating to particular channels.

143    It follows that the number of contraventions of s 36 is the number identified by AUSTRAC on its fall-back position, being 1,190 contraventions for Star Sydney and 327 contraventions for Star Queensland.

6.    THE RELEVANT APPROACH TO ASSESSING PENALTY

6.1    Legislation

144    Section 175 of the AML/CTF Act relevantly provides:

(1)    If the Federal Court is satisfied that a person has contravened a civil penalty provision, the Federal Court may order the person to pay the Commonwealth a pecuniary penalty.

(2)    An order under subsection (1) is to be known as a civil penalty order.

Determining amount of pecuniary penalty

(3)    In determining the pecuniary penalty, the Federal Court must have regard to all relevant matters, including:

(a)    the nature and extent of the contravention; and

(b)    the nature and extent of any loss or damage suffered as a result of the contravention; and

(c)    the circumstances in which the contravention took place; and

(d)    whether the person has previously been found by the Federal Court in proceedings under this Act to have engaged in any similar conduct; and

(e)    if the Federal Court considers that it is appropriate to do so—whether the person has previously been found by a court in proceedings under a law of a State or Territory to have engaged in any similar conduct; and

(f)    if the Federal Court considers that it is appropriate to do so—whether the person has previously been found by a court in a foreign country to have engaged in any similar conduct; and

(g)    if the Federal Court considers that it is appropriate to do so—whether the person has previously been found by a court in proceedings under the repealed Financial Transaction Reports Act 1988 to have engaged in any similar conduct.

Maximum pecuniary penalty

(4)    The pecuniary penalty payable by a body corporate must not exceed 100,000 penalty units.

…

Conduct contravening more than one civil penalty provision

(6)    If conduct constitutes a contravention of 2 or more civil penalty provisions, proceedings may be instituted under this section against a person in relation to the contravention of any one or more of those provisions. However, the person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.

…

145    The value of penalty units is assessed by reference to s 4AA of the Crimes Act 1914 (Cth) at the time of the contravention. The increase in the monetary value of a penalty unit does not apply to a civil contravention which occurred before the commencement of the amending legislation: Murrihy v Betezy.com.au Pty Ltd (No 2) (2013) 221 FCR 118; [2013] FCA 1146 at [28] (Jessup J). As such, the maximum penalty per contravention in the Relevant Period is:

6.2    Relevant principles

146    In Fewstone Pty Ltd v Australian Competition and Consumer Commission (2026) 317 FCR 149; [2026] FCAFC 104 (Collier, Neskovcin and Moore JJ) (Fewstone) at 157 [39]–[40], the Court summarised some general principles applicable to the imposition of a civil penalty as follows:

39    It is recognised that civil penalties are imposed primarily, if not solely, for the purpose of deterrence: Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450; [2022] HCA 13 (Pattinson) at [15] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ; Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; [2015] HCA 46 (DFWBII) at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. The object of deterrence reflects both the need to deter repetition of the contravening conduct by the contravenor (specific deterrence) and to deter others who might be tempted to engage in similar contraventions (general deterrence): Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 (TPG) at [65] per French CJ, Crennan, Bell and Keane JJ; DFWBII at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ and [110] per Keane J. The Court must seek to “put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene” the relevant statute: Pattinson at [15] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ, quoting Trade Practices Commission v CSR Ltd [1991] ATPR ¶41–076; [1990] FCA 762 at [50] per French J. A penalty should nonetheless be proportionate in the sense of striking “a reasonable balance between deterrence and oppressive severity”: Pattinson at [41], [46]-[47] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ. 

40    Determining an appropriate civil penalty usually involves a difficult and complex process of multi-factorial decision-making, where the result is arrived at by a process of “instinctive synthesis”: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25; [2016] FCAFC 181 (Jagot, Yates and Bromwich JJ) (Reckitt Benckiser) at [44], citing Wong v R (2001) 207 CLR 584; [2001] HCA 64 at [74]-[76] (Wong v R) and Markarian v R (2005) 228 CLR 357; [2005] HCA 25 at [37]. In Wong v R at [74]-[75], Gaudron, Gummow and Hayne JJ observed that to proceed by applying increments to, or decrements from, a predetermined range of sentences involved an error of principle, because (citations omitted, emphasis in original):

it does not take account of the fact that there are many conflicting and contradictory elements which bear upon sentencing an offender… [T]he task of the sentencer is to take account of all of the relevant factors and to arrive at a single result which takes due account of them all. That is what is meant by saying that the task is to arrive at an “instinctive synthesis”. This expression is used, not as might be supposed, to cloak the task of the sentencer in some mystery, but to make plain that the sentencer is called on to reach a single sentence which, in the case of an offence like the one now under discussion, balances many different and conflicting features.

147    The following additional matters were emphasised by the parties in the present case.

148    First, the word ‘may’ in s 175(1) allows a discretion: Crown at [92] citing Adler v Australian Securities and Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131 at [748] (Giles JA; Mason P and Beazley JA agreeing). This discretion is to be exercised judicially, having regard to the subject matter, scope and purpose of the legislation: Crown at [92] citing Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450; [2022] HCA 13 (Pattinson) at [40].

149    Secondly, the wording in s 175(3) of the AML/CTF Act is such that the Court “must have regard to” the matters to which it refers, although the Court has discretion as to how much weight to ascribe to each. Although they are matters that may inform the ultimate object of a civil penalty, they do not alter the deterrence principle affirmed in Pattinson.

150    Thirdly, it may be appropriate to have regard to what have become known as the “French factors” as outlined by French J in Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076; [1990] FCA 762 when referring to the Trade Practices Act 1974 (Cth). These factors, which “may inform the assessment of a penalty of appropriate deterrent value”, are set out at 52,152–153 as follows:

1.    The nature and extent of the contravening conduct.

2.    The amount of loss or damage caused.

3.    The circumstances in which the conduct took place.

4.    The size of the contravening company.

5.    The degree of power it has, as evidenced by its market share and ease of entry into the market.

6.    The deliberateness of the contravention and the period over which it extended.

7.    Whether the contravention arose out of the conduct of senior management or at a lower level.

8.    Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.

9.    Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.

These factors were cited with approval in Pattinson at [18]. Further, they were applied by Perram J when determining breaches of the AML/CTF Act in TAB (No 3) at [9] and by Lee J in Crown at [93].

151    It may also be helpful to refer to Beach J’s augmented “French factors” set out in Australian Securities and Investments Commission v Westpac Banking Corporation (No 3) (2018) 131 ACSR 585; [2018] FCA 1701 at [49], which his Honour subsequently applied to the AML/CTF Act in Westpac at [58], being:

(a)    the extent to which the contravention was the result of deliberate or reckless conduct by the corporation, as opposed to negligence or carelessness;

(b)    the number of contraventions, the length of the period over which the contraventions occurred, and whether the contraventions comprised isolated conduct or were systematic;

(c)    the seniority of officers responsible for the contravention;

(d)    the capacity of the defendant to pay, but only in the sense that whilst the size of a corporation does not of itself justify a higher penalty than might otherwise be imposed, it may be relevant in determining the size of the pecuniary penalty that would operate as an effective specific deterrent;

(e)    the existence within the corporation of compliance systems, including provisions for and evidence of education and internal enforcement of such systems;

(f)    remedial and disciplinary steps taken after the contravention and directed to putting in place a compliance system or improving existing systems and disciplining officers responsible for the contravention;

(g)    whether the directors of the corporation were aware of the relevant facts and, if not, what processes were in place at the time or put in place after the contravention to ensure their awareness of such facts in the future;

(h)    any change in the composition of the board or senior managers since the contravention;

(i)    the degree of the corporation’s cooperation with the regulator, including any admission of an actual or attempted contravention;

(j)    the impact or consequences of the contravention on the market or innocent third parties;

(k)    the extent of any profit or benefit derived as a result of the contravention; and

(l)    whether the corporation has been found to have engaged in similar conduct in the past.

As noted by Star, Beach J considered these factors “non-mandatory”. Whether individual factors constitute relevant matters to the assessment pursuant to s 175 would depend upon the circumstances: Westpac at [60].

152    Relatedly, these factors must not be regarded as a rigid catalogue of matters for attention, as if they were a legal checklist: Pattinson at [19]. As Lee J observed in Crown at [94]:

The overriding need to focus on what is necessary for specific and general deterrence is key, and the above matters are important insofar as they inform the remedial response necessary to secure the objects of deterrence.

153    Fourthly, the High Court in Pattinson rejected an approach where contraventions are graded on a scale of increasing seriousness, with the maximum penalty to be reserved exclusively for the worst category of contravening conduct. The following principles emerge from Pattinson. The fixing of a penalty is not constrained or controlled by some proportionality with the worst category of case. The maximum penalty does not provide a “yardstick” in that way. Rather, the relevant “proportionality” is that the penalty strikes a reasonable balance between deterrence and oppressive severity. Relatedly, the fixing of a penalty is not controlled by a relationship with the objective seriousness of the contravention. Other matters may require a penalty different from that suggested by the objective seriousness of the contravention. For example, a higher penalty may be necessary for deterrence where the contravener has a history of prior contraventions. A lower penalty may be appropriate where the contravener has expressed remorse. Whilst (subject to the matter referred to in the next paragraph) there must ordinarily be some “reasonable relationship” between the theoretical maximum penalty and the penalty imposed, that does not require some graduated scale based on the severity of the contravention. The “reasonableness” may be established by reference to the circumstances of the contravener as well as by the circumstances of the contravention.

154    In this regard, Star emphasises that a contravention may be an isolated event, rather than being the latest instance of the contravener’s pursuit of a deliberate strategy involving recalcitrance in order to have its way. It notes that, consistently with Pattinson at [47], a more modest penalty can be arrived at where a future contravention is unlikely due to factors such as changes in the membership of an organisation.

155    Fifthly, there are cases where there are so many contraventions and the maximum penalty is accordingly so large that it ceases to bear any meaningful relationship to the appropriate penalty for the purposes of specific and general deterrence. An example is found in Reckitt Benckiser at [157].

156    Sixthly, the civil penalty must not be “an acceptable cost of doing business” (Pattinson at [17]) and persons engaged in trade and commerce must be deterred from the “cynical calculation involved in weighing up the risk of penalty against the profits to be made from the contravention” (Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 at [63] (Keane CJ, Finn and Gilmour JJ)).

157    Seventhly, the principles of totality, parity and course of conduct derived from criminal sentencing may assist the Court: Pattinson at [45]. However, the principles of retribution, denunciation and rehabilitation are not relevant to the imposition of a civil penalty: Pattinson at [15].

158    One area of principle debated between the parties was the role, in fixing a penalty, of the contravener’s capacity to pay that penalty.

159    AUSTRAC submits that the primary consideration when imposing a penalty is not whether the contravener has the capacity to pay the penalty, instead submitting that the contravener’s financial capacity is one factor among many to which the Court may have regard when determining if the primary object of deterrence is served by the penalty ordered. AUSTRAC relies upon Australian Competition and Consumer Commission v High Adventure Pty Ltd (2006) ATPR ¶42-091; [2005] FCAFC 247 (High Adventure) at [11] where the Full Court (Heerey, Finkelstein and Allsop JJ) observed:

Moreover, as deterrence (especially general deterrence) is the primary purpose lying behind the penalty regime, there inevitably will be cases where the penalty that must be imposed will be higher, perhaps even considerably higher, than the penalty that would otherwise be imposed on a particular offender if one were to have regard only to the circumstances of that offender. In some cases the penalty may be so high that the offender will become insolvent. That possibility must not prevent the Court from doing its duty for otherwise the important object of general deterrence is undermined.

See also viagogo AG v Australian Competition and Consumer Commission [2022] FCAFC 87 (viagogo) at [167] (Yates, Abraham and Cheeseman JJ); Electoral Commissioner of the Australian Electoral Commission v Laming (2024) 304 FCR 561; [2024] FCAFC 109 (Laming) at [26] (Logan J, Perry and Meagher JJ agreeing at [103], [105]).

160    There are numerous single-judge decisions to the same effect. In Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd (2011) ATPR ¶42-351; [2011] FCA 372, Gordon J observed (at [54]):

However, as deterrence is the primary objective of penalties, the financial capacity of a respondent to pay must not prevent the Court from doing its duty even if in some cases, the penalty is so high that the offender will become insolvent: ... Put another way, I accept that capacity to pay is a relevant factor, but one of “less importance when balanced against the necessity of imposing a penalty that satisfies the objective of general deterrence”: Australian Communications and Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong (No 6) [2009] FCA 1533 at [28] and Leahy Petroleum (No 2) [2005] FCA 254 at [9] and [11].

161    In Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281; [2005] FCA 254, Merkel J observed (at [9] and [11]):

9    ... However, a contravening company’s capacity to pay a penalty is of less relevance to the objective of general deterrence because that objective is not concerned with whether the penalties imposed have been paid. Rather, it involves a penalty being fixed that will deter others from engaging in similar contravening conduct in the future. Thus, general deterrence will depend more on the expected quantum of the penalty for the offending conduct, rather than on a past offender’s capacity to pay a previous penalty ...

...

11     ... Giving significant weight to capacity to pay in such circumstances would not only produce anomalous outcomes, such as the most culpable offender receiving the lightest penalty, but it would also reward companies for carrying on business in a manner that resulted in those companies having few, if any, assets available to pay a penalty when it is imposed ...

162    See also Australian Communications and Media Authority v Clarity1 Pty Ltd (2006) 155 FCR 377; [2006] FCA 1399 at [43] (Nicholson J); Tax Practitioners Board v Su (2014) 98 ATR 813; [2014] FCA 731 at [20] (Jagot J); Tax Practitioners Board v Dedic (2014) 98 ATR 373; [2014] FCA 511 at [8] (Davies J); Commissioner of Taxation v Ludekens (No 2) (2016) 103 ATR 532; [2016] FCA 755 at [74] (Pagone J); and Australian Communications and Media Authority v Getaway Escapes Pty Ltd [2016] FCA 795 at [29] (Rangiah J).

163    Star seeks to confine the effect of these cases. It says that in High Adventure and viagogo, the Full Court was not satisfied with the evidence adduced in relation to the financial position of the contraveners: High Adventure at [10]; viagogo at [167]. It says that the cases relied upon in viagogo at [167] only consider instances where the contraveners were already in liquidation or bankrupt, being significant as in those instances the likelihood of the cost of deterrence being borne by innocent employees is not a relevant consideration: cf. Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission (2003) 127 FCR 170; [2003] FCAFC 2 at 173 [7]–[8] (Sackville J).

164    Further, it notes that in Laming, the observations of Logan J were made in the context of considering the impact of a costs liability, by specific reference to Abraham J’s comments in Australian Securities and Investments Commission v Select AFSL Pty Ltd (No 3) (2023) 171 ACSR 331; [2023] FCA 723 on that same issue.

165    The principle expressed in these cases is not capable of being limited in the way that Star suggests. The principle is well recognised in decisions involving no such qualifications.

166    I would express the matter as follows. The focus of the penalty-setting exercise is on deterrence, both specific and general. The size of a contravener, including its financial metrics (such as revenue and profit), will be relevant to deterrence because it is relevant both to what is required for specific deterrence and also to what is required for general deterrence for that size or type of entity. In that regard, the appropriate penalty for one of Australia’s largest public corporations will be different from the appropriate penalty for a small family company. In that respect, the appropriate penalty for general deterrence is not some fixed number – the penalty will be understood by other potential contraveners as reflecting objective circumstances, including the circumstances of the contravener not just the circumstances of the contravention. Thus a potential contravener would recognise that if they are larger and have greater financial resources the penalty will be larger. The particular financial position of the contravener may also be relevant to specific deterrence, because it may affect the extent to which a given penalty will “sting”, subject to particular considerations in a given case such as whether the corporation had divested itself of assets in an attempt to lighten the penalty. However, beyond that, the appropriate penalty for a particular size or type of corporation (including for the purposes of general deterrence) will not readily be discounted or capped because of a stated inability to pay.

167    In relation to the potential for an impact on employees or creditors, if a particular penalty figure is appropriate to deter other entities from engaging in conduct that exposes Australia and Australians to the risk of money laundering and terrorism financing, then this is the primary consideration in setting a penalty. The potential impact on employees and creditors may, nevertheless, be a relevant factor.

168    It follows that the contravener’s capacity to pay a penalty is not a cap on an appropriate penalty. Star did not suggest otherwise. It may be a factor, but in the way identified above.

169    Another matter relevant to the fixing of a penalty in the present case is the proper role of previous penalty decisions, and in particular agreed penalties. This was the subject of recent consideration in Fewstone at 165–168 [86]–[99]. Given the submissions of the parties in the present case, it is appropriate to set out the relevant passages from that decision in full as follows:

86    It is well recognised that previous penalty decisions may provide little assistance in engaging in the required penalty-setting exercise.

87    In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 (Keane CJ, Finn and Gilmour JJ), the Full Court observed (at [60]):

[T]he Court is not assisted by Optus’ citation of penalties imposed in other cases, where the combination of circumstances were different from the present, as if that citation is apt to establish a “range” of penalties appropriate in this case. As Middleton J rightly said in ACCC v Telstra Corporation Ltd (2010) 188 FCR 238; [2010] FCA 790 at [215]:

It is apparent that there are many difficulties in simply referring to penalties previously imposed for contraventions of legislation in widely differing circumstances or in circumstances where some of the factors are similar but others dissimilar to those of the present proceeding…

88    In Director of Consumer Affairs Victoria v Alpha Flight Services Pty Ltd [2015] FCAFC 118 (Barker, Katzmann and Beach JJ), the Full Court observed (at [76], certain citations omitted):

[T]here is little to be gained by considering penalties imposed in other cases which turned upon their own facts and, indeed, where “agreed” penalties had been reached… It is difficult to see what can be gained from reviewing or considering the quantum of “agreed penalties” in cases such as Australian Competition and Consumer Commission v Cotton On Kids Pty Ltd [2012] FCA 1428 and Australian Competition and Consumer Commission v Smash Enterprises Pty Ltd [2011] FCA 375…

89    In Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243; [2018] FCAFC 73 (Allsop CJ, Middleton and Robertson JJ) at [237], the Full Court observed (citations omitted):

[T]here is little utility in reference to other cases decided at a different time, in different circumstances and with different facts. In this latter connection, Yazaki referred to a number of cases said to give some guidance as to the appropriate penalty to impose… These cases all involved an “agreed penalty” submitted by the parties and involved different circumstances and facts. It is not necessary to give any particular attention to any of the cases referred to by Yazaki for the purposes of this appeal.

90    In Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) (2018) 260 FCR 68; [2018] FCAFC 53 (Allsop CJ, Davies and Wigney JJ), the Court observed at [69] that there is little utility in referring to other cases with different facts, and that “One does not work back or forward from other more or less serious cases”. It was, however, observed that “Comparables may give some broad guidance”. The Full Court also noted at [70] that referring to other decisions does not involve the consideration of “parity”, and that this is inapposite use of criminal sentencing conceptions apt for co-offenders.

91    In Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513; [2007] FCAFC 146 (Moore, Dowsett and Greenwood JJ) at [67], after referring to a large number of previous penalty decisions cited by the ACCC, the Full Court observed that:

Having considered all of these authorities, the Court is confirmed in the view that there is little to be gained in undertaking in these reasons a detailed comparative analysis of the conduct of each corporation in the identified cases, the extent to which particular officers of those corporations engaged in the contravening conduct or the scale and dimension of the conduct. The constellation of circumstances, essential character of the conduct and the factors to be weighed by the Court are inevitably sufficiently different in each case that previous determinations ultimately provide little utility in precisely informing the appropriate pecuniary penalty to be imposed in any particular contravention.

92    However, the Full Court went on in the next paragraph to refer to the possibility that previous determinations in relation to a particular type of contravention may provide “a high level broad range” within which an appropriate penalty may be imposed.

93    Even the notion of a “high level broad range” may need to be treated with some caution, in light of more recent High Court authority (e.g. Pattinson) which emphasises the consequences of the singular objective of deterrence. That singular objective may, in a particular case, limit the role of the seriousness of the particular conduct. For example, the history of prior contraventions might be more influential than the severity of the instance of conduct, or the circumstances of the contravenor might be more significant than the circumstances of the contravention: Pattinson at [59], [60]. The fixing of a penalty by reference to some “high level broad range” referable to particular types of conduct has at least the potential to impermissibly distract attention from the correct analysis.

94    In McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29 (North, McKerracher and Jagot JJ), the Full Court observed, at [23]-[24]:

23    The appellants’ reliance on the penalties imposed in other cases is also misconceived. In Hili v R; Jones v R (2010) 85 ALJR 195 [(2010) 242 CLR 520] (Hili) the High Court (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) said:

[48]    Consistency is not demonstrated by, and does not require, numerical equivalence. […]

[49]    The consistency that is sought is consistency in the application of the relevant legal principles.

24    While this observation concerned federal offences, the underlying principle emerges from the nature of the sentencing discretion. As observed in Hudson v R [2010] VSCA 332 [(2010) 30 VR 610] (Hudson) in a joint judgment of the Victorian Court of Appeal (Ashley, Redlich and Harper JJA):

[29]    “Like” cases can only, at best, provide a general guide or impression as to the appropriate range of sentences.

[…]

[31]    A detailed examination of “like” cases to implicitly suggest that a particular sentence is the correct one or that the sentence should fall within a very narrow band, is not permissible.

95    Some of these authorities express particular reservations about the use of previous agreed penalties as a comparable. It is appropriate that there be such reservations. Previous agreed penalties are even less helpful in the penalty setting exercise. Agreed penalties are the product of a process of negotiation, where unidentified and unknowable factors may have contributed to the outcome. Although the penalty has to be approved by the Court, that exercise is a different exercise involving different criteria from the process of the Court itself determining an appropriate penalty.

96    In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285; [1996] FCA 1134 (NW Frozen Foods), Branson and Sackville JJ observed, at pp 290-291 (Carr J agreeing at p 299) that given the public interest in promoting the negotiated resolution of civil penalty proceedings, and that the fixing of the quantum of a penalty is not an exact science, the task of a court in approving an agreed penalty is not necessarily to ask itself whether it would independently have come to the precise quantum proposed by the parties. At p 291, their Honours explained that there is an important public policy involved, being that when corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts and the ACCC to deal with other matters. That would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. Their Honours observed that:

A proper figure is one within the permissible range. A court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.

97    The approach in NW Frozen Foods was endorsed by the Full Court in Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] ATPR ¶41-993; [2004] FCAFC 72 (Mobil Oil), and more recently by the High Court in DFWBII. In DFWBII, the High Court considered criticisms of the approach in NW Frozen Foods and Mobil Oil and rejected those criticisms.

98    A previous agreed penalty therefore has a limited role as a guardrail or comparable for a subsequent penalty-setting exercise, even as part of indicating a “high-level broad range” of appropriate penalties. Certainly, any attempt to compare and contrast the particular circumstances of the individual cases to see whether the agreed penalty supports a particular level of penalty in a contested hearing is likely to be an exercise in futility, and to risk the penalty-setting process miscarrying.

99    That does not mean that it is necessarily an error to refer to prior decisions. It depends on the use that is made of those decisions.

170    In the present case, the parties engaged in just such an exercise of comparing and contrasting the particular circumstances of the agreed penalty decision in Crown. That is not the correct approach.

171    AUSTRAC considers the following to be relevant to the assessment of a final penalty:

(a)    The overview of the nature and extent of the contraventions and the circumstances in which the contraventions took place. This it considers to be a mandatory consideration pursuant to ss 175(3)(a) and 175(3)(c) of the AML/CTF Act.

(b)    The nature and extent of the harm suffered (AML/CTF Act s 175(3)(b)).

(c)    The previous findings against Star (AML/CTF Act s 175(3)(d)–(e)).

(d)    Other penalty factors which are further broken down into:

(i)    Star’s profit or benefit from the contravening conduct;

(ii)    the board and senior management’s involvement and corporate culture;

(iii)    the deliberateness of Star’s conduct;

(iv)    Star’s cooperation, contrition and remediation; and

(v)    general and specific deterrence.

172    In addition, the financial position of Star is considered. This was a disputed fact between the parties.

173    These factors will be considered, as presented by AUSTRAC, in the sections that follow. With reference to the principles above, I note my discretion as to the weighting that I attribute to each.

7.    THE NATURE AND EXTENT OF THE CONTRAVENTIONS AND THE CIRCUMSTANCES IN WHICH THE CONTRAVENTIONS TOOK PLACE

174    The nature and extent of the contraventions and the circumstances in which the contraventions took place are mandatory considerations pursuant to ss 175(3)(a) and 175(3)(c) of the AML/CTF Act. As AUSTRAC suggests, it is sensible to consider them together. As the relevant matters to be addressed are detailed and lengthy, I have allocated them a separate section of these reasons.

7.1    Overview

175    In its submissions, Star acknowledges that the contraventions were wide-ranging, systemic and serious and that they extended over the Relevant Period. It notes that there were improvements to management of its ML/TF risks over the course of the Relevant Period, but accepts that these were by no means adequate.

176    It is not practicable to set out the details of every admitted contravention for the purpose of fixing a penalty. As noted earlier, the KAD alone is 437 pages. In many cases, there are multiple different ways in which contraventions have occurred per customer. Further, many of the contraventions referred to in the KAD are couched in somewhat general language that does not assist in assessing the degree of seriousness of the conduct: e.g. that Star did not conduct an “appropriate” process, or that Star had an “inadequate” system. Instead, at the hearing AUSTRAC proceeded by identifying particular thematic areas of contravention that reflected what it considered to be examples of the nature of the deficiencies and which permitted some meaningful assessment of the seriousness of the conduct. That course is appropriate, and it is one I adopt in these reasons.

177    In that regard, AUSTRAC focussed its submissions on: designated services; overseas remittance channels; High Risk Customers; Channel Customers; Excluded Customers; junkets and Star’s response to the KPMG Report; and the Bergin and other inquiries. Most of what is set out in this section is drawn from the KAD. Before dealing with the detail of these matters, there is one general issue that requires comment.

7.2    The general approach to the contraventions of s 81

178    There is something of a difficulty in the way in which AUSTRAC presents its case in relation to the asserted contraventions of s 81 of the AML/CTF Act. AUSTRAC relies on three different forms of contravention of s 81:

(a)    contraventions of s 81 because Part A of Star’s Joint AML/CTF Program did not have the purpose specified in s 85(2)(a);

(b)    contraventions of s 81 because Part A of Star’s Joint AML/CTF Program did not comply with the requirements for Part A specified in the AML/CTF Rules, as required by s 85(2)(c); and

(c)    contraventions of s 81 because Part B of Star’s Joint AML/CTF Program did not comply with the requirements for Part B specified in the AML/CTF Rules, as required by s 85(3)(b).

179    The focus of AUSTRAC’s submissions is on subparagraph (a) above. That includes detailed submissions on the proper construction of s 85(2)(a), and why Star’s conduct fell within s 81 when read with s 85(2)(a). That has been dealt with earlier in these reasons. I have concluded that there is no contravention by reason of (a).

180    Both (b) and (c) above require a conclusion that Star’s Joint AML/CTF Program did not comply with the requirements of the AML/CTF Rules. However, AUSTRAC did not address me in any detailed or consistent manner in either written or oral submissions as to the relevant AML/CTF Rules. It did not identify with precision the relevant AML/CTF Rules or subrules that applied to each subset of contravening conduct, address the proper construction of the relevant AML/CTF Rules, or explain why Star’s Joint AML/CTF Program did not comply with the relevant AML/CTF Rules. To the extent that AUSTRAC purported to undertake this exercise, its submissions often merely cross-referred to the KAD.

181    This is a lacuna in AUSTRAC’s case. The Court is not a rubber stamp. In order to impose a penalty or to make any declarations reflecting any contraventions of s 81 by virtue of s 85(2)(c) or s 85(3)(b), the Court needs to be positively satisfied that the conduct in question amounts to a contravention, and that Parts A and B of Star’s Joint AML/CTF Program breached the requirements of the AML/CTF Rules (and if so, why). An admission by Star that it has contravened the AML/CTF Act in a relevant respect is not sufficient for this purpose.

182    It is not appropriate for a regulator to leave the Court to identify for itself relevant AML/CTF Rules, seek to construe the AML/CTF Rules, and then seek to match admitted or suggested facts against the requirements of the AML/CTF Rules. Yet that is what AUSTRAC has done. Given the importance of establishing these matters and the failure to address them, one possible conclusion is that AUSTRAC has simply failed to demonstrate that there have been any contraventions of s 81. That would significantly reduce the applicable penalty and the scope of the declarations.

183    With some hesitation, I have concluded that it is appropriate to seek to discern and apply the relevant AML/CTF Rules. It is important to record, however, that this is an unsatisfactory position for the Court.

184    As a result of this gap in AUSTRAC’s case, its submissions were at times confusing and difficult to apply. AUSTRAC commenced its discussion of the nature and extent of the contraventions and the circumstances in which they took place by stating, in paragraph [162] of its written submissions, that:

Part B, above, addresses the nature of the contraventions in respect of the Joint Part A Program and, specifically, the Joint Part A Program’s risk assessment methodology failures, Star’s failures to align the Joint Part A Program to the risks it reasonably faced, Star’s failures to implement appropriate controls and Star’s oversight failures.

185    However, that submission is incorrect, in the sense that Part B did not address the AML/CTF Rules, or the contraventions of s 81 when read with s 85(2)(c) in respect of the Joint Part A Program. It therefore did not address the available contraventions in respect of the Joint Part A Program.

186    For its part, Star made some limited submissions in [46]–[48] of its written submissions about why some aspects of its Part A Program did not meet the requirements of certain identified AML/CTF Rules, without expanding on the rules or addressing why they are engaged by the conduct in question. In paragraph [49] of its written submissions, it identifies some more general failures with its Part A Program, only one of which is tied to any identified AML/CTF Rule. I observe that it is not Star’s primary role to lay out the case against itself.

187    Both parties cross-refer to the KAD. As noted above, that is not a substitute for making an appropriate submission to the Court. To a limited extent, the KAD provides some identification of the basis on which relevant conduct is said to contravene the AML/CTF Rules and thus the AML/CTF Act. However, although the KAD sometimes identifies the relevant AML/CTF Rule that is said to be contravened, in many cases it does not. In other cases, the relevant AML/CTF Rule could only be located by navigating through nested cross-references which spanned several documents.

188    For example, [434]–[438] of the KAD (cited at [49(b)] of Star’s written submissions in chief) contains an admission that the automatic ranking of customers as low risk by default understated the level of ML/TF risk. These paragraphs do not directly identify the rule said to be contravened by this conduct. The relevant rule can only be found by either:

(a)    returning to the KAD at [399] which summarises the contraventions in relation to this conduct, following the reference to SOC [76] and then following the reference in SOC [76] to SOC [93]–[193]. Only at SOC [93]–[95] are the specific AML/CTF Rules particularised, and they are done so at an extremely general level, with no subrules being identified; or

(b)    following the reference in KAD [435] to SOC [116], then following the reference in this paragraph to SOC [88] and SOC [139]–[143]. Only there are specific rules particularised, and again at a general level. Different AML/CTF Rules are also identified in relation to this conduct in the Second Agreed Background Facts document, which is also cited in these paragraphs of the KAD. Again, these are expressed at a high level of generality.

189    This is the exercise the Court had to undertake to identify the relevant AML/CTF Rule in relation to just one subset of Star’s conduct. I note further that the submissions and KAD contain minimal discussion of these AML/CTF Rules in the sense that there are some summaries, but these do not rise to the level of analysis. The submissions and KAD also do not explain how this conduct contravened the AML/CTF Rules other than to say, at a high level, that the Joint AML/CTF Program was ineffective and unsatisfactory.

190    The scale of this issue is evident from the fact that the KAD identifies 19 AML/CTF Rules that are said to be relevant to Part A of the Joint AML/CTF Program, and a further 12 AML/CTF Rules that are said to be relevant to Part B. The Court was not addressed on any of these AML/CTF Rules. In some cases, the KAD identifies the relevant rule that is said to be engaged by particular conduct that is admitted. In other cases, it does not. The KAD summarises the relevant rules in paragraphs [270] and [272].

191    In section F.1.2 of the KAD, there is a summary of the “Part A Failures”. It relevantly provides (emphasis and errors in original):

397.    [SOC 74(B)] From 30 November 2016, the Joint Part A Program did not meet the requirements of section 85(2)(c) of the AML/CTF Act and Chapters 9 and 15 of the AML/CTF Rules because the Joint Part A Program did not comply with the requirements of the AML/CTF Rules with respect to the matters set out at paragraphs 398-402 below.

398    [SOC 75] The Joint Part A Program did not include an appropriate risk methodology that was capable of appropriately identifying and assessing the ML/TF risks of designated services provided by Star Sydney and Star Queensland for the reasons set out at Part F.2 below.

399    [SOC 76] The Joint Part A Program was not aligned to the ML/TF risks reasonably faced by Star Sydney and Star Queensland with respect to the provision of designated services for the reasons set out at Part F.3 below.

400    [new] The Joint Part A Program’s deficiencies with respect to establishing and maintaining an appropriate approval and oversight framework that was capable by design of identifying, mitigating and managing the ML/TF risks reasonably faced by Star Sydney and Star Queensland and of meeting the requirements of the AML/CTF Rules are set out at Part F.4 below.61

401    [SOC 78] For the reasons set out at Parts F.5 and F.6 below, the Joint Part A Programs did not include appropriate risk-based systems and controls that were capable by design of identifying, mitigating and managing the ML/TF risks reasonably faced by Star Sydney and Star Queensland with respect to:

(a)    [SOC 78(a)] Gaming accounts, for the reasons set out below at Part F.5.3, including with respect to:

(i)    [SOC 78(a)(i)] FMAs SKAs;

(ii)    [SOC 78(b)(ii)] CWAs;

(b)    [SOC 78(b)] Remittance services, including with respect to high risk international remittance channels, for the reasons set out below at Part F.5.4;

(c)    [SOC 78(d)] The exchange of money for casino value instruments such as chips and tickets (and vice-versa), for the reasons set out below at Part F.5.6;

(d)    [SOC 78(e)] Table games and electronic gaming machines, for the reasons set out below at below at Part F.5.7;

(e)    [SOC 78(f)] Foreign currency exchange, for the reasons set out below at paragraphs below at Part F.5.8;

(f)    [SOC 78(g)] Designated services provided in foreign currency, for the reasons set out below at paragraphs below at Part F.5.8;

(g)    [SOC 78(h)] Safe deposit boxes, for the reasons set out below at Part F.5.9;

(h)    [SOC 78(i)] Designated services provided in cash, for the reasons set out below at Part F.5.10;

(i)    [SOC 78(j)] Designated services provided through junket and rebate channels, for the reasons set out below at Part F.6.

402    [SOC 65] From 30 November 2016, the Star Sydney and Star Queensland Joint Part A Programs did not meet the requirements of section 85(2)(c) of the AML/CTF Act and Chapters 9 and 15 of the AML/CTF Rules because the Joint Part A Programs did not:

(a)    [SOC 65(b)] include a transaction monitoring program that complied with rules 9.1.3, 9.1.4, and 15.4 to 15.7 of the AML/CTF Rules, for the reasons set out below at Part F.7;

(b)     [SOC 65(c)] include an enhanced customer due diligence program that complied with rules 1.2.1, 9.1.3, 9.1.4 and 15.8 to 15.11 of the AML/CTF Rules, for the reasons set out below at Part F.8; and

(c)    [SOC 65(d)] include systems and controls designed to ensure Star Sydney and Star Queensland complied with the reporting requirements under Part 3 of the AML/CTF Act in compliance with rule 9.9.1(2) of the AML/CTF Rules, for the reasons set out below at Part F.9.

192    However, this structure does not supply all of the relevant information for present purposes. For example, although this approach starts by cross-referring to section F.2, that section does not explicitly identify any relevant AML/CTF Rule. Nor does section F.3. The KAD is therefore an insufficient guide as to how AUSTRAC puts its case under s 85(2)(c). To a considerable extent, the Court is therefore left unassisted.

193    Of the rules identified in the KAD, the AML/CTF Rules set out below appear to be most relevant to the asserted deficiencies of Part A of Star’s Joint AML/CTF Program. The relevant AML/CTF Rules are as follows:

9.1.3    Some of the requirements specified in these Rules may be complied with by putting in place appropriate risk-based systems and controls. In determining and putting in place appropriate risk-based systems and controls, Part A must have regard to the following factors in relation to each reporting entity in the designated business group:

(1)    the nature, size and complexity of business [sic]; and

(2)    the type of ML/TF risk that might be reasonably faced.

9.1.4     For the purposes of these Rules, in identifying the ML/TF risk, Part A must take account of the risk posed by the following factors in relation to each reporting entity in the designated business group:

(1)     the customer types, including any politically exposed persons;

(2)     the types of designated services provided;

(3)     the methods by which designated services are delivered; and

(4)     the foreign jurisdictions dealt with.

9.1.5     Part A must be designed to enable the group to:

(1)    understand the nature and purpose of the business relationship with its customer types, including, as appropriate, the collection of information relevant to that understanding; and

(2)     understand the control structure of non-individual customers;

(3)     identify significant changes in ML/TF risk for the purposes of the group’s Part A and Part B programs, including:

(a)    risks identified by consideration of the factors in paragraph 9.1.4; and

(b)    risks arising from changes in the nature of the business relationship, control structure or beneficial ownership of its customers; and

(4)    such changes [sic] in ML/TF risk to be recognised for the purposes of the requirements of the group’s Part A and Part B programs; and

(5)     identify, mitigate and manage any ML/TF risk arising from:

(a)    all new designated services prior to introducing them to the market;

(b)     all new methods of designated service delivery prior to adopting them;

(c)     all new or developing technologies used for the provision of a designated service prior to adopting them; and

(d)    changes arising in the nature of the business relationship, control structure or beneficial ownership of its customers.

9.4.1    Except where paragraph 9.4.2 applies, the Part A program must be approved by the governing board and senior management of each reporting entity in the designated business group. Part A must also be subject to the ongoing oversight of each reporting entity’s board and senior management. Where the reporting entity does not have a board, Part A must be approved and overseen by its chief executive officer or equivalent.

9.4.2    Where each member of a designated business group is related to the other members, the Part A program may be approved by and subject to the ongoing oversight of the governing board and senior management of the main holding company of the group.

9.9.1    Part A must include:

(1)    the obligations that apply to each of the reporting entities under sections 41, 43, 45 and 47 of the AML/CTF Act (reporting obligations); and

(2)    appropriate systems and controls of each of the reporting entities designed to ensure compliance with the reporting obligations of the reporting entity; and

…

15.2    A reporting entity must include in Part A of its AML/CTF program appropriate risk-based systems and controls to enable a reporting entity to determine in what circumstances further KYC information or beneficial owner information should be collected or verified in respect of customers or beneficial owners of customers to enable the review and update of KYC information and beneficial owner information for ongoing customer due diligence purposes.

15.3    A reporting entity must undertake reasonable measures to keep, update and review the documents, data or information collected under the applicable customer identification procedure (particularly in relation to high risk customers) and the beneficial owner identification requirements specified in Chapter 4 of these Rules.

15.4    A reporting entity must include a transaction monitoring program in Part A of its AML/CTF program.

15.5    The transaction monitoring program must include appropriate risk-based systems and controls to monitor the transactions of customers.

15.6     The transaction monitoring program must have the purpose of identifying, having regard to ML/TF risk, any transaction that appears to be suspicious within the terms of section 41 of the AML/CTF Act.

15.7     The transaction monitoring program should have regard to complex, unusual large transactions and unusual patterns of transactions, which have no apparent economic or visible lawful purpose.

15.8     A reporting entity must include an enhanced customer due diligence program in Part A of its AML/CTF program.

15.9     Subject to paragraph 4.4.18, the reporting entity must apply the enhanced customer due diligence program when:

(1)    it determines under its risk-based systems and controls that the ML/TF risk is high; or

(2)    a designated service is being provided to a customer who is or who has a beneficial owner who is, a foreign politically exposed person; or

(3)    a suspicion has arisen for the purposes of section 41 of the AML/CTF Act; or

(4)    the reporting entity is entering into or proposing to enter into a transaction and a party to the transaction is physically present in, or is a corporation incorporated in, a prescribed foreign country.

15.10     The enhanced customer due diligence program must include appropriate risk-based systems and controls so that, in cases where one or more of the circumstances in paragraph 15.9 arises, a reporting entity must undertake measures appropriate to those circumstances, including a range of the measures in subparagraphs 15.10(1) to (7):

(1)    seek information from the customer or from third party sources in order to undertake one or more of the following as specified in subparagraphs 15.10(1)(a) – (d):

(a)    clarify or update KYC information already collected from the customer;

(b)    subject to paragraph 4.4.18, clarify or update beneficial owner information already collected from the customer;

(c)    subject to paragraph 4.4.18, obtain any further KYC information or beneficial owner information, including, where appropriate, taking reasonable measures to identify:

(i)    the source of the customer’s and each beneficial owner’s wealth; and

(ii)    the source of the customer’s and each beneficial owner’s funds;

(d)    clarify the nature of the customer’s ongoing business with the reporting entity;

(2)    undertake more detailed analysis of the customer’s KYC information and, subject to paragraph 4.4.18, beneficial owner information, including, where appropriate, taking reasonable measures to identify:

(a)    the source of the customer’s and each beneficial owner’s wealth; and

(b)    the source of the customer’s and each beneficial owner’s funds;

(3)    verify or re-verify KYC information in accordance with the customer identification program;

(4)    subject to paragraph 4.4.18, verify or re-verify beneficial owner information in accordance with the beneficial owner identification requirements specified in Chapter 4 of these Rules;

(5)    undertake more detailed analysis and monitoring of the customer’s transactions – both past and future, including, but not limited to:

(a)    the purpose, reasons for, or nature of specific transactions; or

(b)    the expected nature and level of transaction behaviour, including future transactions;

(6)     seek senior management approval for:

(a)    continuing a business relationship with a customer; and

(b)    whether a designated service should continue to be provided to the customer;

(7)    consider whether a transaction or particular transactions should be processed.

15.11    If the circumstances in subparagraph 15.9(2) arise, in addition to any other appropriate measures in paragraph 15.10, a reporting entity must undertake the measures in subparagraphs 15.10(2) and 15.10(6).

194    Some of these rules appear to be very broad in their operation, in the sense that they give AUSTRAC a broad basis for contending that inadequacies in Star’s Part A Program lead to a program that is not in accordance with the rules. For example, in general terms, the Part A Program must:

(a)    in determining and putting in place appropriate risk-based systems and controls, have regard to the nature, size and complexity of the business and the type of ML/TF risk that might reasonably be faced: r 9.1.3;

(b)    take account of the risk posed by the customer types, the types of designated services provided, and the methods by which designated services are delivered: r 9.1.4;

(c)    be designed to enable the group to identify, mitigate and manage any ML/TF risk arising from all new designated services prior to introducing them to the market, all new methods of designated service delivery prior to adopting them and all new or developing technologies used for the provision of a designated service prior to adopting them: r 9.1.5;

(d)    be approved by and subject to the ongoing oversight of the governing board and senior management of SEG: r 9.4.2;

(e)    have a transaction monitoring program that includes appropriate risk-based systems and controls to monitor the transactions of customers: r 15.5; and

(f)    have, in relation to its enhanced customer due diligence program, appropriate risk-based systems and controls so that, in cases where one or more of the circumstances in paragraph 15.9 arises, a reporting entity must undertake measures appropriate to those circumstances, including the range of the measures in subparagraphs 15.10(1) to (7): r 15.10.

195    I am satisfied that these obligations are sufficiently broad to cover the specific matters AUSTRAC has emphasised, which are analysed in more detail in this section.

196    However, it is also appropriate to recognise that AUSTRAC takes a broad approach to what is required by certain of the AML/CTF Rules. For example, section F.4 of the KAD deals with the alleged non-compliance of oversight by SEG’s board (Board) and senior management of the Joint AML/CTF Program. Paragraphs [468]–[470] of the KAD provide as follows:

468.    In order for a reporting entity to comply with its oversight obligations pursuant to section 85(2)(c) and rules 9.4.1 and 9.4.2 of the AML/CTF Rules, a Joint Part A program of a reporting entity the nature, size and complexity of Star Sydney and Star Queensland requires either the Part A program to implement or the reporting entity to have established oversight arrangements and processes specific to ML/TF risk and compliance management.

469    The oversight arrangements and processes referred to above required the inclusion of at least the following features:

(a)    the capacity for the Board to set, monitor and vary the reporting entity’s risk appetite specific to ML/TF issues;

(b)    sufficiently detailed qualitative and quantitative metrics for ML/TF risk to enable the Board and senior management to consistently monitor Star’s performance against its appetite for that risk;

(c)    appropriate guidance, to management, in relation to:

(i)    the ML/TF risks that could be accepted and the controls required to appropriately manage those risks;

(ii)    when to escalate ML/TF risks that may potentially be out of ML/TF risk appetite to the Board or senior management; and

(iii)    how those ML/TF risks should be reported to the Board or senior management.

470     For the Board and senior management of a reporting entity the nature, size and complexity of Star Sydney and Star Queensland to have accurate and complete information on which to exercise their oversight of a Part A program, the oversight processes and arrangements must be supported by appropriate information management systems, appropriate data management, adequate resourcing of AML functions, well defined reporting lines, adequate guidance and criteria for escalation of ML/TF issues and a framework for appropriate assurance and audit functions for AML/CTF matters.

197    The Court has not been addressed on these matters. It has not been explained how all of these matters are obligations arising out of the general language of rr 9.4.1 and 9.4.2 of the AML/CTF Rules. The same could be said for many other paragraphs in the KAD. It is therefore important to observe that these reasons do not give judicial imprimatur to everything set out in the KAD (or in other admissions by Star) or in the written submissions.

198    The matters to which the Court has had regard in considering the nature and seriousness of the contravening conduct are the matters specifically identified in this section.

7.3    Joint Part A Program: general deficiencies

199    In its written submissions, Star admits that, during the Relevant Period, Part A of the Program did not meet the requirements of s 85(2)(c) of the AML/CTF Act and Chs 9 and 15 of the AML/CTF Rules in the respects outlined immediately below. The following summary of the admitted deficiencies is drawn from Star’s written submissions, was not disputed by AUSTRAC, and substantially reflects the admissions recorded in the KAD.

200    Transaction monitoring: The transaction monitoring program did not comply with rr 9.1.3, 9.1.4, and 15.4 to 15.7 of the AML/CTF Rules. Star’s transaction monitoring program was not aligned to an appropriate ML/TF risk assessment; did not include appropriate automated transaction monitoring systems and controls, particularly prior to April 2021 when transaction monitoring processes were predominantly manual, thereby limiting Star’s ability to monitor transactions or behaviours across complex transaction chains; was inadequately resourced; was not adequately supported by appropriate information systems; was not capable of appropriately monitoring financial services or gaming account transactions; did not include appropriate risk-based systems and controls to monitor transactions facilitated through junkets; did not include appropriate risk-based systems and controls to monitor transactions through the Hotel Card channel; and did not include appropriate assurance processes.

201    Enhanced Customer Due Diligence (ECDD): The ECDD program did not comply with rr 1.2.1, 9.1.3, 9.1.4 and 15.8 to 15.11 of the AML/CTF Rules. While Star’s ECDD program required that ECDD be completed in the circumstances specified in r 15.9 of the AML/CTF Rules, it did not include appropriate systems, controls and procedures to ensure that in each of these circumstances a customer was escalated for ECDD; nor did it have in place appropriate systems and controls to determine what ECDD measures would be undertaken when ECDD was triggered. Further, the systems and controls to obtain, analyse or record source of wealth or source of funds information were not appropriately risk-based for the purpose of carrying out ECDD. The ECDD program also did not have in place appropriate risk-based systems and controls to seek and obtain senior management approval to determine whether Star ought to have a continuing business relationship with particular customers. Finally, Star’s ECDD program was not supported by appropriate information management and record-keeping management systems when necessary.

202    Reporting obligations: Contrary to the requirements of r 9.9.1(2) of the AML/CTF Rules, Star failed to include appropriate systems and controls in Part A of the Program to ensure compliance with the obligations to report under ss 41, 43 and 45 of the AML/CTF Act. As a result, AUSTRAC and law enforcement agencies were denied financial intelligence.

203    In addition to the above contraventions of s 85(2)(c), Star has admitted that Part A of the Program was deficient in the following respects:

(a)    Part A did not include an appropriate risk methodology capable of identifying and assessing the ML/TF risks associated with the designated services provided by Star Sydney and Star Queensland, including risks arising from customer types, channels, jurisdictions and complex transaction chains.

(b)    Part A was not aligned to the ML/TF risks reasonably faced by Star Sydney and Star Queensland because the identified risks were not adequately reflected in the controls and procedures adopted by the program.

(c)    While Part A of the Program (and its various iterations throughout the Relevant Period) was approved by the SEG Board or the SEG Board Risk and Compliance Committee, senior management did not also approve it, in contravention of rr 9.4.1 and 9.4.2 of the AML/CTF Rules.

(d)    Part A of the Program did not include appropriate risk-based systems and controls that were capable by design of identifying, mitigating and managing the ML/TF risks reasonably faced by Star Sydney and Star Queensland with respect to gaming accounts (FMAs, SKAs and CWAs), remittance services, the exchange of money for CVIs such as chips and tickets (and vice-versa), table games and EGMs, foreign currency exchange, designated services provided in foreign currency, safe deposit boxes, designated services provided in cash and designated services provided through junket and rebate channels.

204    Star also referred in its written submissions to further admissions of contraventions of rr 9.4.1 and 9.4.2 of the AML/CTF Rules. Star observes that while Part A of the Program included a governance framework, that framework did not include sufficiently detailed qualitative and quantitative metrics for ML/TF risks to enable the SEG Board and senior management to consistently monitor Star’s performance against its appetite for that risk, nor did it provide appropriate guidance to management in relation to Star’s ML/TF risk appetite and how ML/TF risks should be reported to the SEG Board and senior management. Nor was that governance framework adequately supported by appropriate information management systems, appropriate data management, adequate resourcing of AML/CTF functions, well-defined reporting lines, adequate guidance and criteria for escalation of ML/TF issues and a framework for appropriate assurance and audit functions for AML/CTF matters. However, as noted above, I have not been addressed about the proper construction and effect of rr 9.4.1 and 9.4.2 of the AML/CTF Rules, and so I do not take these matters into account.

7.4    Designated services

205    AUSTRAC submits that Star did not undertake appropriate risk assessment or include appropriate risk-based controls in respect of its provision of designated services, failing to include appropriate controls to ensure it complied with its reporting obligations. In particular, it draws attention to Star’s patron and gaming accounts, CVIs, table games and EGMs, foreign currency exchange, safe deposit boxes and cash and reporting obligation failures.

206    Star and EEIS maintained 52 Star Patron Accounts which Star customers could use to transfer funds into the customer’s gaming accounts, for other expenditure at Star or for repayment of CCFs. Face-to-face transfers were not required through the Star Patron Accounts. Until 24 December 2020, money could also be deposited through ATMs and cash deposits into these accounts, limiting visibility as to the depositor. Until 5 November 2021, third parties were able to deposit funds into these accounts without signed authority forms. What this meant is that a customer could deposit into the Star Patron Accounts cash and foreign currency, with no daily or transactional limits, which could then be credited to a customer’s FMA and made available to the customer for gaming. Star admits that this provided an avenue for money laundering through smurfing or cuckoo smurfing. Smurfing, otherwise known as structuring, involves the breaking of large transactions into multiple smaller amounts below the reporting threshold limit found in s 43 of the AML/CTF Act so as to escape detection. Cuckoo smurfing involves the hijacking of a legitimate cross-border transaction by replacing the legitimate funds with funds to be laundered, with a third-party agent depositing cash into an Australian account on behalf of a money laundering syndicate controller and the international transfer being offset without physical movement of funds to Australia.

207    In addition, at all times third parties were permitted to deposit funds into customers’ gaming accounts (FMAs or SKAs). Once moneys were deposited into an FMA or SKA, the customer could instruct Star to transfer the funds to either their own or another customer’s Star gaming account or a bank account, including a bank account of another casino. This meant that customers had the ability to “park” funds in FMAs or SKAs, which could put distance between the acts that generated the illicit funds and the ultimate recipients of those funds, making this harder to trace, in effect hiding funds from law enforcement.

208    Another of Star’s designated services, CVIs, enabled the exchange of money for chips and tickets (and vice-versa). CVIs could be purchased with cash, issued with large values and with no limits, were highly transferable, could be cashed out with minimal or no play, could be redeemed for tickets in non-face-to-face transactions and where redemption could not always be attributed to winnings. They could also be used to layer funds, making it difficult to understand the purpose of transactions, the beneficial owner of the funds or the ultimate beneficiary of value moved. Star accepts that it did not conduct an appropriate risk assessment or include appropriate controls to identify, mitigate or manage these risks, which could have included daily transaction limits or restrictions on non-face-to-face redemption channels for these services.

209    Star also accepts that at no time did it identify and assess the risks relevant to different table games and EGMs in accordance with an appropriate ML/TF methodology, or include appropriate systems and controls to identify, mitigate and manage the risks that they posed. Money was able to be moved through table games and EGMs through buying in and cashing out using cash, chips and other CVIs. Cash could also be inserted into EGMs and ETGs and tickets collected with minimal or no play. ETGs and EGMs are not face-to-face and therefore were overseen less by staff at Star.

210    From August 2017, up to $7,500 (prior to August 2017 up to $10,000) could be inserted into ETGs and EGMs. At all times during the Relevant Period, unrestricted machines at Star Sydney and Star Queensland could accept cash of $10,000 or more. EGMs and ETGs also automatically issued tickets (for redemption), including in amounts of up to $10,000 for high value machines and $100,000 for unrestricted machines, without requiring oversight from a gaming attendant. AUSTRAC notes as an example that even where EGM play was carded, there were inadequate controls in place, noting Person 67 was issued 30 gaming cards in 15 days by Star Sydney, with Star Sydney’s records showing that the customer appeared to have been issued multiple devices at the same time, with it being unclear as to why he was issued with 30 cards.

211    Star accepts, and I am similarly satisfied, that its Joint Part A Program should have had appropriate preventative controls (in the form of transaction or daily limits with respect to buy-ins and cash-outs) and appropriate source of funds procedures, and should have relied on more than manual observations by staff.

212    Further risks not identified and assessed by Star related to its provision of designated services through foreign currency exchange, safe deposit boxes and cash. This included the fact that there were no limits on cash transactions at the Cage (daily or transaction-based), no specific approvals were required before large cash transactions could be processed, there were no limits on cash withdrawals on FMAs, SKAs, CCF accounts or cashless wagering accounts and there were no appropriate risk-based controls with respect to large transactions through such accounts. In addition, there were no limits on the amount of cash that could be taken into a private gaming room, notwithstanding that Star Sydney and Star Queensland were aware of suspicious activity involving large amounts of cash in private gaming rooms. Further, safe deposit boxes in private gaming rooms did not impose limits or keep records of cash or chips stored. There were also no systems or controls in place to understand the source of funds being stored in those boxes.

213    During the Relevant Period, Star also was required to include appropriate systems and controls to ensure its compliance with ss 41 (in relation to SMRs), 43 (in relation to TTRs) and 45 (in relation to IFTIs) of the AML/CTF Act. Star accepts that its Joint Part A Program did not have adequate assurance processes regarding its reporting obligations, appropriate systems and controls designed to ensure compliance with the obligation to report SMRs under s 41 of the AML/CTF Act and did not have appropriate documented guidance and processes with respect to the reporting of SMRs, TTRs and IFTIs in relation to junkets. The latter of these made it difficult for AUSTRAC and its relevant law enforcement partners to understand the role of different parties to the suspicious activity or the transaction, including what transactions actually took place, the source of funds, who instructed the movement of funds, the recipient of the funds and further details of the transaction.

7.5    Overseas remittance channels

214    AUSTRAC submits that Star disregarded its AML/CTF obligations when establishing and maintaining overseas remittance channels at all levels during the Relevant Period. As at February 2016, Star’s International Rebate Business (IRB) was valued at $900 million, representing 17% of the indicative group value and forecast in FY2016 to be 27% of the group’s gross revenue.

215    Many of these overseas remittance channels were used as a result of China’s increased regulation of, and restrictions on, cross-border fund flows, including for gaming. AUSTRAC asserts that Star’s conduct was a deliberate circumvention of those restrictions. It places particular emphasis on this because AUSTRAC asserts that this conduct amounts to deliberate contraventions of the AML/CTF Act.

216    However, that does not necessarily follow. If Star deliberately circumvents a capital control, but does not even turn its mind to the ML/TF risk of doing so, that is not (without more) a deliberate contravention of the AML/CTF Act. AUSTRAC’s submissions did not appropriately focus on relevant states of mind: i.e. whether Star’s conduct was a deliberate failure to comply with its AML/CTF obligations, wilful blindness, reckless indifference, negligence, or something else.

217    Conduct that deliberately circumvents a capital control might be serious conduct depending on the nature of the conduct and the risk. The seriousness might stem from the fact that it was deliberate in that sense, and might stem from the involvement of senior management or from other factors. But without more, it might not involve a deliberate contravention of the AML/CTF Act. By contrast, if Star recognises that its conduct enhances the risks of money laundering and recognises that its Joint AML/CTF Program does not specify appropriate procedures or steps to deal with the risks thereby created, but proceeds regardless, then such conduct might amount to a deliberate contravention of the AML/CTF Act. To a considerable extent, AUSTRAC’s submissions on this topic addressed the question of whether the conduct to get around capital controls was deliberate, rather than addressing the requisite question of whether any associated contravention of the AML/CTF Act was deliberate. The latter is an important consideration for the Court in the penalty-setting exercise.

218    As it relates to AML/CTF risks, it is AUSTRAC’s submission that by engaging in activity to facilitate that which the Chinese authorities were trying to prevent, Star made it easier to disguise the source of funds, in turn making it more difficult to detect whether money laundering was occurring. I accept that submission at a level of generality. However, it remains necessary to consider the extent to which the relevant contravention was deliberate in the requisite sense. AUSTRAC’s submissions erroneously proceed on the footing that a deliberate act in relation to capital controls is equivalent to a deliberate contravention of the AML/CTF Act.

219    These observations do not mean that the conduct summarised below is not serious misconduct.

7.5.1    Hotel Card channel

220    During the Relevant Period, Star made funds available to its customers for gaming purposes sourced from transactions on debit cards (Hotel Cards) at designated Star hotels (Hotel Card channel). The Hotel Card channel commenced at Star Sydney in 2013 and Star Queensland in January 2017. In an internal email dated 18 February 2013 from Mr Brett Houlding, General Manager Group Finance, it was recognised that Hotel Cards were a “convenient low cost way for [Chinese] residents to get money out of China”.

221    Star recognised that the funds to be used for gaming were to be charged at the hotel reception and then internally transferred to the FMA of the patron for IRB activity.

222    Initially, only cleared funds from transactions through the Hotel Card were to be deposited into a patron’s FMA, to prohibit the provision of credit to patrons for gaming, avoiding the potential operation of s 74(1) of the Casino Control Act 1992 (NSW). However, from February 2014 a “temporary” CCF was established to cover the period between a Hotel Card being swiped and funds clearing in Star’s bank account. Temporary CCFs were used in connection with the majority of Hotel Card channel transactions at Star Sydney until February 2020. Once funds had been credited to a Star customer’s FMA, the patron could apply the funds to purchase a chip purchase voucher for gaming, but could equally withdraw the money in cash or apply the funds to moneys owed under a third party’s CCF. Risks resulting from this included enabling customers to disguise the purpose and nature of transactions on their debit cards. This was exacerbated by Star misrepresenting the purposes of the transactions in circumstances where the issuer of the Hotel Card had prohibited the card’s use for gaming.

223    In the Relevant Period and from no later than 2013, the operating regulations of the issuer of the Hotel Card (based in China) prohibited the use of the card for gaming, specifically, “betting” and “casino gaming chips”. Star described transactions on the Hotel Card channel as “hotel”, rather than “casino” charges. In some instances, “dummy room” numbers were indicated on Hotel Card payment records created by Star, despite the patron not staying at a relevant Star Group hotel.

224    National Australia Bank (NAB), which provided the terminals at which the Hotel Cards could be used at Star’s hotel venues, brought the Hotel Card issuer’s operating regulations to Star’s attention in March 2013 and October 2015, when it queried the high value of certain “hotel” transactions. On or about 5 November 2015, NAB raised the prospect of cancelling the service where the cancellation would be based on “the risk that the service would be used for gambling services as per the figures already provided”. This email was communicated to Ms Martin, Mr White and Mr Power, of whom Ms Martin has been accepted by Star to be senior management for the purposes of the AML/CTF Act.

225    On 27 October 2016, the CEO, Mr Bekier, brought to the attention of the SEG Board that there were “[e]ven more aggressive controls around money movements for Chinese based VIP players”, noting the potential downside of a reduction of between $23 million and $46 million in earnings before interest, taxes, depreciation and amortisation (EBITDA) for that year.

226    In a series of emails between NAB and Star from 2016 until March 2020, NAB raised concerns in attempts to ensure that “no proceeds or deposits for gambling are placed through this terminal”. Star made representations to NAB to the effect that the transactions in question were for “hotel accommodation services”.

227    One such representation, on 19 June 2019, involved Star attaching documents to an email to NAB, which identified a room number, arrival and departure date, stating amounts of $200,000 as being a “transfer to customer’s account”. Whilst these transactions gave the appearance of being for hotel charges, they were in fact transfers to the Star Cage.

228    AUSTRAC submits that on 28 July 2017, Mr Power sent an email to Ms Martin regarding “compliance risks” from the Hotel Card channel. However, it is clear from the email considered as a whole that the “risks” being identified are risks that Star was in breach of its arrangements with NAB for the provision of the service. It is not a reference to ML or TF risks. The email reads:

… the risks associated with [Hotel Card] are well known and a risk assessment and legal advice has been given in this regard. However, earlier in the year an instruction had been given to hotel staff to start issuing “dummy” rooms to International Guests (for example, by issuing them with an uninhabitable room or a dirty room, a room that had not been cleaned, in the knowledge that the guest would not be occupying the room). This instruction was corrected, but it highlights a risk that the use of [Hotel Card] for international guests may well have exceeded the intended scope of this service, which may call into question the arrangement we have in place [with] The Star’s bank (NAB).

(Emphasis added.)

229    The use of the Hotel Card channel continued, as evidenced by an email of 11 September 2018, sent by Mr Hornsby to Mr Huang, Mr Theodore, Mr Bekier, Mr Barton, Mr Whytcross and Mr Hawkins:

We are still received [sic] very strong patronage in the [Hotel Card] service with large amounts of patrons utilising this (222 last month). The volume amounts are consistent totalling in the AUD10-20m per month range, mainly given our daily swipe at 100k x 5 (500k). We have not received any noise from the banks regarding particular transactions for a period of 6 months or more.

We has [sic] been hearing noise regarding China Capital control measures for a long period of time, but the major actions taken thus far has been the closure of all Foreign Casino accounts by the BOC [Bank of China], and some Macau and HK banks refusing to take casino winnings wires from us. On top of that we are noticing many clients from the Nth Regions are having troubles wiring to STAR directly and require the use of alternative methods such as EEIS LOCAL NAB (marker payments only) or the [Customer] contract structure for other payment matters as a last resort.

230    Members of the Board and other officers were kept informed of high-level developments.

231    Communications with NAB escalated and on 3 March 2020, NAB forwarded a warning letter from the issuer of the Hotel Card to SEG requiring detailed supporting documents for the assertion that the charges were for accommodation purposes. This warning letter was forwarded to Mr White, Mr Theodore and Ms Martin, but not tabled before the Board of SEG. On 4 March 2020, Ms Scopel emailed NAB, copying Mr Theodore and Mr White, advising that Star had made the operational decision to cease the Hotel Card channel across the business, with similar communications sent internally. Despite this, Star Sydney continued to use the Hotel Card channel until February 2022 and Star Queensland continued to use this channel until 8 March 2020.

232    In late 2021, the SEG Board was presented with two papers, noting that Star may have breached the Hotel Card issuer’s rules and that NAB may have been misled in respect of the use of the cards.

233    Over $990 million was deposited through the Hotel Card channel at Star Sydney from 2013 to 18 February 2022, with over $493 million deposited on and from 30 November 2016. In addition, $55.4 million was deposited through the Hotel Card channel at the Star Queensland casinos from 1 January 2017 to 8 March 2020. In 2013, Star Sydney designated the ML/TF risk of the Hotel Card channel as “low”, with Star Queensland assessing the ML/TF risk as “moderate to low” in 2015.

234    Star now accepts that Part A of its Program did not include or provide for appropriate risk-based systems and controls that were capable by design of identifying, mitigating and managing the ML/TF risks reasonably faced by Star with respect to the designated services provided on FMAs through the Hotel Card channel, on the grounds that:

(a)    Part A did not require Star to keep central records of transactions resulting from the channel (although transactions were recorded), restrict commingling of funds with other funds and transactional activity at the point it was credited into the customer’s FMA, or conduct monitoring in relation to a customer’s source of funds for Hotel Card transactions; and

(b)    the Hotel Card channel was designed by Star Sydney and Star Queensland so that the purpose of the transactions lacked transparency, and Star Sydney and Star Queensland did not keep a central record of all customers who used the Hotel Card channel, which inhibited the ability to appropriately monitor the ML/TF risks of these transactions.

235    I accept that the conduct in connection with the Hotel Card channel involved contraventions of s 81 and was serious conduct. I also accept that the potential for the Hotel Card channel to be used for ML was apparent and Star ought to have exercised greater controls in light of that risk. However, AUSTRAC has not drawn my attention to any material to suggest that the contraventions were deliberate, in the sense that Star was aware that it was exposing the public and the financial system to unacceptable ML/TF risk and proceeded regardless.

7.5.2    Bank of China (Macau) cash channel

236    During the Relevant Period, many of Star’s international customers wanting to transfer money to Star preferred to do so in cash. There were practical difficulties in doing so. To facilitate such transfers, Star set up the Bank of China (Macau) cash channel.

237    The Bank of China (Macau) cash channel involved Star accepting cash deposits from customers, with cash being directly deposited into Star’s Bank of China (Macau) accounts at a Bank of China (Macau) branch. Once cash was deposited, it could be applied to a customer’s FMA or SKA or a CCF, or to pay off a debt to Star Sydney or Star Queensland, or to any other transaction permitted through their FMA or SKA, including cash withdrawals.

238    When cash was deposited into the Bank of China (Macau) accounts, Star Group Macau did not conduct any source of funds checks on the customer’s cash deposit, nor did it have any policies or procedures that required cash deposits into Star’s Bank of China (Macau) accounts to be made by the customer and not by a third party or an associate of the customer. Likewise, neither Star Sydney nor Star Queensland conducted source of funds checks, or had policies or procedures requiring cash deposits to be made by the customer rather than a third party or associate. Additionally, Star accepts that it did not keep appropriate records of the identity of the person who deposited the cash in relation to the Bank of China (Macau) accounts during the Relevant Period.

239    However, Bank of China (Macau) required Star to provide evidence of source of funds before cash deposits could be accepted. Star took steps to get around those checks to enable the money to flow. Star would provide source of funds letters that purported to provide proof of the source of funds, and employees of the Star Group would accompany the customer to the bank to provide the letter so as to satisfy Bank of China (Macau)’s requirements. However, some of the letters were false in that they would purport to say that the source of customer funds was a withdrawal from a Star casino, when this was not correct. More generally, the letters purported to provide proof of the source of funds when Star did not conduct any source of funds checks at the time that the letters were prepared.

240    Employees of Star Group in Macau therefore created false source of funds documentation to provide to Bank of China (Macau) to facilitate patrons’ cash deposits. Star’s office in Macau, in consultation with Star’s relationship managers at the Bank of China (Macau) branch, developed template letters to meet Bank of China (Macau)’s requirements for source of funds checks for cash deposits not withdrawn from Macau-based casinos or a bank account.

241    An example of this conduct included a letter asserting that cash being deposited by the Star Group employee had been withdrawn from the “Macau branch office safekeeping” despite Star Group never having a Cage or safekeeping facility in Macau.

242    It is not alleged by AUSTRAC that Star senior management was aware of these matters at the time.

243    Star accepts that it did not retain appropriate records of which deposits had been made in cash, or which customers had made cash deposits into Star’s Bank of China (Macau) accounts during the Relevant Period. Given this, it is not possible to say how many of these letters were issued. A report by HWL Ebsworth in 2023 identified 30 draft letters and 16 copies of related templates, all dated between September and November 2017, with this same report identifying that some electronic devices from Star Group’s overseas offices including Macau had been “deliberately wiped”. Draft source of funds letters have been located for Mr Alvin Chau aka Cheok Wa Chau (Mr Chau) (of at least AUD$7.3 million), Customer 25 (of at least HKD$80 million) and Customer 34 (of at least HKD$45 million).

244    In an EEIS Steering Committee report dated 24 January 2018, titled “Historical Cash Repayments”, it was reported that the Bank of China (Macau) accounts in Macau accepted the equivalent of AUD$200.9 million in cash between January and November 2017 as repayment for outstanding balances.

245    The Bank of China (Macau) accounts held by Star Sydney and Star Queensland were closed on 25 January 2018, with the five EEIS Bank of China (Macau) accounts being closed on 27 April 2018.

246    An assessment of the ML/TF risks of accepting cash deposits through the Bank of China (Macau) accounts for and on behalf of customers was not performed by Star.

7.5.3    Kuan Koi channels

247    Mr Kuan Koi was a junket operator and junket player at Star Sydney and Star Queensland. In response to increasing regulatory scrutiny and the impending closure of Star’s Bank of China (Macau) accounts, Star developed a channel using Kuan Koi (Kuan Koi channel) so that it could continue to accept cash and other deposits from offshore customers. Kuan Koi collected money on behalf of customers, including in the form of cash, chips from Macau-based casinos or transfers from Macau-based junket accounts, to be made available to customers at Star Sydney and Star Queensland. This was then extended to third parties, including foreign remitters, offshore junket operators, associated companies and a known associate of Kuan Koi, to collect and remit funds (known as the Modified Kuan Koi channel).

248    From January 2018 to September 2019, at least AUD$140 million was moved through the Kuan Koi channels, of which around AUD$49.5 million was moved prior to 30 June 2018.

249    The Kuan Koi channels agreement was entered into on 15 January 2018 between the Star Group and Kuan Koi, establishing what was referred to as the Liquidity and Credit Management Service (LCMS). This was executed by Mr Barton on behalf of Star Entertainment International Pty Ltd. Pursuant to the LCMS, Kuan Koi was to be compensated with a monthly service fee of HKD$1.35 million for January 2018 and HKD$2.7 million per month thereafter (with an original end date of 30 June 2018). As part of this arrangement, Kuan Koi was obliged to transfer HKD$90 million into his FMA with Star, to fund the transfers to Star customers. This FMA was to be topped up monthly to maintain the HKD$90 million balance.

250    Once the LCMS was executed, Kuan Koi received deposits on behalf of Star Sydney customers in foreign jurisdictions, including cash deposits into accounts he held with casinos and a junket operator in Macau and with Bank of China (Macau), and non-cash deposits, including funds transfers or deposits of chips into accounts Kuan Koi held with Macau casinos. Following a deposit, Star Sydney transferred funds from Kuan Koi’s FMA or SKA at Star Sydney to a customer’s FMA or SKA at Star. Once credited, customers could access the money at the Cage as chips and other CVIs, could withdraw the cash in AUD or foreign currency, could repay a CCF, or could conduct any other transaction permitted through an FMA.

251    The SEG Board was informed of the Kuan Koi channel on 8 February 2018, which was described as an “interim” arrangement to assist overseas patrons sending funds (mainly in cash) to Star casinos, and expected only to be in place until the EEIS/Macau Marketing Subsidiary (discussed at [274] below) initiative became operational, which was expected to occur by 30 June 2018.

252    Prior to entry into the LCMS, Star Group performed a risk assessment for ML/TF with respect to the LCMS on 10 January 2018. The risk assessment considered risks in terms of source of funds, lack of transparency and criminal infiltration. The assessment concluded that the ML/TF risk of the LCMS was low. In relation to source of funds, it was identified that the risk was low because the procedures employed would require identification of the depositor, the beneficial owner and any other third parties involved in the transaction. It was assessed as being more informative, and permitting greater information to be passed to AUSTRAC, than previous arrangements: i.e. it was an improvement. It was also assessed that Star would be able to detect if there was structuring or the use of money mules. It was also concluded that the customers using the facility would be subject to Star’s existing customer due diligence processes, and therefore would be subject to appropriate controls. On the issue of lack of transparency, it was concluded that there would be transparency because the use of one point of deposit (Kuan Koi), the existing KYC procedures for the customers involved, and the record keeping that would be required, meant that it would be clear which money was being transferred and for which customer. Finally, it was concluded that the risk of criminal infiltration was low, again because it was being used for known customers. As a general matter, the assessment emphasised the circumstance that the transactions in question were to be on behalf of known customers and therefore involved a lower risk than other styles of international transfers.

253    In around April 2018, Kuan Koi advised SEG that Bank of China (Macau) had blocked wire transfers to Kuan Koi’s accounts, and issuances of cashier orders and personal cheques, and that banks in Hong Kong were questioning the use of Kuan Koi’s accounts and putting stops on some transfers.

254    In an internal email dated 31 March 2018, Mr Hornsby noted that Star expected customer deposits in April totalling between $50 million and $75 million, with there being no solution presently viable for Star to accept such funds. This was brought to the attention of Mr Bekier via Mr Barton. Mr Barton suggested on 31 March 2018 that they continue to explore other options, with the option of starting to offer a discount to players and junkets that paid directly into their accounts. Mr Bekier approved this saying “Fine with me. Let’s use all avenues”.

255    Notwithstanding the problems that Kuan Koi was experiencing in Macau, Star continued to accept payments from or on behalf of customers that were made using Kuan Koi (including with the assistance of third parties) until September 2019. This was the Modified Kuan Koi channel. The Modified Kuan Koi channel involved third parties, including remitters in foreign jurisdictions, offshore junket operators, and others (such as an associate of Kuan Koi) collecting and remitting funds from international customers into the Star Patron Accounts, as well as funds being made available from Kuan Koi’s FMA and SKA accounts to other customers’ FMAs and SKAs. Notably, the Modified Kuan Koi channel was not the subject of any written agreement, the subject of any legal and risk assessment, or formally approved or disclosed to the Board, before or while it was operating. Kuan Koi received a service fee for transfers through the Modified Kuan Koi channel.

256    Between January 2018 and September 2019, money was transferred through the Kuan Koi channels to the FMAs or SKAs of at least 60 Star Sydney and Star Queensland customers, including a number of high-risk Star Sydney customers.

257    Star did not conduct due diligence on the directors of some Hong Kong and Singaporean companies used for transfers, with the source of funds for the amounts remitted through those companies being unknown. Additionally, some deposits used misleading payment descriptions (e.g. “property investment” to describe a payment of an amount owing to Star).

258    Star accepts that at no time did its Joint Part A Program include appropriate risk-based systems and controls to identify, mitigate and manage the ML/TF risks faced with respect to Kuan Koi or the Modified Kuan Koi channels. It similarly accepts that at no time did it carry out an appropriate risk assessment of the ML/TF risks posed by these channels. AUSTRAC submits, and I accept, that there are clear visibility issues with these channels. Star accepts that the Kuan Koi channels involved higher ML/TF risks because:

(a)    there were no limits on the amount of money, including cash and chips issued by third-party casinos, that a customer could deposit with Kuan Koi;

(b)    deposits could be made by those with known criminal connections;

(c)    deposits by third parties were permitted, including in cash, chips or transfers from other gaming accounts;

(d)    Star had limited visibility over the source of funds of deposits made through Kuan Koi and the customers using the Kuan Koi channels to remit funds had higher ML/TF risks;

(e)    deposits were permitted through non-transparent and high-risk channels, such as through Macau-based casinos, junket operators and remitters;

(f)    Star Sydney had no visibility over the source of funds sourced from Macau-based casinos or junket operator accounts; and

(g)    the Kuan Koi channels were intended to mask that customers were transferring funds to an Australian casino and could be used to facilitate currency flight.

7.5.4    Additional overseas remitters

259    Additional overseas-based remitters were available to Star customers throughout the Relevant Period. Following the closure of Star’s Bank of China (Macau) accounts in early 2018, and in addition to the Kuan Koi channel, Star introduced customers to overseas remittance service providers, such as Currenxie, Silver Express Investment Limited, and Regal Crown, which could facilitate the collection of offshore funds and transfer them into the Star Patron Accounts.

260    AUSTRAC drew particular attention to the use of Regal Crown, a licensed money remitter in Hong Kong, which was not licensed to accept remittances in Macau. The immediate impetus for using Regal Crown was the difficulty which Kuan Koi was experiencing in Macau in acting as a conduit for funds to Star.

261    The proposal discussed by March 2018 was that Regal Crown would accept cash from or on behalf of Star Sydney customers in Macau, and Regal Crown would hold this cash in a secure safe for 70 days or deposit the cash into various facilities. Funds would then enter Regal Crown’s bank account from these various sources, which Regal Crown would deposit into the bank accounts of SEG-related entities in small amounts over a long time, which Star Sydney would in turn credit to a customer’s FMA or SKA.

262    From at least April 2018, senior management at SEG were aware that Regal Crown did not apply KYC or AML procedures when collecting cash from Star Sydney customers.

263    Mr White sent a memorandum of advice to Ms Martin and Mr Hawkins, copying Mr Whytcross, Mr Hornsby and Ms Arnott on 26 August 2019 which discussed, inter alia, the Regal Crown proposal, and included the following statements:

The arrangements outlined above intrinsically carry a higher AML/CTF risk, as the funds being used to repay amounts owing to The Star are originating from our patrons as cash and it is difficult to identify the source of the cash being transferred.

…

Our preferred approach would be that VIP Credit & Collections and/or International Marketing teams limit their involvement to providing details of licenced remitters to patrons on the basis that The Star knows that other patrons have used these remitters.

…

Any increased involvement by The Star’s employees in the repayment process above what is outlined above increases the need for appropriate compliance controls and information collection, as well as the risk of potential issues around local law enforcement activity in light of DICJ’s recent notice.

264    Star admits that it continued to allow customers to utilise this overseas remitter channel despite Mr White’s advice. The ongoing use of overseas remitters was also communicated to the SEG Board and Risk & Compliance Committee in May and December 2021.

265    The use of Regal Crown had high ML/TF risks as Star had no visibility over the source of funds remitted. Further, Regal Crown often used other overseas remitters as intermediaries to transfer funds to Star Sydney or Star Queensland (being a further layer of non-transparency).

266    Given this lack of visibility, Star is unable to determine the total amount of funds transferred by, or transfers facilitated by, Regal Crown. In addition, when responding to s 167 notices in relation to the use of Regal Crown, Star noted that given there was “an absence of any employees with the requisite knowledge, The Star Sydney [is unable to] provide a complete response”.

267    Despite this, it is Star’s understanding that funds transferred by Regal Crown were transferred into Star Sydney’s NAB account. The EEIS AUD NAB account received the following deposits in the Relevant Period:

(a)    83 deposits from Silver Express Investment Limited in the period from 11 November 2018 to March 2020, totalling over AUD$52 million; and

(b)    20 deposits from Currenxie in the period from June 2018 to August 2019, totalling approximately AUD$19.8 million.

268    Star accepts that at no time did SEG, Star Sydney or Star Queensland carry out an appropriate risk assessment of the ML/TF risks posed by overseas remittance channels including transfers through Regal Crown. AUSTRAC submits, and I accept, that the ML and TF risks of engaging in unlicensed remittance activity that involved the parking of cash-sourced funds and then structured on-payment of those funds ought to have been apparent.

7.5.5    EEIS

269    EEIS was a private company incorporated in Hong Kong and a wholly owned subsidiary of SEG. It was incorporated in November 2013 to facilitate offshore settlement activities and provide credit to international junkets and premium players on behalf of Star casinos. Star used bank accounts in the name of EEIS to accept customer deposits. Star admits that EEIS was established as an alternative payment option for international customers who did not want to send money directly to a bank account in the name of a Star casino.

270    From June 2019 until March 2020, EEIS provided loans to a limited number of rebate players and international junket operators at Star, approved by SEG employees. Six loans were made to five international customers for approximately $218 million. From 30 November 2016 to April 2021 (inclusive), at least $250 million was remitted for Star customers via EEIS bank accounts, at least $180 million of which was deposited by third parties. Of the monies remitted into the EEIS accounts, at least $81 million was remitted by Currenxie, Onepip (Singapore) and Silver Express Investment Limited between May 2018 and May 2020.

271    The following people were directors of EEIS during the Relevant Period:

(a)    Mr Bekier, until 8 June 2022;

(b)    Mr Theodore, from 28 October 2019 until 8 June 2022; and

(c)    Mr Barton, from 12 May 2015 until 18 October 2019.

These directors, as well as Ms Martin, were signatories on accounts EEIS opened at various times. Mr Bekier, Mr Theodore, Mr Barton and Ms Martin have all been identified by Star as holding senior management positions for the purposes of the AML/CTF Rules.

272    EEIS opened the following bank accounts:

(a)    four bank accounts with NAB in December 2013 and a further five on 26 April 2018;

(b)    five bank accounts with Bank of China (Macau) in the period between February 2014 and February 2015 (EEIS Bank of China (Macau) accounts); and

(c)    four bank accounts with Bank of China (Hong Kong) in February 2015.

From 2014, EEIS was licensed to provide credit facilities to patrons in Hong Kong.

273    Although established in 2013, EEIS was largely dormant in the years following its incorporation. However, there were at least 20 deposits into EEIS’s Bank of China (Macau) or Bank of China (Hong Kong) accounts between 2015 and 2017. These deposits totalled more than AUD$3.6 million and HKD$150 million and were used by customers for the purposes of CCF redemptions. AUSTRAC submits, and Star admits, that these transactions were not the subject of proper transaction monitoring.

274    EEIS remained only lightly utilised until the end of 2017, being a time when increased regulatory scrutiny was shutting down established channels. On 26 September 2017, the SEG Board was presented with a paper that included the activation of the EEIS channel, as well as the establishment of a Macau Marketing Subsidiary (MMS). As a result, in December 2017 the EEIS Steering Committee was established, including Messrs Bekier, Barton, McWilliams, White, Theodore and Ms Martin, some of whom reported to the SEG Board. Further, an EEIS Working Group was established in January 2018 which also included senior management.

275    A further paper was presented to the SEG Board on 24 May 2018, seeking approval for the establishment of an internal CCF for EEIS with a limit of $400 million to facilitate the provision of loans to IRB patrons (EEIS CCF). This project (at that stage only a recommendation) involved EEIS operating a CCF with SEG providing loans to customers supported by a personal cheque, with EEIS and MMS entering into program agreements with premium players and licensed and unlicensed junket operators, subject to regulatory approval. In practice, it was further described as “[changing] the nature of payments from repayment of gambling debts in Australia to repayment of loans in Hong Kong”, with the program providing “customers the opportunity to repay their loan in Hong Kong to a Star Group bank account rather than to the casino operations bank account in Australia”.

276    The Board resolved to approve the EEIS CCF, but EEIS loans were not made available to customers before June 2019.

277    On 26 September 2018, the SEG Board was presented with a further paper titled “IRB Strategy Update”, which proposed the repayment of CCFs through the EEIS bank accounts via electronic funds transfer, noting that if customers could only pay with cash “The Star sales team may refer the customers to money changers however the business does not engage with these entities directly”.

278    Star admits that designated services through the EEIS remittance channel involved use by High Risk Customers to remit offshore funds into Australia (including junket operators, representatives and players), the channel was used by international customers to repay CCFs, including junket funders, third parties could remit money through the EEIS remittance channel for or on behalf of customers, remittance through this channel lacked transparency as to source of funds, the channel could be used to repay amounts owed under CCFs and thereby facilitate offsetting and cuckoo smurfing, and that remittance through EEIS loans involved an additional layer of non-transparency. Star admits it had “very limited visibility over the source of funds remitted through the EEIS remittance channel”.

279    It was not until July 2022 that Star’s AML team began monitoring deposits into bank accounts by daily manual inspection of electronic bank statements.

280    At no time did Star Sydney or Star Queensland carry out an appropriate assessment of the ML/TF risks of the EEIS remittance channel, and nor did they apply appropriate risk-based transaction monitoring to transactions provided or facilitated through the channel. Nor did the Joint Part A Program appropriately identify, mitigate or manage the ML/TF risks of the channel for reasons including that Star did not include appropriate risk-based controls to understand the source of funds for transactions through this channel, the KYC processes were inadequate, and there were no transaction limits or daily limits.

7.6    High Risk Customers

281    AUSTRAC placed some emphasis on what it described as “high risk” customers. In paragraph [349] of its written submissions, it asserts that these customers were “high risk” “for the purposes of the AML/CTF Act and Rules”. AUSTRAC did not explain what it meant by the latter phrase in its written or oral submissions, for example by pointing to any relevant section or rule. I observe that r 4.13.2 of the AML/CTF Rules specifies that an AML/CTF Program must include appropriate risk-management systems for determining whether PEPs present “high ML/TF risk” and, if so, r 4.13.3 specifies procedures that must be followed. I was not addressed as to whether “high risk” has any other function in the AML/CTF Act or AML/CTF Rules.

282    AUSTRAC says, and Star admits, that Star Sydney and Star Queensland failed to monitor 117 “High Risk Customers” in accordance with s 36 of the AML/CTF Act:

(a)    with a view to identifying, mitigating and managing the ML risk that Star reasonably faced; and

(b)    in accordance with Ch 15 of the AML/CTF Rules.

283    Chapter 15 of the AML/CTF Rules requires that reporting entities have transaction monitoring programs that, in general terms, include appropriate risk-based systems and controls, including an ECDD program that applies when the entity’s risk-based systems and controls determine that the ML/TF risk associated with a customer or transaction is high. I will use “high risk” in this sense. If “high risk” was meant in any other sense, then AUSTRAC has not explained what that might be.

284    Similarly to the approach taken by AUSTRAC to s 81(1) and discussed at Section 7.2 above, while these contraventions are admitted, I was not addressed at any length on the specific requirements of Ch 15, the construction of these rules and the basis on which Star was non-compliant. The KAD contains admissions that generally describe the requirements of Ch 15, as well as specific admissions by Star concerning its conduct that adopt the language of Ch 15 though without identifying which specific rule each admission relates to. Nonetheless, having reviewed the relevant rules, I accept that the admitted contraventions of s 36(1)(b) in respect of the 117 High Risk Customers are made out.

285    Each of the High Risk Customers presented high ML/TF risk indicators and was engaged in transactions at Star casinos. Despite this, Star Sydney and Star Queensland frequently did not recognise High Risk Customers as being high risk, with 83 never being identified as high risk during the Relevant Period.

286    Star Sydney and Star Queensland accept that they did not obtain or appropriately consider information concerning the source of funds or wealth for the High Risk Customers, despite staff being aware that 34 High Risk Customers were connected to organised crime or that their source of funds and wealth may not have been legitimate.

287    At [349]–[351] of its written submissions, AUSTRAC focussed on the following five High Risk Customers as exemplifying the seriousness of the failure to identify customers as high risk as well as not obtaining or considering information regarding their source of wealth:

(a)    Customer 45, being a customer of Star Sydney during the Relevant Period. Star Sydney recorded that he had a cash turnover (being the metric Star used to compare and consolidate rebate turnover for reporting purposes) exceeding $6.8 billion between 2016 and 2021. Star Sydney was aware that law enforcement had concerns about the source of Customer 45’s funds from the commencement of the Relevant Period, including because Star was aware of a law enforcement agency considering questioning Customer 45 about the source of his funds in 2014, as well as further inquiries by law enforcement regarding Customer 45 in 2020 and 2021. Upon request from Customer 45, Star casinos prepared letters to confirm his winnings that did not reflect those winnings: for example, Star Queensland prepared 12 letters of comfort on 5 March 2019 confirming winnings totalling $16 million when he had only recorded an overall win of $1 million. There were also a number of other high ML/TF risk indicators associated with Customer 45, as agreed by the parties and listed at [864] of the KAD. At no time in the Relevant Period was Customer 45 rated “high risk”;

(b)    Customer 83, being a customer of Star Queensland from 2005. Star’s Customer Risk Register included references to media reports alleging that he was the head of an organised crime syndicate from December 2014, as well as from September 2017 being involved in drug importation, murder, extortion and being a known associate of persons with a history of criminal conduct including money laundering and drug trafficking. There were also other high ML/TF risk indicators associated with Customer 83, including a history of being excluded from Star Sydney by law enforcement as well as being banned from other Australian casinos, as agreed by the parties and listed at [874] of the KAD. Customer 83 was not rated “high risk” until 12 February 2020;

(c)    Customer 5 was a customer of Star Sydney in the Relevant Period, with Star Sydney recording cash turnover exceeding $3.5 billion between 2017 and 2020. Star received enquiries from law enforcement regarding this customer in 2018, 2019 and 2020. By at least February 2020, Star had received information that Customer 5 and Customer 21 used junkets operated by Customer 6 to engage in money laundering at casinos. There were also a number of other high ML/TF risk indicators associated with Customer 5, as agreed by the parties and listed at [849] of the KAD. Customer 5 was not rated “high risk” until 1 February 2022;

(d)    Customer 44 was a customer of Star Sydney in the Relevant Period and had a recorded cash turnover exceeding $780 million between 2017 and 2019. Star recorded Customer 44’s occupation as “housewife”, which was the basis upon which the Joint Risk Assessment Meeting continued to allow Customer 44 to engage in transactions at Star Sydney. There were also a number of high ML/TF risk indicators associated with Customer 44, including the suspicious use of large amounts of cash and being the subject of law enforcement inquiries, as agreed by the parties and listed at [857] of the KAD; and

(e)    Customer 89 was a customer of Star Queensland in the Relevant Period and had a recorded cash turnover exceeding $400 million between 2016 and 2022. By April 2017, Star Queensland was aware that Customer 89 was suspected of using Star Queensland as a place to launder money. By January 2018, Star Queensland was aware of information that suggested Customer 89 was supplying drugs on Star Queensland premises. Customer 89’s reported occupation was “beauty therapist” and on this basis was monitored but allowed to continue engaging in transactions at Star Queensland until 28 January 2022.

288    Star Sydney and Star Queensland also accept that they did not undertake appropriate risk-based transaction monitoring of High Risk Customers, including because they were unable to collate information where designated services were provided to High Risk Customers through multiple accounts or identify ML/TF typologies. This meant that they were often unable effectively to monitor the transactions made by High Risk Customers. Examples of this include:

(a)    Customer 45 transferring $9 million from his Star Sydney account to his Star Queensland account on 28 February 2019 for individual rebate play. A further $2.6 million was deposited into Star’s NAB account on 2 March 2019 with a reference number for Customer 45 but containing no further detail of what the deposit was for. Star Queensland (upon request from the bank) said it was unable to determine the initial funds held by Customer 45 at Star Sydney as he held a main account with 40 sub-accounts, appearing to use at least half of these each trip;

(b)    Customer 19 (a junket operator) transferring $33.7 million to Customer 45’s SKA at Star Sydney in 2018, with Star being unable to verify the source of funds, attributing the issue to Customer 45 having multiple accounts; and

(c)    Customer 85 had a cash turnover exceeding $1.9 billion at Star Sydney between 2016 and 2021, and a cash turnover of $3.8 million at Star Queensland in 2019. Customer 85 and persons associated with him engaged in transactions indicative of ML/TF typologies, including cashing in large value chips with no evidence of play, or stockpiling large volumes of CVIs which he provided to third parties.

289    AUSTRAC also submits that Star’s failure to undertake appropriate risk-based transaction monitoring of High Risk Customers and the seriousness of such failures should be understood in the context of the high ML/TF risks presented by the High Risk Customers. In this respect, AUSTRAC notes that these risks are set out at [824] of the KAD, and include the fact that of the High Risk Customers:

(a)    70 were junket funders, operators or players. Junkets funded by High Risk Customers had cumulative cash turnovers of $41.8 billion at Star Sydney (with customer losses of approximately $534 million) and $23 billion at Star Queensland (with customer losses of approximately $190 million) during the Relevant Period. Junkets operated by High Risk Customers had cumulative cash turnovers of $54.9 billion at Star Sydney (with customer losses of approximately $680 million) and $25.2 billion (with customer losses of approximately $195 million) at Star Queensland during the Relevant Period. Junkets with High Risk Customer players had total cumulative cash turnover of $35 billion at Star Sydney (with customer losses of approximately $313.5 million) and $14.5 billion at Star Queensland (with customer losses of approximately $55 million) during the Relevant Period;

(b)    92 recorded cash turnover (other than on junket programs) exceeding $23.2 billion;

(c)    13 were foreign PEPs, including seven who were only identified as such several months or years after they became foreign PEPs;

(d)    41 were connected to other Star customers in respect of whom the reporting entity had formed suspicions, and an additional 10 were involved in facilitating the provision of high value designated services to other customers who posed higher ML/TF risks and in respect of whom the reporting entity had formed suspicions;

(e)    49 were customers whom Star was aware had been engaged in large and unusual transactions and patterns of transactions with no apparent economic or visible lawful purpose;

(f)    37 were engaged in transactions directly or through junket representatives that were indicative of known ML/TF typologies, such as structuring, cuckoo smurfing or offsetting;

(g)    49 were transacting directly or through their junket representatives with cash that was suspicious, including cash in plastic bags, cereal boxes, shoeboxes, cardboard boxes, cash wrapped in rubber bands, cash in small denominations and counterfeit cash. The relevant transactions totalled over $77.9 million. One such example is that, on 19 September 2018, Customer 20’s junket representative presented $100,000 in $50 and $100 notes contained in a cereal box sealed with glue. This cash was deposited to Customer 20’s FMA at Star Sydney;

(h)    97 were customers who caused Star Sydney and Star Queensland to submit over 700 SMRs; and

(i)    75 were the subject of engagement between law enforcement agencies and Star Sydney or Star Queensland. In respect of 16 of those customers, Star was advised that at least one of the law enforcement requests related to money laundering, organised crime or proceeds of crime investigations. In respect of eight, Star was advised that law enforcement agencies had information to suggest that the customers were connected with the supply of illicit drugs. Staff were aware that 17 customers had been charged, arrested, prosecuted, convicted or imprisoned in connection with offences, including cases dealing with the proceeds of crime and money laundering.

290    In respect of the turnover and losses of High Risk Customers, Star notes the evidence of Mr Krile to the effect that there may be double counting as many junkets were funded, operated and/or played by High Risk Customers. As such, it is Mr Krile’s estimation that the Group earned revenue of approximately $1.33 billion from High Risk Customers, which may represent an EBITDA of approximately $275.3 million and net profit after tax (NPAT) of $39.9 million.

291    Star senior management were aware of and involved in the failures to monitor the High Risk Customers. During the Relevant Period, at least 46 High Risk Customers were considered by the Joint Risk Assessment Meeting, the Chief Risk Officer, the AML/CTF Compliance Officer and other members of senior management, with 10 of those customers being determined to be able to continue to have a business relationship with Star despite having engaged in conduct which indicated high ML/TF risks. Star disputes the extent to which the participants of the Patron Action Monitoring Meetings (PAMM) and Joint Risk Assessment Meetings and other individuals were senior management for the purposes of the AML/CTF Rules; however, I note that it has accepted that the Chief Risk Officer and AML/CTF Compliance Officer are relevant senior management roles.

292    In this regard, AUSTRAC drew my attention to Customer 1 (Mr Chau), who was monitored by the Joint Risk Assessment Meeting and the PAMM between August 2019 and November 2021. The minutes of the Joint Risk Assessment Meeting in this period record:

(a)    in August 2019, that Mr Chau was allegedly linked to organised crime and that Australian law enforcement had raised concerns about his links to large scale money laundering activities;

(b)    in September 2019, that his risk rating was lifted to “high”, but having regard to the particular labels used by Star, this was not the highest risk level;

(c)    in October 2019, that the General Manager, Compliance and Responsible Gambling, at Star Sydney, Mr Micheil Brodie, advised the Joint Risk Assessment Meeting to retain Mr Chau until a risk assessment was completed;

(d)    that despite noting links between Mr Chau and a “triad society”, at meetings in February, March, July, August, October, November and December 2020, Star’s AML/CTF Compliance Officer repeatedly determined that Mr Chau would remain on the watchlist pending the outcome of the Bergin Inquiry;

(e)    in February 2021, that the findings of the Bergin Inquiry would be discussed with inhouse lawyers;

(f)    in June 2021, that no decision about whether to continue a business relationship with Mr Chau would be made until an independent review had been completed; and

(g)    in August 2021, at a meeting attended by SEG’s Chief Legal and Risk Officer, Star Sydney’s General Counsel, and the Managing Director of Star Sydney, amongst others, that Star could safely maintain its relationship with Mr Chau subject to specific risk mitigation measures.

293    It was not until Mr Chau had been arrested by Macau Police on charges of criminal association, illegal gaming and money laundering that Mr Houlihan determined that Star should cease its business relationship with him, more than two years after a copy of a report was provided to the senior management at Star linking him to overseas organised crime syndicates.

294    Star further accepts that it continued to engage with High Risk Customers 3, 20, 28 and 29 associated with the Suncity junket (discussed at Section 7.9 below), notwithstanding the high ML/TF risks associated with junket activities and related suspension of junkets in October 2020 (with Star only issuing a withdrawal of licence to Customer 20 in March 2022 and Customer 3 in April 2022).

295    AUSTRAC referred to examples of particular conduct by High Risk Customers in connection with the next topic (i.e. Channel Customers). However, these examples are not properly analysed as typical risks posed by the relevant channels, but rather are relevant as idiosyncratic matters that should have raised concerns about the particular customer.

296    One such example of this is that on 23 November 2018, Customer 81 and her husband, Person 57, completed a Hotel Card channel transaction for $150,000 and deposited $50,000 in $100 notes into Customer 81’s account. Customer 81 then withdrew $190,000 in cash in straps marked with a permanent marker, and left the buy-in room with Person 57. An hour later, Person 57 deposited $125,000 in cash bundled in the same straps given to Customer 81, and soon withdrew $120,000 in cash. Customer 81 later returned with the $120,000 in cash withdrawn by Person 57 and an additional $115,000 in cash. Star Sydney’s report of the incident noted “given the large amounts of cash movement without any play it is quite suspicious”. Star Sydney suspected that Customer 81 was using the Hotel Card channel, as well as other methods, to remit money out of a foreign country.

297    AUSTRAC notes another example to demonstrate the lack of regard of Star’s senior management as to monitoring High Risk Customers in relation to the use of the Hotel Card channel.

298    On 7 February 2017, Oliver White, General Counsel Corporate at SEG was alerted to the fact that Customer 51 was travelling to Sydney with the intention to gamble at The Star casino, buying-in for $100,000 using the Hotel Card channel. Mr White proceeded to review background information regarding this customer noticing that he was being investigated by law enforcement for money laundering offences in September and October 2016. He brought this to the attention of Messrs Bekier, Hornsby and Barton. Mr Bekier noted that it was not worth the reputational risk for $100,000, but it was not worth knocking the patron back as he was already flying to Sydney. Mr Hornsby said that despite Customer 51 having been blacklisted by 17 casinos in the past, he had no concerns with Customer 51 using the Hotel Card channel but that if the channel failed for any reason “there was no prospect of recovering”. Messrs Bekier and Barton indicated that they were “prepared to proceed for now”, suggesting to “keep this low profile”. AUSTRAC notes that there is no record of any further discussion (beyond reputational and recovery of credit) of the ML/TF risks of Customer 51 using the Hotel Card channel.

299    I consider the conduct relating to High Risk Customers to be particularly serious for the purpose of the penalty-setting exercise. Whereas some of the other conduct of Star led to an unacceptable risk of ML or TF, in the case of many of the High Risk Customers Star had information that would suggest to a reasonable person that ML was in fact occurring. Star continued to receive and profit from money that evidence available to it suggested was most likely from criminal activity and was being laundered.

7.7    Channel Customers

300    The Channel Customers represent 1,221 customers of Star Sydney and/or Star Queensland who received services provided through:

(a)    the Hotel Card channels;

(b)    the Bank of China (Macau) cash channel;

(c)    the Kuan Koi channels;

(d)    the EEIS patron accounts; and/or

(e)    third party deposits through Star Patron Accounts.

301    Star admits that payments through these channels carried higher ML/TF risks than services provided through other channels, including because there was little to no transparency as to the source of funds, they facilitated third party transactions and cash deposits (except in the case of the Hotel Card) including in circumstances where the identity of the third party was not recorded, and they were used (inter alia) to repay money owed to Star Sydney and Star Queensland under CCFs and therefore were vulnerable to offsetting. Star admits that Star Sydney and Star Queensland failed to monitor these 1,221 customers in accordance with s 36(1) of the AML/CTF Act.

302    Star accepts that via the Hotel Card channel, Channel Customers could disguise the purpose and nature of transactions, giving the ability for customers to withdraw money deposited into FMAs in cash without gaming or to transfer money to third parties.

303    Between 30 November 2016 and 8 March 2020, Star Sydney approved a total of 5,560 temporary CCFs, or increased limits for temporary CCFs, pending clearance of a Hotel Card payment for the Channel Customers, with the total value of these Hotel Card payments made by Star Sydney to Channel Customers in connection with temporary CCFs being over $424 million.

304    Between 1 December 2016 and 18 February 2022, Star Sydney and Star Queensland deposited money into the FMAs of Channel Customers on 1,177 occasions totalling over $70 million. Despite this, neither Star Sydney nor Star Queensland kept a central record of all customers using the Hotel Card channel, nor did they conduct source of wealth checks in respect of those customers, inhibiting the ability of reporting entities to monitor the ML/TF risks of those transactions.

305    One such example of the Hotel Card channel being used to facilitate significant funds is that between 8 December 2016 and 17 February 2020, Person 72 transacted over $7.9 million through the Hotel Card channel in 122 transactions, with Star Sydney approving a temporary CCF or approving an increased temporary CCF limit on each occasion.

306    For clarity, the High Risk Customers are not pleaded as Channel Customers. Nevertheless, AUSTRAC also uses some examples of High Risk Customers using the Hotel Card channel as an example of the risks inherent in the channel. I accept that while these examples are therefore not directly relevant to the question of a failure to monitor Channel Customers in accordance with s 36(1) of the AML/CTF Act, they demonstrate how significant ML/TF risks may arise with respect to Star’s customers using the Hotel Card channel.

307    Additionally, AUSTRAC notes that 17 High Risk Customers used the Hotel Card channel to transact over $54 million in the Relevant Period. One such example is Customer 52 who, between 3 November 2016 and 1 March 2020, transacted $13,600,450 through the Hotel Card channel in 226 separate transactions.

308    AUSTRAC also emphasised some examples of customers using other cash channels. In this regard:

(a)    Customer 45 used the Bank of China (Macau) cash channel on 18 occasions to access a total of more than $2.7 million between 14 July 2015 and 9 March 2016. Between 9 and 14 September 2016, unknown persons deposited a total of $781,700 in cash at Bank of China which Star Queensland made available to Customer 45 via his FMA and SKA. Customer 45 is discussed above as a High Risk Customer.

(b)    Between 9 December 2016 and 29 November 2017, Star Sydney or Star Queensland made available 45 cash deposits totalling over $20.4 million to Channel Customers through the Bank of China (Macau) cash channel.

(c)    Between 8 February 2018 and 23 November 2018, deposits through the Kuan Koi channels totalling AUD$1,725,261 and HKD$807,860 were made available by Star Sydney to Customer 24’s FMA. Star Queensland was aware that Customer 24 had access to two different passports with different names and dates of birth and engaged in large and unusual transactions. Between 2 July 2019 and 12 July 2019, deposits through the Kuan Koi channels totalling at least $1 million were also made available to Customer 24’s FMA at Star Queensland.

(d)    Through the Kuan Koi channels: HKD$17.8 million was made available to Customer 45’s account on 6 March 2018, at least AUD$12 million and HKD$13.4 million was made available to Customer 5’s account between 25 April 2018 and 25 October 2018, and $563,087 was made available to Mr Chau’s account on 12 August 2019, with a further $1.3 million being made available on 27 August 2019 through deposits made by an overseas remittance service provider. These customers are discussed above at Section 7.6.

(e)    Between 11 January 2018 and 2 September 2019, Star Sydney or Star Queensland made available deposits totalling over AUD$32.1 million and HKD$107.6 million through Kuan Koi channels, some of these being made by overseas remittance service providers.

(f)    On 23 April 2019, a third party acting on behalf of Customer 5 deposited a total of $419,515 into the EEIS patron accounts which Star Sydney made available to Customer 5. Between 5 September 2019 and 20 April 2020, more than $13.7 million was deposited into EEIS patron accounts and made available to Mr Chau with the source of these funds for each of the 15 separate deposits being recorded as “unknown”. These customers are discussed above at Section 7.6.

(g)    Between 27 November 2017 and 14 April 2021, Star Sydney or Star Queensland made available 125 deposits to Channel Customers through the EEIS patron accounts totalling over AUD$53 million, HKD$50 million and USD$3.3 million. A large proportion of these deposits were made by third parties.

(h)    In late March 2018, Regal Crown (an overseas remittance service provider) deposited approximately $3.2 million to a Star Patron Account which Star Sydney made available to Customer 5’s SKA. Customer 5 is discussed above at Section 7.6.

(i)    Between 4 December 2017 and 28 October 2021, Star Sydney and Star Queensland made available 433 third party deposits into the Star Patron Accounts to Channel Customers totalling over $17.4 million.

7.8    Excluded Customers

309    Unfortunately, AUSTRAC’s approach to Excluded Customers is slightly confusing. AUSTRAC’s written submissions in chief have a single section on Excluded Customers from [420]–[444]. Those submissions have brief references to s 36 of the AML/CTF Act (in paragraphs [435] and [444]) but refer to no other section. On the face of the submissions, AUSTRAC only seeks to make out a case for a contravention under s 36 of the AML/CTF Act. However, it is apparent from other materials that Star admits a contravention of s 81, via s 85(2)(c), in relation to Excluded Customers. This is found in paragraph [458] of the KAD. The two types of contravention are quite different, and AUSTRAC’s approach of mixing them up and not explaining its claim inhibits the ability of the Court to obtain any clear picture of the nature, extent and seriousness of the contraventions.

310    One possibility is that AUSTRAC has abandoned its case under s 81 of the AML/CTF Act in respect of Excluded Customers, given that it does not mention it in its submissions. However, some of the submissions appear to refer to matters that do not sensibly fall under s 36, and therefore on balance the better approach is to treat AUSTRAC as maintaining a case under s 81, even though it has not said as much.

311    The conduct in relation to Excluded Customers is particularly serious. Throughout the Relevant Period, customers of Star casinos could be subject to exclusion orders, meaning that customers would be prohibited from entering or remaining in Star casinos. These would be given at the direction of either the Commissioner of New South Wales Police or the Commissioner of Queensland Police.

312    Prior to February 2019, where a customer was subject to an exclusion order in one state, Star could decide (but was not required) to exclude the customer from Star casinos in the other state. Under the Joint Part A Program, the issuance of an exclusion order for a customer in one state did not of itself prompt an ML/TF risk assessment in respect of the customer in the other state. After February 2019, Star introduced a withdrawal of licence (WOL) providing for an exclusion order issued in one state to be mirrored in the other state, although exceptions would be at the discretion of the Chief Risk Officer or ethics panel.

313    Despite introducing this policy, it was only from May 2022 that Star provided for the mirroring of exclusion orders between states issued prior to February 2019. AUSTRAC notes that each of the 15 Excluded Customers was a customer of Star Queensland during the Relevant Period despite being subject to an exclusion order issued by a law enforcement agency in NSW. The 15 Excluded Customers were provided with designated services by Star Queensland at Star Gold Coast and/or Treasury Brisbane.

314    In the KAD, Star admits that, in light of these matters, its Joint Part A Program did not include an appropriate procedure to escalate a customer excluded in one state for an ML/TF risk assessment in the other state and to determine whether designated services should continue to be provided to the customer on a risk-basis. I accept that this is so and that Star has contravened s 81 of the AML/CTF Act on this basis.

315    AUSTRAC submits that Star senior management was made aware that designated services were being provided to Excluded Customers during the Relevant Period. On 10 July 2015, the Queensland Investigations Manager sent an email to the NSW Investigations Manager copying the Group General Counsel and Company Secretary, Paula Martin and Group Investigations Manager, Kevin Houlihan noting that many persons subject to NSW exclusion orders were high-stakes gamblers in Queensland. There was other correspondence to Star senior management to a similar effect, including an email where the Queensland AML Administrator raised the possibility of an exclusion being applied to a customer in February 2019, and the Chief Risk Officer Mr Paul McWilliams described Star’s longstanding practice as requiring “a material recent change in circumstances (i.e. a charge brought against him), in addition to the previous exclusion order, before a customer would be excluded in another State”. I note that Star has admitted that both the Group General Counsel and Company Secretary and the Chief Risk Officer are senior management positions for the purpose of the AML/CTF Rules.

316    As late as November 2020, 18 months after the policy change to mirror exclusion orders between states, the Star VIP Services Host Manual stated: “[in Queensland] a member with a NSW Excluded status is to be treated as an active member”, with the NSW Excluded status being allocated to certain members with approval of senior management and where this member was granted the ability to gamble and participate in the Loyalty Program.

317    AUSTRAC notes that not only were senior management aware of this, but some Excluded Customers were incentivised to gamble at Star Queensland casinos by way of airfares, limousines, hotel accommodation and upgrades. One such example is Customer 84, who was issued a NSW exclusion order on 24 July 2007 but remained a customer of Star Queensland until 10 December 2021. He was provided the following incentives and gifts throughout the Relevant Period:

(a)    a $5,000 Gucci voucher and a $5,000 Louis Vuitton voucher on 6 December 2016;

(b)    a $52,695 Rolex watch in March 2017;

(c)    a food and beverage package totalling $18,153 on 25 May 2018;

(d)    hotel incidentals totalling $31,587 on 24 January 2019;

(e)    hotel incidentals and upgrade totalling approximately $3,000 on 4 April 2019;

(f)    hotel incidentals totalling $8,106 on 1 August 2019;

(g)    football grand final private box tickets valued at approximately $6,100 on 26 August 2019;

(h)    a private jet flight from Melbourne to Brisbane on 21 October 2019 (valued at $6,050);

(i)    an airfare, limousine and food and beverage package totalling approximately $2,000 on 7 July 2020; and

(j)    a private jet flight from Melbourne to the Gold Coast on 18 December 2020.

318    Customer 84 received over $570,000 in incentives and gifts during the Relevant Period, excluding benefits accrued in relation to loyalty points. Other Excluded Customers were also provided complimentary goods and services by Star during the Relevant Period.

319    AUSTRAC submits that the ML/TF risks of providing designated services to Customer 84 were not appropriately considered, despite Star Queensland having multiple opportunities to do so.

320    On 22 July 2016, Customer 84 was discussed at a Joint Risk Assessment Meeting, a meeting which included Group Investigations Manager Mr Houlihan and Chief Risk Officer Paul McWilliams. In this meeting, Customer 84’s NSW exclusion order was noted as well as a request from a law enforcement agency in relation to his gaming records. It was discussed whether his risk rating should be raised from “Medium” to “High”, but no change was made.

321    In January 2020, the AML/CTF Administrator for Star Queensland, Sabrina Li, escalated consideration of Customer 84 in a report to the AML/CTF Compliance Officer and Group Manager, AML/CTF Financial Crime, Skye Arnott. This included media coverage of Customer 84’s involvement in criminal proceedings, connections with high-profile underworld figures, as well as suspicious activities in relation to cash. For example, in May 2018, Customer 84 supplied $198,950 in cash in wet $50 notes carried in a blue cooler bag from Woolworths.

322    Ms Li’s recommendation was to continue a business relationship with Customer 84, but Ms Arnott also recommended that his risk rating be updated to “High” and a source of wealth update be completed. The earliest record of further information in relation to the source of wealth is the provision of three screenshots of partial segments of Australian Taxation Office business activity statements provided in January 2021, displaying limited financial information between the entity and Customer 84.

323    Between 30 November 2016 and July 2021, Star Queensland gave the AUSTRAC CEO more than 15 SMRs relating to suspicious behaviour by Customer 84, including in early 2021 an incident involving a complex series of cash transactions to the value of $149,000 where Customer 84 exchanged a plastic bag of $100 notes with an unknown male. In August 2021, Mr Houlihan suggested that Customer 84 be added to the “Watch List”, but determined to continue to have a business relationship with the individual. In October 2021, a decision was made to issue Customer 84 with a WOL, however saying that the customer was entitled to retain the gifts and incentives gifted to him given his “level of loyalty”.

324    Another example is Customer 91. By at least January 2018, Star Queensland was aware that a law enforcement agency suspected Customer 91 was gambling with the proceeds of crime in cash. By March 2019, Star Queensland was aware that two further law enforcement agencies suspected they were involved in laundering money for an organised crime syndicate. In February 2021, Star Queensland recorded that their source of funds was not known or verified. Despite this, Customer 91 had a total turnover of at least $230 million at Star Queensland. Customer 91 received benefits in the form of hotel accommodation and upgrades, transportation, and entry into events and tournaments totalling over $81,000, as well as complimentary special purchase vouchers on three occasions during the Relevant Period with a total value of $30,500. Customer 91 was only issued a WOL in October 2021.

325    AUSTRAC describes Star Queensland’s failures to monitor the Excluded Customers in accordance with the requirements of s 36(1) of the AML/CTF Act as egregious. I accept this description. Star’s conduct in relation to Excluded Customers is serious for the purposes of the penalty fixing exercise because Star Queensland had information to suggest that it was likely that money laundering was occurring. Star Queensland accepts that it failed to monitor the Excluded Customers with a view to identifying, mitigating and managing the money laundering risks that it reasonably faced.

7.9    Junkets

326    Junkets (arrangements between a casino and a junket operator to facilitate gambling by high wealth players on agreed terms) are highly vulnerable to organised crime and served as a non-transparent channel through which billions of dollars were gambled at Star in the Relevant Period without appropriate risk-based systems and controls. For example, the cash turnover with respect to Suncity junkets in the period 30 November 2016 to November 2020 exceeded $11.8 billion in relation to Star Sydney and $2.9 billion in relation to Star Queensland. The level of revenue from designated services provided through junket channels in the period 30 November 2016 to October 2020 exceeded $1 billion in relation to Star Sydney and exceeded $267 million in relation to Star Queensland. Star provided high value designated services to thousands of junket players on thousands of junket programs.

327    Some key ML/TF risks associated with Star’s junket programs included:

(a)    junket players were not required to have an FMA at Star to participate. Rather than having a direct relationship with the customer, Star therefore relied on the junket operator as its intermediary or agent. This meant that Star did not always know who it was providing designated services to via the junket channels;

(b)    junket players generally relied on junket funds and junket operators to make their funds available at the casino including through CCFs. This increased anonymity and a lack of transparency which was also heightened by Star often not being made aware of the financial arrangements between the junket operators, junket funds and junket players;

(c)    offsetting arrangements used by junket operators to facilitate the provision of funds for junket operations create risks of exploitation by criminal entities, can circumvent international funds transfer reporting requirements and can facilitate the laundering of proceeds of crime;

(d)    the use of multiple bank accounts can obscure the identities of those transacting and the source and ownership of funds of customers;

(e)    junket gaming accounts are highly vulnerable to the storage and movement of potentially illicit funds, as the parking of money in such accounts creates a degree of separation between the generation and receipt of such funds, making it more difficult to trace money. Money deposited into a junket operator’s account and then withdrawn with minimal gaming activity can also give the funds the appearance of legitimacy;

(f)    given that the customer base was predominantly foreign residents, there were large amounts of money being moved across international borders, increasing the exposure to transnational organised crime, with the source and destination of funds and customers’ criminal and financial activity being difficult to identify;

(g)    some junket funders, operators and players at Star were foreign PEPs, which AUSTRAC identifies is a recognised indicator of high ML/TF risk under r 15.9(2) of the AML/CTF Rules; and

(h)    certain junkets had access to private gaming rooms (often containing safe deposit boxes) where there were no limits on the amount of cash taken in, no controls as to who could bring cash into the rooms and limited visibility as to the source of funds.

328    One such example of this is in relation to Customer 12. Between 18 October 2019 and 12 December 2019, third parties associated with Customer 12 deposited almost $3 million in cash into Customer 12’s FMA, having been transported from a foreign country, a significant amount presented in $50 notes, bundled in elastic bands and contained in either a plastic suitcase or a black duffle bag.

329    AUSTRAC submits and I accept that at least Star’s senior management were aware of the high ML/TF risks associated with junkets and yet they were pursued as a core part of Star’s business strategy without adequate consideration as to how these ML/TF risks would be identified, mitigated or managed. The knowledge of the Board itself of the ML/TF risks of junkets appears from the evidence to be quite general in nature and the documents the Court was taken to do not evidence a detailed breakdown of the precise ML/TF risks associated with junket activity. For example, at Star’s Board meeting on 26 May 2017, a paper prepared by Star’s Managing Director and CEO, Mr Bekier and President, International Marketing, Mr John Chong entitled “IRB Strategy Update” stated:

Over the next 5 years, Management plans to: …

    Refocus the activities of the North Asia team on selling to and through junkets only. This will require a greater presence of team members in Hong Kong and Macau.

    Establish and re-activate a range of entities that facilitate and support the increased focus on junket interactions and the travel needs of our target customers.

    These strategies should allow the business to grow earnings to around $130 million (normalised EBITDA) by 2021/2022.

330    The paper highlights that the Suncity junket turnover had increased from $918 million in FY2016 to $2.1 billion in FY2017, becoming Star’s largest customer.

331    Similarly, the Board was aware of approving large credit limits (in the form of CCFs) to both junket players for gaming activity on junket programs and to junket operators / funders on request. One such example is the Board approving a credit limit of $266.7 million for Mr Chau in February 2018.

332    Star submits that the Board was aware of the ML/TF risks presented by junkets, being presented with a separate document entitled “IRB Strategy-Key Considerations Board Meeting of 26 September 2017”. That document does not refer to the risks of junkets specifically, but says that the IRB (of which junkets were a significant part) carries inherent “reputational risk”, with a “potential impact on domestic licenses”. Precisely what this meant, and whether it was referring to ML/TF risk, was not explored. Nor was it explored whether the Board was aware that ML/TF risks were not being managed in an appropriate manner. Nevertheless, it is apparent from other material that senior management at least was aware that junkets presented significant ML/TF risks. Despite this, designated services received through junket programs were considered low risk by default under Star’s Joint Part A Program until November 2019. Similarly, when a junket operator or funder applied for a CCF, Star’s assessment of source of funds and source of wealth was focussed on credit risk and not ML/TF risks.

333    Of particular note is the Suncity junket, funded by Mr Chau. Star was aware that Mr Chau and his business partner (Customer 2) were connected to overseas organised crime syndicates. Between December 2016 and September 2019, the Suncity junket was granted exclusive use of a private gaming room (Salon 95), which facilitated 48 junket programs.

334    In mid-April 2018, Star informed Suncity that it could conduct cash transactions at the Suncity Service Desk (a service desk set up within Salon 95 in April 2018 which was operated and serviced by Suncity staff) in specific circumstances with a number of controls. By no later than May 2018, the Managing Director of Star Sydney, SEG’s CEO and other members of senior management were aware that Suncity was exchanging chips for cash (and vice versa) and that non-junket participants were withdrawing cash at the Suncity Service Desk, which Star accepts was in effect a “pseudo cage”. This is despite Mr White’s initial advice from March 2018 that “they do not operate a cage and have no authority to operate a cage”.

335    Between 17 April 2018 and 17 May 2018, 13 suspicious cash transactions took place in Salon 95 through the Suncity Service Desk, involving Suncity staff members counting money retrieved from various miscellaneous bags including suitcases and esky bags, unknown third parties entering Salon 95 with large bundles of cash and third parties leaving Salon 95 with large bundles of cash despite the third party not being known to have played on any Suncity junket. Star Sydney had no records of the total amount of cash involved in those transactions, and a subsequent investigation determined that Star also could not identify the names of the persons who conducted the transactions or what amounts were attributed to junket players. From 15 May 2018, Star Sydney was also aware that CCTV blind spots within Salon 95 were being exploited, meaning that there was limited visibility over cash transactions taking place.

336    AUSTRAC gives a further example where in May 2018, a Star Sydney staff member observed a customer receive $45,000 in cash at the Suncity Service Desk, despite not being a junket player on the Suncity junket at any time. When questioned by Star Sydney’s internal investigators, the man advised he needed the money urgently for a private business matter and an associate had given him instructions on how to contact Suncity.

337    The risk assessment for this junket was conducted following its implementation on 27 April 2018. Despite senior management being aware of unusual cash transactions occurring, the risk assessment was never updated, even though these transactions continued until September 2019. It is AUSTRAC’s submission that senior management’s response to these serious matters involving ML/TF risks was reactive in the sense that they failed to promptly engage in effective risk management procedures once they came to their attention, instead waiting until such matters were raised publicly (i.e. via the media) before taking action. AUSTRAC contends that senior management were thus prepared to court the risk of being “caught out”.

338    By May 2018, the Managing Director of Star Sydney, SEG’s CEO and other members of senior management were aware of the suspicious cash transactions occurring in Salon 95. At a SEG Board meeting on 26 July 2018, a paper dated May 2018 prepared by the Managing Director and CEO was tabled confirming the concerns emerging in Salon 95, stating that “regular on-going compliance monitoring” would be undertaken.

339    On 28 November 2018, Mr McGregor (the then Investigations Manager, Star Sydney) provided a report to Mr Houlihan entitled “Salon 95/Sun City & Related Matters”. This report disclosed that NSW Police had conducted an investigation into “several people associated with Salon 95 and the Sun City Group” and that various persons would be the subject of an exclusion order under s 81 of the Casino Control Act 1992 (NSW). Those persons included patrons of the Suncity Service Desk, Suncity junket representatives and Suncity staff.

340    Star’s Group Compliance Manager, Mr Stevens, prepared a report concerning Suncity’s compliance with the operational procedures required for the Suncity Service Desk on or about 23 May 2019. In this report, he gave a rating of “satisfactory”, concluding there was “no evidence of the practices that raised a concern around the operation of the room in 2018 continuing and the Star now has an effective level of oversight of the operation of the room”. AUSTRAC submits that this confidence in Salon 95’s practices was misplaced. In an email dated 24 June 2019 sent by Ian Tomkins (Senior Regulatory Affairs Advisor, Star Entertainment) to Ms Arnott (Group Manager AML/CTF Financial Crime) and also copying in Mr Stevens, it was reported that suspicious money activity that pre- and post-dated Mr Stevens’ report was occurring. AUSTRAC notes that there was no evidence that Mr Stevens qualified or updated his report.

341    On 12 June 2019, Mr Buchanan (the then Due Diligence, Program Manager, SEG) sent an email to Ms Martin, Mr White and Mr Houlihan entitled “HKJC Sun City Report” (HKJC report) noting the report had been prepared by the Hong Kong Jockey Club (HKJC) due to the potential threat SunCity posed to the integrity of racing in Hong Kong. Mr Buchanan also noted that the report had been disseminated to senior management in the Hong Kong Police, Hong Kong ICAC, Australian Criminal Intelligence Commission and the Australian Federal Police. In this report, Mr Chau was noted as the founder of Suncity Group, an alleged member of an organised crime syndicate and recipient of USD$18 million in laundered funds following a cyber attack on the Federal Reserve Bank of New York.

342    On 22 July 2019, Mr Brodie notified Mr Hawkins and Ms Martin of the NSW Police Commissioner’s decision to exclude six individuals from Star Sydney associated with Suncity, including Suncity staff who worked in Salon 95.

343    On 15 August 2019, at the SEG Board meeting a paper was tabled entitled “Crown Resorts Ltd Media and Related Matters”. The Board was not informed of the suspicious cash transactions in Salon 95 the subject of CCTV footage, the nature of the HKJC report, Suncity’s breaches of controls in place in respect of Salon 95 and various persons connected with Suncity the subject of exclusion orders. In oral submissions, AUSTRAC submitted that as at this meeting there was no decision made to terminate any relationship with Mr Chau.

344    In July 2019 and August 2019, Star also became aware of media reports alleging that the Suncity junket was implicated in operating gambling platforms and facilitating underground banking and illegal gambling in a foreign country, noting Mr Chau’s connection to overseas organised crime syndicates. It was only after the airing of these allegations that Salon 95 was shut down in August 2019.

345    Star, however, continued to do business with Suncity. By early September 2019, Suncity was moved to another private gaming room, Salon 82, in which Star Sydney continued to allow Suncity exclusive access despite the fact that senior management knew the ML/TF risks posed by the junket in respect of its activity in Salon 95.

346    In October 2020, the Star Group temporarily suspended its dealings with junkets following evidence raised at the Bergin Inquiry concerning the suitability of junkets. In that same month, the SEG Board resolved that the Star Group would cease dealing with junkets.

347    In the period after October 2020, Star Sydney and Star Queensland determined to maintain business relationships with persons associated with junket activities including Mr Chau and Customers 3 and 20.

348    AUSTRAC submits, and Star accepts, that Star Sydney and Star Queensland did not carry out an appropriate ML/TF risk assessment of the high ML/TF risks of providing designated services through the junket channels in the period from 30 November 2016 to October 2020. Star also accepts that consequently, during this period, its Joint Part A Program did not include appropriate risk-based controls to identify, mitigate and manage the ML/TF risks of the provision of designated services through junkets. In this respect, Star accepts that from 30 November 2016, its Joint Part A Program did not comply with the requirements specified in the AML/CTF Rules for the purposes of s 85(2)(c) in breach of s 81 of the AML/CTF Act.

349    The conduct of Star in relation to junkets is very serious conduct for the purpose of penalty-setting. The information available to Star suggested not just that there was a risk of ML, but that ML was most likely occurring.

7.10    Star’s response to the KPMG Report, Bergin and other inquiries

350    AUSTRAC submits that, during the Relevant Period, Star became aware of serious deficiencies in its AML/CTF Program through reports prepared pursuant to Part 9.6 of the AML/CTF Rules. In addition, it became aware of serious concerns raised in inquiries into, and arrests of staff employed by, other casinos, which related to similar conduct engaged in by Star and certain customers that frequented Star. The events and reports that AUSTRAC drew my attention to were the arrest of Crown staff members, independent reports prepared by KPMG and BDO in relation to its joint AML/CTF program, the inquiry into Crown Resorts Limited under s 143 of the Casino Control Act 1992 (NSW) (Bergin Inquiry), the inquiry into Star conducted by Mr Bell SC commencing September 2021 (Bell Inquiry) and discussions with AUSTRAC in relation to remediation.

351    Firstly, AUSTRAC drew me to Star’s response to 18 Crown staff being detained in China. In a meeting in October 2016, the Star Board was briefed by senior management about the arrests, proposed initial response and implications. The initial response included moving all staff from China, but maintaining VIP relations in South East Asia and “Premium Mass” players. In this meeting, as part of a risk assessment it was advised in relation to VIP revenues:

[m]arket share gain opportunity is limited near term, but promising longer term, over a lower revenue base.

352    AUSTRAC notes a further Board update in December 2016, from Mr McWilliams and Ms Martin in relation to the situation in China. In this report, it noted that Crown had been “overly aggressive, both in promotion within China of its Australian gambling facilities and in its facilitation of money flows out of China”. In this meeting, the Board determined that the arrests were not an “industry-wide clamp down”, but that the real issue being addressed by the Chinese authorities was “money laundering and/or arranging illegal money flows”. The same document referred, under the heading “Future Business Model”, to steps that had been taken by Sands (i.e. a competitor) to put in place stringent processes around, inter alia, customer due diligence and source of wealth checks. It was also noted that Macau was in the process of tightening its AML laws, which would increase customer due diligence obligations, including in relation to customers’ sources of funds.

353    In February 2017, the Board received a further update from Mr McWilliams and Ms Martin in relation to China and steps taken to enable the resumption of activities in China which involved the use and transfer of customers to EEIS.

354    AUSTRAC submits that Star did not appropriately respond to the increased regulatory scrutiny and instead took this as an opportunity to increase its market share. That submission needs to be treated with a little caution. It is unsurprising that Star would be looking to ensure that whatever problems had been encountered by Crown were not replicated at Star, and would be focussed on whether it could maintain substantial business in China or even increase its business. However, I accept that Star did not give appropriate attention to the ML/TF risks of international channels from China, including Macau, and that this was a serious omission. That the Board updates themselves identified that Crown’s problems were in part the result of a focus by authorities on money laundering should have prompted greater focus by Star on that very topic.

355    Secondly, AUSTRAC emphasises the KPMG report, performed in November 2017 and reflecting the independent reviews of KPMG regarding Part A and Part B of Star’s Joint AML/CTF Program (KPMG Report).

356    KPMG noted that both Star’s ML/TF risk assessments and transaction monitoring were “red” (i.e. high risk) meaning that there was: an absence or breakdown in control procedures that led to high exposures; a breach of legal requirements and/or regulations resulting in material compensation and/or financial payouts; large individual or many smaller transactional errors; and issues arising from inadequate training. As part of this classification as “red” it was recommended that these issues be remediated within three months.

357    The summary findings in relation to ML/TF risk assessments noted:

SGR does not have an adequately documented ML/TF risk assessment methodology on which its ML/TF assessments have been performed.

SGR applies a default customer ML/TF risk rating of “Low” that has not been adequately explained or documented. The AML/CTF regulations require customers to be assessed for their ML/TF risks and it may be difficult for SGR to demonstrate how its ML/TF risk assessment is effective if it applies default ratings, particularly default ratings of low ML/TF risk.

We note that a customer who brings a significant amount of money into the casino will not automatically be assessed as higher than “Low” risk by SGR. In our view, these customers should be considered as potentially higher risk of being involved with the facilitation of ML/TF, which indicates that the customer ML/TF risk assessment could be improved.

The risk assessment does not consider terrorism financing as required by the AML/CTF Rules and does not consider in sufficient detail the ML/TF risk posed by specific parts of the business, in particular where the ML/TF risk may be higher. Jurisdictional risk is not considered and some of the customer risk ratings applied appear to understate the level of ML/TF risk.

358    It is not disputed by Star that its AML/CTF Program remained non-compliant throughout the Relevant Period, failing to remediate issues brought forward by the KPMG Report. However, AUSTRAC further notes that following the report, Star challenged a number of KPMG’s findings.

359    Senior management and members of the Board Risk & Compliance Committee of the Audit Committee were briefed on the KPMG Report on 23 May 2018, with the Board being briefed on 24 May 2018. In a series of meetings in June and July 2018, Star’s senior management sought to “clarify twenty two (22) aspects” of the KPMG Report. AUSTRAC submits that this evidences a reluctance to accept the findings and a desire to push back on them. It may be evidence of that, or it may be evidence of seeking to ensure that the report was accurate. AUSTRAC did not undertake an analysis (including of the knowledge and state of mind of the relevant persons) to enable me to determine that question.

360    The points that were challenged by Star included:

(a)    a default “low” customer ML/TF risk rating;

(b)    whether customers bringing significant amounts of money into the casino should be considered higher risk;

(c)    KPMG’s conclusion that junket participants are customers of Star, which in turn affected whether they formed part of their AML/CTF obligations; and

(d)    other findings in relation to junkets.

361    Despite these challenges, it was noted in the minutes of the Board meeting on 26 July 2018 that “KPMG confirmed that the findings and recommendation items in their original report will stand”.

362    The KPMG Report also raised concerns about Star’s transaction monitoring program, with the Risk & Compliance Committee receiving a report saying Star’s review of its automated transaction monitor systems and implementation of a new monitoring system was outstanding as of 3 December 2019. AUSTRAC notes that Star developed TrackVia, a new automated transaction monitoring tool and that this was implemented in April 2021, almost three years after the KPMG Report was received. It is admitted by Star that there was a lack of sufficient speed to implement a transaction monitoring system that had the ability to monitor transactions of critical risk customers and despite its implementation, the Program did not include appropriate automated transaction monitoring systems and controls having regard to the size, nature and complexity of Star’s business.

363    Thirdly, Star engaged BDO to conduct a review of Part A of Star’s Joint AML/CTF Program in 2020. Despite the Phase 1 and Phase 2 reports being positive and concluding that Star was compliant and effective, AUSTRAC notes that there were still deficiencies and limitations in these reports. As with the KPMG report, there were serious concerns about Star’s Transaction Monitoring Program and the limitations of Transwatch (Star’s automated transaction monitoring tool prior to TrackVia). The Phase 2 report dated August–September 2021, which had the intention of assessing TrackVia, noted that there were serious limitations including an inability to access Transwatch data, TrackVia data was limited due to the effects of the COVID-19 lockdown meaning that there was a limited ability to test systems at that time, and that the review of learnings derived from TrackVia was limited given its recent rollout. Star accepts that TrackVia was implemented with a lack of sufficient speed.

364    Fourthly, of note is the Bergin Inquiry into Crown, with public hearings commencing in January 2020 and a final report being delivered on 1 February 2021.

365    Star provided a paper to its Board in relation to the media and related matters concerning Crown on 15 August 2019. This paper noted:

(a)    the substantial media focus on Crown, its dealings with junkets and its international VIP business, particularly in relation to China, noting the arrests in 2016 of Crown employees;

(b)    investigations or referrals concerning Crown and Australian casinos including the Independent Liquor and Gaming Authority commencing an investigation;

(c)    that Star had formed a focus group to monitor media, update risk assessments on areas of vulnerability, action recommendations arising from a review of the Crown allegations and co-ordinate responses to regulator requests for information;

(d)    a list of the main allegations against Crown with what was said to be the “key control processes in place at The Star which mitigate against those risks”; and

(e)    a list of the key personalities and groups identified, with their history and status with Star.

366    The analysis in the paper described Crown as being “wilfully blind to the source of funds and source of wealth of junkets and key people”, which Star said was a potentially differentiating factor. As highlighted above, however, Star was already engaged in a number of high risk and non-transparent channels.

367    The Board was given updates regarding the Bergin Inquiry on many occasions both before and after the release of the final report. This included during Board meetings in December 2019, February 2020, March 2020, May 2020, August 2020, December 2020, February 2021, May 2021, June 2021 and September 2021. These updates provided limited engagement with how Star may need to change its conduct in light of the Bergin Inquiry. In September 2021, the paper presented included an assessment performed by HWLE of Star’s use of the Hotel Card channel, as a result of the Finkelstein Royal Commission highlighting Crown’s use of the same or similar channel. The assessment concluded that “[t]he practices of The Star did not involve any regulatory contraventions but arguably represented questionable commercial conduct. The facilitation and use of [China UnionPay] did not breach any Australian law”.

368    The paper also included a section dealing with the AML implications of the Hotel Card channel, which states:

The Star designed controls and procedures that sought to ensure that CUP cards could be used for gambling (within the full purview of its AML system) but not as a means of bringing cash to Australia.

…

Cage staff were careful to ensure that CUP debits did not become a means of withdrawing cash for general use by the cardholder. For most debits the ‘exchange’ was chip purchase vouchers or chips. In a relatively small number of instances, patrons who proposed to play EGMs were allowed an exchange into a small amount of cash, well under $10,000. The cage verified that such cash amounts were in fact used in EGMs as a prerequisite to any subsequent small cash withdrawal. In all cases, patrons who did not use the vouchers, chips or small cash amounts on casino play were banned from using CUP again.

369    As admitted by Star, no such restrictions were in place and as discussed above in Section 7.5.2, once funds were in a customer’s FMA, the customer could access the funds in any way permitted by Star, including cash withdrawals or transfers to bank accounts. In addition, AUSTRAC notes that Star had lodged at least one SMR in relation to a High Risk Customer’s use of the Hotel Card channel for what Star considered may have been for the purpose of getting cash out of China.

370    It is apparent that Star was too focussed on explaining to third parties how it was better than Crown, rather than giving proper attention to the lessons from the Bergin Inquiry for improving Star’s own practices.

371    Fifthly, in September 2021, Mr Bell SC was appointed to preside over the Bell Inquiry. Public hearings were held from March to June 2022, with a final report delivered in August 2022.

372    Star issued two ASX announcements in response to media reports which made allegations against Star on 11 and 12 October 2021. The first announcement suggested that the media reports were misleading. The second announcement included denials of certain allegations including that Star had kept the KPMG Report secret. Media reporting alleged that Star had engaged in similar conduct to that engaged in by Crown. The Bell Inquiry ultimately found Star engaged in conduct of the same nature as exposed in relation to Crown, and thus AUSTRAC submits that there seems to be no basis for claiming the reporting was misleading.

373    Sixthly, AUSTRAC notes that from September 2021 it met with Star and exchanged information in relation to remediation of its AML/CTF Program.

374    In a meeting between AUSTRAC and Star in September 2021, Star advised AUSTRAC that following the KPMG Report Star embarked on an uplift and rewrite of its AML/CTF Program. AUSTRAC noted in response that the information presented by Star did not give it confidence that Star was addressing the issues identified in the assessment. Following this meeting, AUSTRAC sought further clarification as to the “uplift” that Star was undertaking. Upon receiving this information, AUSTRAC noted to Star that there were a number of matters that Star did not fully address. AUSTRAC submits that Star’s admissions in these proceedings evidence the validity of AUSTRAC’s concerns at the time, with Star’s programs remaining non-compliant.

7.11    Conclusion

375    I take all of the matters set out in this section into consideration.

8.    OTHER MANDATORY FACTORS

8.1    Nature and extent of harm suffered

376    Section 175(3)(b) requires consideration of the nature and extent of any loss or damage suffered as a result of the contravention.

377    It is sensible to summarise what is common ground between the parties, drawn from the separate Statement of Agreed Facts dated 26 May 2025. Star operates in an industry known, internationally and within Australia, to pose high ML/TF risks. Casinos are vulnerable to laundering of proceeds from a range of serious and organised crime activities, primarily because they are cash intensive businesses, proceeds of crime are often in cash, and the source and ownership of cash is harder to trace compared to other forms of money.

378    During the Relevant Period, the designated services offered by Star facilitated the movement of money into and out of the casino environment, including across international borders, with cash turnover in the billions of dollars. By facilitating this movement of money without appropriate AML/CTF controls, Star exposed its banking partners and other financial institutions in transaction chains to ML/TF risks.

379    Although harm is unquantifiable, the key harm arising from a failure to manage the risk of ML/TF is the creation of the opportunity for such risks to be realised and go undetected. The failure to implement an appropriate program for managing the risk of ML and TF hinders the ability of law enforcement to investigate and prosecute serious crimes. ML and TF by their very nature expose the Australian community and financial system to loss or damage that extends beyond the amount of money laundered or used to finance terrorism. Money laundering facilitates drug trafficking, human trafficking, child exploitation, corruption, arms dealing and other crimes which cause real-world harm.

380    Star provided designated services to customers who posed higher ML/TF risks, including customers transacting through junkets or rebate programs, customers from foreign jurisdictions, and potentially PEPs. International customers often relied on CCFs provided by Star as a means of accessing funds on arrival at Star casinos. Those facilities enabled funds held in foreign jurisdictions (by customers or third parties) to be used in Australia without the need for a cross-border transfer.

381    Star also provided a range of designated services to customers during the Relevant Period through junket channels involving complex transaction chains, including the receipt of funds, account management, gaming activities and outward disbursement of funds involving different channels and jurisdictions. Exposure to some higher ML/TF risk jurisdictions is inherent in the junket operations sector as there is a particular vulnerability associated with jurisdictions with currency flight and gambling restrictions in place, as these measures create demand for covert money remittances, which can be exploited by criminal groups, and having a customer base composed of predominantly foreign residents can increase the junket operations sector’s attractiveness and exposure to transnational serious and organised crime, simply due to its geographical reach. A material source of Star’s revenue was sourced from junkets ($1.178 billion across FY18–FY21, representing approximately 14% of Star’s total gross revenue in that same period) which were known by Star to pose higher ML/TF risks.

382    Appropriate risk-based controls were not in place to enable Star to understand the sources of money moving through these high-risk channels, or whether there was a risk that money was illicit. These business practices and risk management failures exposed Star to the risk of money laundering. For example:

(a)    failure to appropriately identify, mitigate and manage the ML/TF risks of FMAs and SKAs made Star vulnerable to criminal exploitation;

(b)    the EEIS accounts were at risk of being exploited by organised crime; and

(c)    the failure to appropriately identify, mitigate and manage the ML/TF risks of providing designated services through the Star Patron Account channel made Star vulnerable to criminal exploitation.

383    As a result of Star’s non-compliance with the AML/CTF Act, the Australian and global community and financial system have been exposed to systemic ML/TF risks over many years. The scale of the contravening conduct, the fact that it continued for the duration of the Relevant Period, the high volumes of funds moving through Star’s casinos in circumstances of high ML/TF risks, and the known connections between some of Star’s customers and organised crime, indicate the scope of the opportunity for ML/TF risks to be realised.

384    It can be inferred that the contravening conduct engaged in by Star caused not insignificant loss or damage to the Australian community and financial system for the following reasons:

(a)    The failure of Star to appropriately identify, mitigate and manage the ML/TF risks associated with the designated services it provided and to ensure appropriate systems and controls to fully and accurately report suspicious transactions resulted in inadequate controls, and reduced transparency, in relation to international payment flows.

(b)    The contraventions exposed the Australian community and financial system to the systemic risk of ML/TF over the course of at least six years.

(c)    By offering designated services that enabled money to be transferred in non-transparent ways and without subjecting customers to appropriate due diligence, Star created higher ML/TF risks compared to businesses that were compliant. For example, organised crime could remit money through Star in ways that involved less transparency than remitting money directly through other compliant financial institutions.

(d)    The opportunities created by the contravening conduct exposed Star’s banking partners and other financial institutions to downstream ML/TF risks, as Star’s customers’ money flowed through bank accounts.

(e)    The contravening conduct undermined the ability of AUSTRAC and law enforcement agencies to trace money to its source, resulting in the loss of opportunity to detect and disrupt possible suspicious and unlawful activity and to recover proceeds of crime, including with respect to predicate crimes such as drug trafficking.

(f)    The reduced transparency resulting from Star’s conduct undermined the reputation, integrity and security of Australian and global payments systems.

385    I accept these agreed matters. The following additional matters are relevant.

386    The nature of the contravention penalised by s 175 is such that it may be difficult to identify any specific or quantifiable harms, especially given that the very object of money launderers is to obscure, mixing illegitimate with legitimate funds. In Westpac, Beach J observed at [172]:

Money laundering is fundamentally about obscuring the origin and destination of funds. For this reason, payment transparency is one of the basic foundations of AML/CTF risk management and compliance. Payment systems that are not transparent can be exploited by organised crime, can facilitate tax offences and can impede law enforcement investigations.

387    As observed in Crown at [109], in the absence of appropriate risk-based ML/TF assessments and controls, the key harm arising from a failure to manage ML/TF risks is the creation of the opportunity for ML/TF risks to be realised and proceed undetected. AUSTRAC accepts that the extent to which Star’s vulnerabilities were exploited cannot be determined.

388    Nevertheless, AUSTRAC submits that the Court may infer from the contravening conduct that harm or potential harm has occurred as a result of that conduct: Crown at [166]. This much is common ground, as set out above. Indeed, having regard to the particular evidence summarised above (especially the evidence about the way that cash was presented and handled at Star, and the backgrounds of various individuals), it may be inferred that Star’s contraventions permitted amounts of money to be laundered through the various facilities which Star provided or permitted. I cannot draw the same inference that terrorism financing was facilitated, but Star’s conduct certainly created a material risk of this.

389    The facilitation of ML and TF is very harmful to society. Money laundering supports criminal activity, and often very serious criminal activity. It hampers detection of crime, permits payments for criminal activities to be made, and permits criminal organisations to function effectively. It also facilitates corruption. It is unnecessary to expand on why the facilitation of TF is socially harmful.

390    Star submits that it is difficult to estimate the loss or damage caused by its contravening conduct. It says that the extent to which the ML/TF risks were realised cannot be determined because its failure to manage those risks undermined the capacity for those risks to be identified. It accepts the evidence of Detective Inspector Gilbert Laverdure that money laundering is a key enabler of organised crime networks’ capacity to cause significant economic and social harm, noting that it has potentially exposed the Australian community and financial system to loss and damage extending beyond the amount of money laundered or used to finance terrorism. As such, it says that it is appropriate for the Court to draw an inference that the contravening conduct caused a not insignificant loss or damage to the Australian community and financial system.

391    To the extent to which there is any distinction between “significant” and “not insignificant”, I infer that the harm caused by the contraventions was significant.

392    AUSTRAC submits that it is useful to have regard to Star’s turnover from its customers and services as it represents the volume of money transacted through the provision of designated services by Star without appropriate risk management. AUSTRAC says that the turnover figures indicate the scope of the opportunity for ML/TF risks to be realised. It submits that this approach is consistent with Westpac, where Beach J addressed the substantive impacts that Westpac’s contravening conduct had on the objects of the AML/CTF Act, including by reference to the value of transactions affected by the contravening conduct.

393    The Suncity junkets had a high turnover. In respect of these junkets alone, the amount of cash turnover in the period 30 November 2016 to November 2020 exceeded $11.8 billion for Star Sydney and $2.9 billion for Star Queensland.

394    In addition:

(a)    junkets funded by High Risk Customers during the Relevant Period had a cumulative cash turnover of approximately $41.8 billion and $23 billion at Star Sydney and Star Queensland respectively;

(b)    junkets operated by High Risk Customers during the Relevant Period had a cumulative cash turnover of approximately $54.9 billion and $25.2 billion at Star Sydney and Star Queensland respectively;

(c)    during the Relevant Period there was a cumulative cash turnover on High Risk Customers’ gaming activities on junket programs of $35 billion at Star Sydney and $14.5 billion at Star Queensland;

(d)    Star Sydney recorded a total cumulative cash turnover of $14.4 billion for High Risk Customers’ gaming activity (with customer losses of approximately $80 million) other than junket programs during the Relevant Period;

(e)    Star Queensland recorded a total cumulative cash turnover of $8.8 billion for High Risk Customers’ gaming activity other than junket programs, with losses of approximately $62.4 million;

(f)    between 30 November 2016 and 17 September 2020, there were over 900 unusual or suspicious junket incidents involving cash totalling more than $242 million that occurred in connection with junkets at Star Sydney and Star Queensland;

(g)    over $990 million was deposited through the Hotel Card channel at Star Sydney from 2013 to 18 February 2022, with over $493 million being deposited on and from 30 November 2016;

(h)    approximately $55.4 million was deposited through the Hotel Card channel at Star Queensland casinos from 1 January 2017 to 8 March 2020;

(i)    from 30 November 2016 to April 2021 inclusive, at least $250 million (as a total in AUD) was remitted for the benefit of Star customers via accounts held in the name of EEIS. Of this, at least $180 million was deposited by third parties into accounts held in the name of EEIS for the ultimate receipt by customers at Star, including approximately $81.8 million deposited by admitted third-party remitters;

(j)    from 30 November 2016 to 30 November 2022, at least AUD$150 million and HKD$130 million was remitted for the benefit of High Risk Customers at Star via accounts held in the name of EEIS;

(k)    deposits made by or on behalf of High Risk Customers into a Bank of China (Macau) account totalled HKD$80,030,620 and AUD$36,297,438.08; and

(l)    approximately $49,809,838 was remitted through EEIS as part of the Kuan Koi channel.

395    Of course, turnover is not a direct measure of harm or a proxy for harm. However, I accept that the very large amounts involved support the conclusion set out above that Star’s contraventions permitted amounts of money to be laundered through the various facilities which Star provided or permitted.

396    I conclude that this factor is a factor of considerable weight.

8.2    Previous findings against Star

397    No previous findings have been made against Star for the purposes of ss 175(3)(d), (e), (f) and (g) of the AML/CTF Act.

398    AUSTRAC submits, and Star accepts, that this does not displace the necessity for a substantial penalty in the present case in light of the seriousness of the contravening conduct. Both parties observe that a first-time contravention does not necessarily give rise to a substantial discount, particularly where the contravention is serious and has occurred over a considerable period of time: Crown at [183].

399    Nevertheless, I take the absence of any previous findings into account.

9.    OTHER PENALTY FACTORS

9.1    The benefit from the contravening conduct

400    Where the profit from contravening conduct is ascertainable, it may assist in the determination of an appropriate penalty, in a direct sense, and consistently with the principle that contraveners should not profit from their wrongs. The present case is not one where profit is calculable in that way. Nevertheless, it is relevant to consider more broadly whether Star benefited from the contraventions.

401    AUSTRAC submits that Star stood to gain (and did gain) considerable monetary benefits from pursuing revenue through channels and customers posing high ML/TF risks. I accept that this is so.

402    However, Star submits that it is not possible to determine a precise figure for the profit derived by Star from its contraventions of the AML/CTF Act: firstly, because such a calculation would require retrospective assumptions to be made about how Star would have managed ML/TF risks at various points in time; and secondly, because turnover and revenue are distinct from profit. Star submits that turnover and revenue are not appropriate metrics to measure the benefit derived by Star from its contraventions because turnover is the sum of the bets that a customer has wagered, consisting of customer wins and losses, and revenue does not take into account the costs incurred by Star. Star submits that the better metrics to use are EBITDA and NPAT, NPAT providing the basis for determining the availability of distributions to investors. Star observes that EBITDA and NPAT of SEG for FY17-22 represented 20.7% and 3% respectively of SEG’s gross revenue over this same period.

403    I accept that turnover from gaming activities can be somewhat unhelpful as a measure of benefit. A given customer may wager the same dollar many times before losing it or withdrawing it. For that reason, wagering businesses tend to be high-turnover, low-margin businesses. Turnover in respect of a particular customer might be many times the amount of revenue earned from that customer, even before allowing for costs.

404    Likewise, I accept that measuring the revenue from the contraventions (rather than from the channels or customers per se) is not possible because it requires consideration of the extent to which Star could have earned revenue from the same channels or customers but with compliant conduct. The agreed facts and other evidence before the Court do not permit a counterfactual analysis of that sort. For example, there has been no attempt to assess whether a particular channel could still have been used, but with stricter controls or limits, and to what extent the revenue from that channel would have been reduced in those circumstances. The same can be said for the EBITDA and NPAT from that channel.

405    Nevertheless, revenue (and likewise EBITDA and NPAT) provides an indication of the scale of the business which was affected by conduct in contravention of the AML/CTF Act. Further, at least some of the conduct in question would not have been possible to conduct in a compliant way. For example, some of the High Risk Customers would be unlikely to be able to be customers in a manner consistent with Star’s AML/CTF obligations.

406    The following paragraphs summarise figures for particular types of business.

407    In relation to junket channels, in the period from 30 November 2016 until October 2020, the level of revenue from designated services provided through junket channels to Star Sydney exceeded $1 billion and to Star Queensland exceeded $267 million.

408    The following table contains the revenue, variable contribution (revenue less direct cost), EBITDA and NPAT in the period FY17-21 that Star derived from its international junket business.

409    In relation to its rebate programs, Star recorded turnover of over $116,645,159 in respect of its international rebate programs, and $1,354,230,384 in respect of domestic rebate programs between October 2020 and April 2022.

410    Mr Krile calculated the revenue derived from rebate programs between October 2020 and April 2022. He calculated that there was negative revenue arising from the fact that Star paid more to customers on domestic rebate programs than it gained on international rebate programs, such that Star did not derive a profit from rebate programs between October 2020 and April 2022.

411    In relation to High Risk Customers, I have recorded the relevant turnover figures in Section 7.6. There is a potential double-counting if the figures for junkets are taken into account. Addressing this overlap, Mr Krile calculated that Star earned revenue of approximately $1.33 billion from High Risk Customers. There is no direct measure of EBITDA or NPAT from High Risk Customers. Applying the percentages from the overall business would suggest an EBITDA of $275.3 million and an NPAT of $39.9 million. However, these are approximate only because costs are not uniform across the business.

412    AUSTRAC submits that it is necessary to have regard to the circumstance that Star saved money which it would otherwise have been required to spend to ensure that its systems and processes were compliant. It notes that Star’s expended and projected remediation costs as set out in Mr Krile’s and Ms Mok’s affidavits are:

413    The figures for capex reflect capital expenditure on remediation. For example, for FY25, the total remediation cost of $106.8 million comprises operating costs of $66.7 million and capital expenditure of $40.1 million. AUSTRAC says that, rather than this being a factor in discounting the penalty, these costs reflect in part necessary expenditure to bring Star’s Joint AML/CTF Program into compliance which had otherwise been avoided.

414    I accept that part of the benefit from the contravening conduct is the avoidance of compliance costs over the Relevant Period. However, costs incurred subsequently (being the costs identified above) are not a benefit per se: costs are not benefits. It is of course possible that Star is better off because it did not incur proper compliance costs on an annual basis, and the savings are greater than the subsequent one-off cost of overhauling its systems and catching up. I do not have sufficient information to assess or quantify that.

415    In an overall sense, I accept that Star obtained significant benefits from the contravening conduct and I take this into account as a significant factor. However, there is no information from which it could be concluded that the benefits were greater than the penalties proposed by either party.

9.2    Board and senior management involvement and corporate culture

416    AUSTRAC submits that Star’s Board and senior management were closely involved in the contravening conduct. It addressed detailed submissions to this topic, as summarised below. Star did not contradict these submissions but emphasised different matters.

417    It is important to be clear about what is meant by board and senior management involvement in the contravening conduct. First, it is necessary to adopt some precision about the nature of the conduct. For example, in relation to channels, the contravention flows not just from adopting a particular channel per se but from Star’s Joint Part A Program failing to make appropriate provision for processes or controls to manage ML and TF risk. In many cases, AUSTRAC’s submissions about the “conduct” are not completely aligned with a proper identification of the conduct amounting to a contravention. Secondly, there is a question as to the relevant state of mind of the Board or senior management. Consistently with this, the list of “French factors”, or modified French factors, would normally involve the consideration of the deliberateness of the conduct prior to the consideration of the extent of involvement of senior management. In the present case, the parties have addressed the matter differently.

418    In relation to the second of these issues, AUSTRAC mixes up different states of mind in a somewhat confusing way across two sections of its written submissions: section G.2 (“Board and senior management involvement and corporate culture”) and section G.3 (“Deliberateness of Star’s conduct”). At the commencement of section G.3, AUSTRAC makes the following submission:

In determining whether Star’s conduct was deliberate (which is an aggravating penalty factor) the question is not whether Star intended to contravene the specific provisions in question. Rather, the relevant inquiry is whether Star ‘courted the risk’ of doing so.

419    The submission cites Reckitt Benckiser at [136] and Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540; [2015] FCA 330 (Coles) at [74]. This is not an accurate statement of principle.

420    In Reckitt Benckiser, at [129]–[131], the Full Court rejected the approach of the primary judge of classifying conduct in three ways, being knowing contraventions, recklessness, and innocent contraventions, rather than recognising that the characterisation of kinds of conduct might involve more nuanced considerations than are capable of being conveyed by that limited choice. Their Honours then observed (at [131]):

If a contravention does not involve any state of mind then it is for the party asserting any particular state of mind (be it a deliberate flouting of the law, recklessness, wilful blindness, “courting the risk”, negligence, or innocence or any other characterisation of state of mind) to prove its assertion. If, in the event, neither party discharges its onus to establish any particular state of mind in relation to the contraventions, the Court determines penalty on no more than the fact of the proscribed nature of the conduct (see, by analogy see R v Olbrich [1999] HCA 54; (1999) 199 CLR 270 at [22]-[28]). However, if any degree of awareness of the actual or potential unlawfulness of the conduct is proved then, all other things being equal, the contravention is necessarily more serious. Such awareness may be able to be inferred from the very nature of the conduct or representations constituting the conduct. However absence of such proof does not establish a mitigatory state of mind (see, by analogy, R v Storey [1998] 1 VR 359 at 369, quoted with approval by the majority in Olbrich at [27]; see also [25]). It means only that the neutral state of mind required for liability has not been disturbed for the purposes of penalty. If a contravening party wishes to go beyond the neutral statutory state of mind for liability and positively assert a lack of consciousness of the character of the conduct for the purposes of penalty, that is a circumstance of mitigation which the contravening party must prove.

421    Thus, contrary to AUSTRAC’s submission, it is not the case that the question is not whether Star intended to contravene the specific provisions in question, or that the relevant inquiry is whether Star “courted the risk”. Rather, whether Star “courted the risk” is merely one relevant inquiry. “Courting the risk” is one possible state of mind which AUSTRAC could allege along the spectrum of possible states of mind. Having regard to AUSTRAC’s submissions, I understand AUSTRAC to be alleging a case involving a courting of the risk.

422    In the present context, it is relevant to distinguish between involvement and knowing involvement (or various other mental states). Involvement in (or knowledge about) the manner in which the services are operating at Star is different from knowledge that Star is not complying with its AML/CTF obligations, or involvement in the failures of Star’s AML/CTF programs.

423    AUSTRAC refers to three matters, which Star has not contradicted.

424    Firstly, Star’s senior management were involved in the design and implementation of the Hotel Card channel, the Kuan Koi channels, the use of other overseas remitters and the EEIS channel, with the Board approving the establishment of the Kuan Koi and EEIS channels. For example, it was Star’s CFO, Mr Barton, who executed the initial agreement to establish the Kuan Koi channel in January 2018. This channel is further discussed above in Section 7.5.3.

425    The EEIS channel was presented to Star’s Board by Mr Bekier in September 2017, and a further proposal to establish a cheque cashing facility that would “[change] the nature of payments from repayment of gambling debts in Australia to repayment of loans in Hong Kong” and would “[provide] customers the opportunity to repay their loan in Hong Kong to a Star Group bank account rather than to the casino operations bank account in Australia” was presented by Mr Barton to Star’s Board on 24 May 2018. This channel is further discussed above in Section 7.5.5.

426    A further update was given to the Board on 28 September 2018, where the Board was advised that customers could repay cheque cashing facilities through the EEIS bank accounts via EFT, noting that if customers could only repay funds with cash, the Star sales team may refer that customer to money changers but that the business does not engage with those entities directly.

427    AUSTRAC observes that at all material times, Star’s Board was expressly on notice of the intended purpose of the EEIS channel, being to obscure the source of funds being remitted into Star casinos. AUSTRAC further submits that Star’s Board was on notice that customers who could only make payments via cash were being referred to money changers.

428    Although AUSTRAC addressed the Court on these matters, the relevant contravention is not, to take the example of the EEIS channel, Star’s conduct in offering that channel. The relevant contravention is the failure of Star’s Part A Program to comply with the AML/CTF Rules having regard to the risk created by the EEIS channel. AUSTRAC did not address the Court on the involvement of the Board or senior management in that matter. It did not, for example, address on whether the Board considered the Part A Program, what the Board was told about the management of ML or TF risks in relation to the EEIS channel (or the other channels), or what instructions were given about the Part A Program or about the management of ML/TF risks.

429    By way of example, the very document relied upon by AUSTRAC to submit that the Board was on notice that customers using the EEIS who could only make payments via cash were being referred to money changers stated that:

Management continue to streamline processes around the money lender process in order to lower the impact to customers whilst maintaining a robust risk and control environment.

430    AUSTRAC did not address me on the involvement of senior management and the Board in the overall conduct constituting the contraventions, rather than that part of the conduct constituting the establishment of the channels. It is entirely possible that the Board and senior management were well aware the ML/TF risks of the channels were unacceptable. It may have been that the Board and senior management were reckless or negligent in relation to compliance with Star’s AML/CTF obligations (which would not be a deliberate contravention, but a lesser state of mind). However, these matters would require careful consideration of the precise information available to the Board and to relevant members of senior management, and what the evidence reveals about their state of mind. AUSTRAC did not address these matters in relation to the overseas remittance channels. It is not for the Court to undertake its own exercise in this regard.

431    The involvement of senior management and the Board in the establishment of the overseas remittance channels and their continuation is something I take into consideration, and I give it some weight.

432    Secondly, in relation to junkets, AUSTRAC submits that at all times the Board and senior management were aware of the high ML/TF risks presented by junkets. That submission in relation to the Board is not supported by the documents to which AUSTRAC refers, as mentioned briefly in Section 7.9 above. In a board paper dated May 2018, the Board was told this:

In May, concerns emerged around certain activities undertaken at the junket service desk in Salon 95. At present functions at the service desk are limited pending the roll out of detailed processes for the junket representatives in that salon. It is expected that training will be completed by 8 June, with regular on-going compliance monitoring following resumption of services at the service desk.

433    Likewise, in a board paper dated 15 August 2019, publicity around junkets in association with Crown was identified, but the Board was told of the steps that Star had taken to mitigate against AML/CTF risk and how this distinguished Star from Crown. AUSTRAC’s submissions note that the Board was not informed of the suspicious cash transactions in Salon 95 the subject of CCTV footage, of the HKJC report in the hands of various Star executives and what that report revealed in relation to Mr Chau’s links to organised crime, nor that Suncity had breached controls in place in respect of Salon 95 and that various persons connected with Suncity were the subject of exclusion orders. This suggests the Board was being kept in the dark. It is of course quite possible there is other material relating to the knowledge of the Board to which the Court was not taken.

434    I therefore accept that Star’s senior management (but not the Board) was aware of the ML/TF risk from junkets, and from Suncity in particular, and that senior management continued to permit junkets (including Suncity) to operate at Star. That is a significant matter and I give it weight.

435    I have noted the risks and chronology with regard particularly to the Suncity Service Desk at Salon 95 above in Section 7.9. AUSTRAC notes in this regard that Star’s senior management continued to allow the provision of designated services to High Risk Customers associated with the Suncity junket despite the high levels of ML/TF risk. I give this matter some weight.

436    Thirdly, Star’s senior management was aware that Star Queensland continued to provide designated services to customers subject to exclusion orders issued by law enforcement in NSW. This has been set out above in Section 7.8. I give this matter some weight.

437    AUSTRAC also makes a submission about Star’s corporate culture. AUSTRAC submits that Star’s corporate culture was not conducive to compliance with the AML/CTF Act. It submits that instead of proactively engaging with ML/TF risk, Star was reactive in response to adverse media coverage, and otherwise treated AML/CTF compliance as a “road block” to profitable business. AUSTRAC also relies upon Star’s response to the KPMG Report and the Bergin Inquiry. In relation to the KPMG Report, AUSTRAC submits that the Star Board and senior management were put squarely on notice of systemic compliance failures in respect of its Joint AML/CTF Program after receiving the KPMG Report, which identified serious deficiencies in relation to AML/CTF risk assessments and transaction monitoring. AUSTRAC says that instead of immediately addressing the matters in the KPMG Report, Star engaged in a period of consultation in which senior management sought to challenge a number of KPMG’s findings.

438    For its part, Star in its written submissions says that, given the deficiencies in Star’s Part A Program, the capacity of the Board and senior management to oversee and manage the Part A Program effectively was diminished or weakened. Further, it accepts that there was inappropriate reporting to the Board and senior management in relation to the ML/TF risks relating to the use of the Hotel Card channel, Salon 95, Suncity and the use of international third-party remittance agreements to facilitate transfers of money for gambling.

439    I accept that Star had a corporate culture of not proactively engaging with ML or TF risk, and I give weight to that matter.

9.3    Deliberateness of Star’s conduct

440    I have dealt with aspects of this topic earlier, including that AUSTRAC submits that the relevant question is whether Star “courted the risk” of infringement. That is not the only relevant question. However, it reveals how AUSTRAC is putting its case on deliberateness: i.e. AUSTRAC contends that Star courted the risk of contravention of the AML/CTF Act.

441    I have referred to relevant principles in Section 9.2 above. I have already discussed that conduct which AUSTRAC emphasises is “deliberate” (for example, that Star engaged in deliberate conduct to evade Chinese capital controls) is not the same as a deliberate breach of the AML/CTF Act, or some deliberate failure to deal with ML or TF risk, or some courting of the risk of contravention. AUSTRAC’s submissions do not draw the relevant distinction. Further, AUSTRAC’s submissions roll up the separate concepts of whether Star ought to have known of risk (and whether risk was obvious), and whether Star was aware that the management and control of ML or TF risk was inadequate but chose to plough on regardless. This mixes together alleged negligent conduct with alleged deliberate conduct. For example, AUSTRAC makes submissions like “The risks of unlawful conduct were glaringly obvious” in the section dealing with an allegation of deliberate conduct. AUSTRAC could have addressed on constructive knowledge, but did not do so.

442    The Court did not receive the assistance it should have received on this topic. The penalty could have been higher if more had been demonstrated.

443    Notwithstanding this, I conclude that in some respects Star courted the risk of contravening the AML/CTF Act. The evidence to which I was taken reveals that Star approached AML/CTF regulation as a roadblock to its business which was to be overcome where possible by doing what it could to allow money to flow before it was prevented, rather than proactively identifying and managing risk. For example, in an internal Star international marketing presentation sent on 3 August 2018 by Mr Booth (Project Manager, EEIS Project) to Mr White (General Counsel Corporate, SEG) and copying Mr Hornsby, Mr Whytcross, Mr Brodie and Ms Arnott, the following appears on the first slide:

IRB customers are facing ever increasing challenges to remit and receive funds to and from The Star.

The Star is developing new payment pathways including EEIS, to overcome these challenges. Development of new pathways has to be continuous in order to address the ever rising tide of AML/CTF regulations as well as respond to pressure from North Asian authorities to stem capital outflows.

444    Likewise, in its written submissions, Star accepts that it had knowledge of the ML/TF risk associated with Suncity and that, despite possessing that knowledge, Star continued to allow the Suncity junket exclusive access to Salon 95 until September 2019 and Salon 82 thereafter until March 2020. Further, Star accepts that it continued to maintain a business relationship with persons associated with this junket’s activities, and about whom suspicions had been formed, after October 2020 when Star suspended junket activities. Star accepts that these matters are aggravating. As stated in Sections 7.9 and 9.2 above, I accept that Star’s senior management was aware of the high ML/TF risks associated with junkets and yet continued to pursue them without considering how such risks would be identified, mitigated or managed. In this sense, I accept that Star at least courted the risk of contraventions in relation to ML/TF risks arising in relation to junkets.

445    I also accept that Star courted the risk of contraventions in relation to some Excluded Customers who were known by Star to have alleged links to organised crime or to be underworld figures. I reach the same conclusion in relation to the High Risk Customers where the activity was suggestive of money laundering.

446    These matters are aggravating matters, and I take them into consideration and give them weight when assessing an appropriate penalty.

447    AUSTRAC also relies upon what it describes as the delayed response to the KPMG Report and the Bergin Inquiry. In relation to the KPMG Report, AUSTRAC submits (footnotes excluded):

The Star board and senior management were put squarely on notice of systemic compliance failures in respect of the Joint AML/CTF Program after receiving the KPMG Report on 23 and 24 May 2018. As set out in Part F.1.7.2 above, the KPMG Report identified serious deficiencies in relation to ML/TF risk assessments and transaction monitoring which required urgent remediation. Instead of taking immediate action to address these matters, Star engaged in a period of consultation with KPMG during which Star senior management (including the CEO, Mr Bekier, CRO, Mr McWilliams and Group General Counsel, Ms Martin) sought to challenge a number of KPMG’s findings. A new transaction monitoring tool was only introduced three years later, in April 2021, and Star admits its transaction monitoring program remained deficient for the rest of the Relevant Period.

448    There is no doubt that Star’s response to the KPMG Report was seriously deficient. However, in order to elevate it to deliberate conduct, it would be necessary for AUSTRAC to trace through the knowledge that Star had that the observations of KPMG were correct, or (for example) some evidence that the matters raised with KPMG were spurious and known to be spurious, or some other basis for contending that the engagement with KPMG was not genuine. AUSTRAC has not undertaken any such exercise.

449    Likewise, in relation to the Bergin Inquiry, AUSTRAC complains that Star’s response to the inquiry was delayed until the release of the final report, and that following the final report, Star failed to reflect on whether it had previously engaged, or was continuing to engage, in conduct that was the subject of criticism in the report and that, to the contrary, Mr Bekier made public statements which gave the misleading impression that Star’s conduct was clean and compliant, and more compliant than other industry participants. Again, although Star’s response to the Bergin Inquiry was inadequate, in order to elevate it to deliberate conduct, AUSTRAC would need to address the knowledge of Star about the deficiencies of its AML/CTF Program and procedures or otherwise address the state of mind of Star. For example, Mr Bekier identified matters that distinguished Star from Crown, but AUSTRAC has not made submissions to the Court as to why Mr Bekier must have known those matters to be incorrect.

450    It may well be that Mr Bekier knew that the matters he relied upon were hollow. It may well be that, following revelations at the Bergin Inquiry, Star knew that some of its practices involved unacceptable ML/TF risk and proceeded regardless. But it is for AUSTRAC to address those matters in detail if it seeks findings of deliberate conduct, or conclusions that Star “courted the risk” of relevant contraventions, including by identifying precisely what Star knew about relevant deficiencies in its AML/CTF practices or otherwise establishing the relevant state of mind of Star. AUSTRAC has not undertaken that exercise, and it is not for the Court to rove through voluminous material to see if there is anything supporting the contention.

9.4    Star’s cooperation, contrition and remediation

451    AUSTRAC notes that following Pattinson, cooperation with the regulator has been recognised as being relevant to deterrence in at least three ways:

(a)    specific deterrence, by demonstrating contrition and acceptance of responsibility;

(b)    general deterrence, by reinforcing the strength and integrity of the regulator and the regulatory process; and

(c)    the utilitarian value of the regulatory process, in the sense of facilitating the course of justice – and by freeing up the regulator’s resources to investigate and bring other proceedings, which itself contributes further to general deterrence.

See, for example: Fair Work Ombudsman v 85 Degrees Coffee Australia Pty Ltd [2022] FCA 1317 (Bromwich J) at [51]. See also Fair Work Ombudsman v 85 Degrees Coffee Australia Pty Ltd (2024) 331 IR 106; [2024] FCA 576 (Bromwich J) at [52]–[56].

9.4.1    Cooperation – the period prior to commencement

452    In the period prior to commencement, Star waived legal professional privilege over all documents produced to AUSTRAC in response to compulsory notices. In doing so, Star provided AUSTRAC with information it may otherwise not have been able to obtain or rely on in its investigation and the proceedings. This is a matter that I take into account.

453    AUSTRAC says, however, that this must be tempered by Star’s inappropriate claim of legal professional privilege over the KPMG Report prior to this concession and the nature of Star’s compliance with AUSTRAC’s compulsory information gathering powers.

454    AUSTRAC first requested a copy of the KPMG Report in September 2018, prior to conducting an on-site assessment of Star. Star declined to provide a copy in October 2018, asserting that this was covered by legal professional privilege, instead providing a copy of the KPMG engagement letter. Following this, in September 2019, AUSTRAC issued a compulsory notice pursuant to s 167 of the AML/CTF Act seeking, among other things, a copy of the KPMG report.

455    Star responded to this request in October 2019 claiming that the KPMG Report was covered by legal professional privilege and did not produce the report. AUSTRAC notes that further discussions were had between AUSTRAC and Star, with legal professional privilege continuing to be asserted. In its submissions to the Bell Inquiry, Star accepted that the claim was “an error, and that it ought not have been made”. AUSTRAC submits that the deficiencies in Star’s AML/CTF Program may have been rectified in a more timely manner had it received the report in September 2018 when requested rather than in 2020, and that Star’s unwarranted claim to privilege hindered AUSTRAC’s investigations. I accept this submission.

456    AUSTRAC had other concerns with Star’s compliance with additional s 167 notices that it issued to Star. These concerns included:

(a)    inaccurate responses by Star, for example, indicating that a number of customers had not received designated services when it was subsequently conceded that they had;

(b)    inappropriately redacting documents without adequate explanation; and

(c)    not producing all responsive documents and only producing what Star asserted was possible in the time allowed despite AUSTRAC granting extensions for production.

457    AUSTRAC notes ongoing difficulties with compliance with the s 167 notices throughout the Enforcement Investigation. It notes that this inhibited the efficient investigation of the conduct the subject of these proceedings, and that, to the extent that Star could be said to have cooperated with AUSTRAC prior to the commencement of these proceedings (noting that compliance with s 167 notices is not voluntary), any recognition should be discounted in light of the above. Further, noting the issue of legal professional privilege, whilst AUSTRAC accepts that legal professional privilege was waived by Star, it also submits that it is relevant that this required the exchange of numerous letters before the issue was resolved.

458    Star accepts that its compliance with s 167 notices was “not perfect”.

459    Therefore, in relation to the pre-commencement period, Star must be given credit for waiving privilege in numerous documents and otherwise cooperating, but this must be tempered by the other matters identified above.

9.4.2    Cooperation – the period after commencement

460    In relation to cooperation following commencement, it must be recognised that Star has made a very large number of admissions which has materially reduced the burden on AUSTRAC and on the use of public resources to conduct what would have been a very large and complex hearing.

461    AUSTRAC says that the KAD was only agreed in March 2025 and that both parties had expended significant time and cost to reach that point, which is not a case of a respondent making full and complete admissions at the earliest possible opportunity. In my view, that criticism has to be treated with some caution. The resolution by agreement of a document of the size and complexity of the KAD (along with the other admissions made by Star) necessarily is a long and detailed process. The cooperation involved in resolving such a document by consent ought not be unduly discounted on the basis that it was not concluded quickly. Further, I have no way of knowing if the time was extended by the failure of Star to make relevant concessions or the failure of AUSTRAC to put reasonable propositions, or both, or neither. Star is entitled to some credit for the admissions that it has made and the cooperation therefore provided.

9.4.3    Contrition

462    There is a significant debate between the parties as to whether Star can be said to have expressed contrition.

463    AUSTRAC relies upon certain observations of Lee J in Crown at [212], where his Honour said that:

Contrition means far more than accepting the reality of a stiff penalty when one is caught and getting rid of those who were primarily responsible. Whether there is real contrition at a corporate level and insight will only be evident from future conduct.

464    I do not interpret those observations as purporting to express some limitation as a matter of principle on the means by which contrition may be expressed, confining it to future conduct. If that were so, the principle would be expressed too narrowly.

465    If contrition is demonstrated, it may reduce the penalty otherwise appropriate for the purposes of specific deterrence. A person who is already remorseful might require less to be deterred from repeat conduct than a person who has no remorse: Commissioner of Taxation v Bogiatto (No 2) [2021] FCA 98 at [77] (Thawley J). As Lee J observed in Australian Securities and Investments Commission v Bekier [2026] FCA 756 at [93], [99]:

[T]he relevance of remorse or contrition lies not in punishment for its absence but in its possible bearing upon the level of specific deterrence required. A demonstrated appreciation of wrongdoing may provide some foundation for concluding that a lesser sanction will nevertheless achieve deterrence. Conversely, where such evidence is absent, the Court may be left without any basis for reaching that conclusion.

…

At bottom, the question is whether the evidence demonstrates that the contravener understands what went wrong, why it mattered, and why the conduct represented a serious failure of the responsibilities attaching to the office held. If it does, that may reduce the need for specific deterrence. If it does not, the Court is entitled to proceed on the basis that the need for specific deterrence has not been materially diminished.

466    Star is regulated in various ways. It is overseen not only by AUSTRAC, but, in NSW, by the Independent Liquor & Gaming Authority, Liquor and Gaming NSW, and the NSW Independent Casino Commission (NICC) and, in Queensland, by the Office of Liquor and Gaming Regulation (OLGR). In September 2021, the NICC appointed Mr Adam Bell SC to undertake a review of the continuing suitability of Star to manage and operate The Star Sydney, being the Bell Inquiry. That included a review of Star’s conduct in the period 29 November 2016 to 13 September 2021, including the maintenance and administration of systems by Star to ensure that the management and operation of the casino remains free from criminal influence or exploitation (which included consideration of the management of ML/TF risks). On 31 August 2022, Mr Bell delivered the results of his review, concluding that Star Sydney was not suitable to be concerned in or associated with the management and operation of a casino in NSW, including because of its failures in connection with its management of ML and TF risks (including defective systems and controls) and its culture in relation to compliance.

467    The report of the Bell Inquiry focussed, inter alia, on Star’s conduct in connection with:

(a)    the Hotel Card channel;

(b)    the Suncity junket;

(c)    the process of dealing with the Bank of China accounts in Macau;

(d)    the EEIS;

(e)    the Kuan Koi channels;

(f)    the response to the KPMG reports;

(g)    the general failures of Star’s AML/CTF Program;

(h)    failures in the prevention of gambling by high-risk individuals; and

(i)    failures in risk management and reporting, including in escalating risk (chiefly ML/TF risk) to the board.

468    Although the report considered other matters as well, much of the focus was on matters the subject of the present proceedings.

469    Likewise, on 14 June 2022, the Queensland Government announced that an independent expert review would be undertaken into the suitability of The Star to continue to hold casino licences in Queensland. This review was undertaken by the Hon Robert Gotterson KC (Gotterson Inquiry). On 30 September 2022, the results of this review were delivered, which left open a finding of unsuitability of the licensees of Star’s Queensland-based casinos. The final report of the Gotterson Inquiry considered the findings of the Bell Inquiry, expressed views about the significant failures of Star’s AML/CTF program and processes, and emphasised the approach of Star Queensland to excluded customers. It therefore also had a significant focus on the AML/CTF issues the subject of the present proceedings.

470    On 17 October 2022, the NICC determined to suspend Star Sydney’s casino licence, appoint a manager, and impose a pecuniary penalty of $100 million. Mr Nicholas Weeks was appointed manager immediately after the suspension of the licence took effect.

471    On 9 December 2022, the Queensland Attorney-General determined to suspend Star Queensland’s casino licences, appoint a special manager, and impose a pecuniary penalty of $100 million.

472    These two inquiries resulted in pecuniary penalties totalling $200 million, the suspension of Star’s casino licences, and the appointment of Mr Nicholas Weeks to the role of manager for Star Sydney on 21 October 2022, special manager for The Star Gold Coast and Treasury Brisbane on 9 December 2022, and external adviser of The Star Brisbane on 29 August 2024.

473    At the time of the evidence of Ms Mok in these proceedings, Mr Weeks was overseeing and reporting to the State regulators on Star’s work to return the casinos to suitability to hold a casino licence. Mr Weeks was supported by a team of dedicated staff, which Ms Mok referred to as the Special Manager Team (SMT).

474    Star submits that it was in that context that Star first announced the development of its Remediation Plan to the ASX on 15 September 2022 and subsequently submitted a first version of that plan to the NICC and OLGR on 16 June 2023. The Remediation Plan has been developed in consultation with the NICC, the OLGR and the SMT, and they monitor Star’s progress against the Remediation Plan.

475    In February 2024, the NICC appointed Mr Bell to undertake a further independent inquiry into the suitability of SEG and Star Sydney to be concerned in or associated with the management and operation of Star’s Sydney casino (Second Bell Inquiry). The further report noted a great deal of hard work, high-level thought and reflection to address fundamental problems identified in previous reviews and reports, but identified “imperfections” including in relation to the design and execution of the Remediation Plan. A further pecuniary penalty of $15 million was imposed.

476    Star notes that, as of May 2025, there had been seven versions of the Remediation Plan, including a reset after the Second Bell Inquiry.

477    Star relies on the following aspects of the Remediation Plan relevant to this proceeding, as detailed in Ms Mok’s affidavit:

(a)    Financial investment: a total forecast investment of $371.1 million from FY2023 to FY2027 and increasing resources to support remediation and financial crime compliance;

(b)    Board and senior executive refresh: reconstituting the SEG Board and senior executive team since the findings of the Bell Inquiry and the Gotterson Inquiry. A number of SEG directors and senior executives resigned from their respective positions either during or following the public hearings of the Bell Inquiry. Further senior executives departed during or following the Second Bell Inquiry. The post-inquiry Boards of SEG, Star Sydney and Star Queensland, as well as the senior management team, were all appointed after the Relevant Period (with only one exception appointed towards the end of the Relevant Period, on 11 July 2022). Therefore, SEG, Star Sydney and Star Queensland are now managed by different individuals to those in control at the time of the contraventions. Star says this is a significant element of its remediation;

(c)    De-risking the business: suspending rebate play, ceasing all junket play, restricting third party payments and use of international remittance providers, reducing cash limits and a phased implementation of mandatory carded play. The suspension of rebate play remains in place and will remain in place until appropriate systems and controls are implemented to manage the risks associated with that channel;

(d)    AML/CTF Program uplift: revising the AML/CTF Program and supporting documents, with regular and ongoing assurance reviews to confirm that the measures outlined in the AML/CTF Program remain appropriate and fit for purpose;

(e)    Governance and oversight: refreshing the governance framework to clarify accountabilities and reporting expectations. That includes a new governance architecture set out in the Program specifically aimed at addressing the weaknesses in previous versions of the Program which resulted in the contraventions of rr 9.4.1 and 9.4.2 of the AML/CTF Rules during the Relevant Period;

(f)    Internal and external assurance: instituting an enhanced ‘three lines of accountability’ model to assure the efficacy of Star’s AML/CTF compliance measures;

(g)    Enhancements to risk assessment capabilities, and risk-based systems and controls: revised risk assessments, and updated controls processes for identifying, managing and mitigating risk across the business, including more stringent controls for cash, third party transactions, remittance services, and updated KYC, transaction monitoring and ECDD measures;

(h)    Information management: refining data strategy and governance, and implementing enhancements to information management controls; and

(i)    AUSTRAC and industry relationships: engagement with AUSTRAC regarding remediation and participation in the Fintel Alliance Casino Working Group, a public-private partnership aimed at increasing the resilience of the casino sector to financial exploitation.

478    These matters are significant and relevant to what is required for deterrence. However, whether they evidence contrition is more problematic. As detailed above, Star’s response to issues concerning AML/CTF compliance is significantly influenced and controlled by the regulatory processes to which Star has been subjected. The significant steps taken pursuant to the Remediation Plan cannot be said to have occurred because some guiding mind at Star was sorry about the conduct and wished to make amends. It has largely occurred because it was essential to have a robust remediation plan, and to carry out that plan, in order to satisfy the regulatory obligations to which Star was subject. For example, at the 2022 AGM on 22 November 2022, the Chairman of SEG gave an address which included the following:

The Bell Review in NSW and the Gotterson Review in Queensland led to findings that The Star was unsuitable to hold casino licences in Sydney, the Gold Coast and Brisbane, the cities in which we’ve been operating since this company – originally known as Echo – was spun out of Tabcorp in 2011.

I will go into more detail shortly about both of the reviews, their findings and the processes that have subsequently followed.

But I first want to extend again my unreserved apology to our more than 70,000 shareholders and the wonderfully committed and hard-working 8,000 team members who do their best every day to deliver world-class experiences to almost 20 million guests who come to our properties every year.

To you, and to them, we’re sorry. We let you down. Our licence in New South Wales is currently suspended. We fully understand the seriousness of that situation.

The control of the Sydney casino now rests with a manager, Mr Nicholas Weeks, who was appointed by the New South Wales Independent Casino Commission.

The onus is now on us to remediate, and to show the regulator we can be suitable to again be afforded the privilege of holding a casino licence in New South Wales.

479    In all the circumstances, Star has not demonstrated that its conduct is the result of contrition in a way that would lead to a reduced need for specific deterrence.

480    However, the regulatory environment in which Star operates is relevant to the penalty-setting exercise in a different way, as discussed below.

9.5    Star’s size and financial position

481    As the plurality observed in Pattinson, at [60], it is undeniable that, all other things being equal, a greater financial incentive will be necessary to persuade a well-resourced contravener to abide by the law rather than to adhere to its preferred policy than will be necessary to persuade a poorly resourced contravener that its unlawful policy preference is not sustainable. The circumstances of the contravener in this respect is a relevant consideration.

482    AUSTRAC submits that at all times during the Relevant Period, Star was a large player in Australia’s gaming and tourism industry, second only to Crown.

483    The revenue and profit of Star Group during the Relevant Period, drawn from the affidavit of Mr Krile (Star’s previous Chief Financial Officer), are set out in the table below.

484    A further interim dividend of $96.4 million was paid for FY2020.

485    Star’s profit was affected in FY2020–FY2022 by the COVID-19 pandemic, due to periodic closures, border restrictions and COVID expenditure. The impact on EBITDA and net cash inflows from operating activities was as follows:

486    AUSTRAC notes that the actual gross revenue for these financial years never fell below $1.5 billion.

487    The total actual EBITDA recorded by Star Group during the Relevant Period was $2.560 billion. The total actual net cash inflows from operating activities in the Relevant Period were $2.060 billion.

488    Star submits that market capitalisation is the appropriate metric for comparing the sizes of the relevant companies here, setting out the following comparisons between Star Group, Crown Resorts Ltd (of which Crown Melbourne and Crown Perth were at the relevant time subsidiaries) and SkyCity Group:

489    Relying upon the table above, based on Mr Krile’s affidavit at [43], Star submits that at all times since FY2018 Star has had a market capitalisation amounting to less than 50% of Crown Resorts’ market capitalisation. It also exhibited an extract from the ASX website showing the market capitalisation of SEG, as at 2 June 2025, was approximately $301.21 million. Star also provided the following tables demonstrating Star’s, Crown Resorts’ and SkyCity Group’s revenue, EBITDA and NPAT from FY2017 to FY2024:

490    In its reply submissions, AUSTRAC submits that market capitalisation is not an appropriate metric to assess the relative size of Star specifically given that Star has been the subject of trading halts, the imposition of a special manager and long-running and continued uncertainty as to the restoration of its casino licence. It prefers reliance on revenue and, in response to the tables provided by Mr Krile, notes the revenue recorded by Crown, Star and SkyCity for the following financial years proximate to the imposition of a penalty:

491    The various forms of financial information presented by the parties, as set out above, cover a multi-year period. In order to ascertain the best picture of the financial resources of the contravener, it is usually appropriate to examine relevant financial metrics over a period that is longer than a single year, so that anomalous or temporary matters do not skew the appropriate analysis and a more reliable picture may be obtained: see Fewstone at [76]. However, in the present case, the financial position of Star has materially deteriorated. In considering the circumstances of the contravener, it is the current financial circumstances that are most relevant (provided the current financial circumstances are likely to be ongoing).

492    Star relies upon evidence, primarily from Mr Krile, concerning the financial difficulties experienced by Star. Much of this evidence is said to be confidential. I accept that there is a proper basis for a confidentiality claim, but this means that some of this section of the judgment will be redacted in the public version.

493    The evidence of Mr Krile is that, at the time of preparation of his affidavit, Star Group was not generating enough cash from its operations to fund either its operating or its non-operating activities. Mr Krile attributes this to various factors.

494    From 19 August 2024, mandatory carded play was required at Star Sydney under s 71A of the Casino Control Act 1992 (NSW) in private gaming areas and on select games on the main gaming floor with daily cash limits of $5,000 for carded play. The daily cash permitted per person was to be further reduced to $1,000 on 19 August 2025. The mandatory carded play had an immediate impact on Star, with a reduction of 10.7% in revenue in the first month after it was introduced when compared to the four-week average before introduction. Further, in the period between 19 October 2024 and 6 April 2025, the average daily revenue at Star Sydney declined by 17% when compared to the four-week daily average prior to 19 August 2024. Mr Krile also notes that NSW clubs and pubs are not subject to the same cashless and carded gaming requirements. [REDACTED].

495    Additionally, Star Group’s NPAT was impacted due to a required uplift in risk and compliance resourcing and necessary step-up in remediation costs. Mr Krile notes that Star Group spent $72 million on remediation in FY2023 and $84.5 million in FY2024. In FY2023, there was an increase in Star Group’s operating expenses by 20.1%, which was attributed in part to increased remediation and the strengthening of compliance processes. Mr Krile deposes that Star Group believes that remediation costs will continue for some time but eventually decline, estimating expenditure of $28.5 million on this in FY2027.

496    As has already been highlighted, Star has been the subject of:

(a)    a pecuniary penalty of $100 million imposed on Star Sydney by the NICC on 17 October 2022;

(b)    a pecuniary penalty of $100 million imposed on Star Queensland and The Star Entertainment Qld Custodian Pty Ltd by the Queensland Governor in Council on 9 December 2022; and

(c)    a pecuniary penalty of $15 million imposed on Star Sydney by the NICC on 17 October 2024.

497    The final instalment of these was to be paid to the NICC on 30 June 2025. Mr Krile notes that these penalties do not reflect the additional costs incurred by way of legal costs, the costs of heightened regulatory oversight in that period and the costs of the special manager.

498    Mr Krile also notes that Star has been subject to increased casino duty rates, asset write-downs and impairments, and derecognised deferred tax expenses as a result of the derecognition of its tax assets.

499    As a result of this, Star Group has been engaged in attempts to raise equity. SEG has previously raised $800 million in equity at $1.20 per share in February 2023 and $750 million in equity at $0.60 per share in September 2023. [REDACTED].

500    As part of this process, Star entered into a syndicated facility agreement (Syndicated Facility Agreement) with 12 lenders (SFA Lenders) on 8 November 2023 for the provision of $450 million of funding to Star, made up of a revolving facility of $150 million (Facility A) and a term loan of $300 million (Facility B). Facility B was drawn in full in December 2023.

501    On 25 September 2024, an amended syndicated facility agreement (Amended Syndicated Facility Agreement) was executed, offering up to $200 million in two tranches: two $100 million super senior bullet term loan facilities (Facility C and Facility D), contingent on the satisfaction of various conditions, including the cancellation of Facility A. Additionally, the conditions precedent for Facility D included [REDACTED]. These conditions precedent were not met for the drawdown of Facility D by the deadline of 9 April 2025.

502    [REDACTED]

503    Mr Krile noted that at the time of writing his affidavit, no further funding was able to be drawn under the Amended Syndicated Facility Agreement, with only bank guarantees for working capital purposes being able to be drawn. [REDACTED].

504    Relatedly, in December 2024, Star engaged prospective voluntary administrators, FTI Consulting, in anticipation of a potential insolvency. This was due to there being material uncertainty as to Star Group’s ability to continue operating. However, the appointment of voluntary administrators was cancelled due to the strategic investment with Bally’s Corporation, as set out below.

505    On 10 March 2025, Star received an unsolicited and non-binding proposal for additional funding from Bally’s Corporation (Bally’s Proposal). Bally’s is a global casino-entertainment company, owning and operating 19 casinos across 11 states in the USA and a further casino in the UK. The key terms of the Bally’s Proposal were:

(a)    there would be a capital raise of at least AUD$250 million, pursuant to which Star would issue convertible notes subordinated to Star’s existing senior lenders. The convertible notes would then be convertible into at least 50.1% of Star’s fully diluted ordinary shares;

(b)    Bally’s would underwrite the entire amount of the capital raise, but would support providing Star’s existing shareholders the right to participate in a significant portion of the offering on a pro rata basis; and

(c)    Bally’s was open to discussing a larger transaction, depending on discussions had regarding Star’s liquidity and capital needs.

506    On 7 April 2025, Star entered into a binding term sheet with Bally’s, setting out a multi-tranche convertible note and subordinated debt instrument with an aggregate principal value of $300 million (the Strategic Investment). Pursuant to the terms of the Strategic Investment:

(a)    a first tranche of $100 million was paid to Star on 9 April 2025; and

(b)    a second tranche of $200 million was to be paid to Star following shareholder and regulatory approvals, with $133 million payable to Star following shareholder approval and a further $67 million payable following receipt of all required regulatory approvals (but no later than two business days after 7 October 2025 if regulatory approvals were still outstanding).

507    On 8 April 2025, the nature of the Strategic Investment changed, whereby the aggregate principal value would remain at $300 million, but Investment Holdings Pty Ltd (Bally’s largest shareholder) could subscribe for up to $100 million of the investment. The shareholders were to vote on the approval of the Strategic Investment on 25 June 2025. At the time of Mr Krile preparing his affidavit, the regulatory approvals required for the Strategic Investment to proceed had not yet been obtained.

508    Mr Krile notes that there was nothing binding Bally’s or Investment Holdings to a further contribution of capital beyond the $300 million proposed. It was his understanding that Bally’s had not conducted due diligence prior to committing to the Strategic Investment beyond analysis of publicly available information, noting it was unclear whether any further information it may gain might impact its interest in providing Star further capital.

509    Beyond Bally’s and Investment Holdings, Mr Krile notes that since the Strategic Investment was announced to the ASX on 7 April 2025, there have been no alternative proposals emerging from investors that were capable of being implemented.

510    [REDACTED]

511    [REDACTED]

512    [REDACTED]

513    [REDACTED]

514    [REDACTED]

515    [REDACTED]

516    [REDACTED]

517    [REDACTED]

518    [REDACTED]

519    Star submits that even if a penalty of $100 million is imposed on Star, Star Group will need to raise [REDACTED]. I note that some of these dates are now in the past.

520    [REDACTED]

521    Star places considerable weight on the matters outlined above. In oral submissions, senior counsel for Star submitted that Star’s capacity to pay a penalty was “the crucial factor” in this case. He then submitted as follows:

We say that the evidence is relatively unchallenged that $100 million is the maximum Star can possibly pay without there being a real risk of insolvency.

522    Star accepted that this was not “determinative”, but it submitted that a penalty should not be set at a level that would drive Star into insolvency because that would be a penalty at a level that was oppressive, would punish innocent employees and creditors, and would render entirely nugatory the extensive work performed on remediation (such that other potential contraveners would conclude that there might be little point in engaging in any proper remediation process).

523    The role of a contravener’s asserted inability to pay has been set out earlier. It is unnecessary to consider this further. That is because it is not possible to conclude on the evidence before the Court that a penalty that I would otherwise impose, or any penalty greater than $100 million, would render Star insolvent. The liquidity analyses on which Star relies, [REDACTED], did not cause the Board to conclude that Star was unable to meet its financial obligations. Those liquidity analyses did not purport to evaluate the funding that Star might receive from debt or equity over the timeframe of analysis. That is not a criticism of the analyses: such matters involve uncertainties. However, the practical reality of Star’s position is that its future prognosis depends upon the extent to which it can raise further funding, by way of debt or equity. In the latter case, it depends upon the extent to which Bally’s will support Star.

524    As observed by AUSTRAC, there was a missing step in Star’s evidence, which was Bally’s plans for Star and the extent to which Bally’s would fund Star going forwards. No witness came forward to address these matters. AUSTRAC’s submission in oral closing was as follows:

Nowhere have you heard Bally’s come and tell your Honour what they propose to do and what they can and can’t do in circumstances where they’re confronted with a $100 million penalty or a $400 million penalty, and that is a great lacuna in the evidence, and it is one which we say will cause the court significant difficulty in accepting the proposition that it must be no more than $100 million, otherwise it will tip Star into liquidation. We say your Honour could not possibly make that finding on the evidence that you both heard and the evidence that, for whatever reason, Star has not called to make good that proposition.

525    I accept that submission.

526    Although I do not consider that the penalty should be constrained by any notion that a penalty of more than $100 million would likely cause insolvency, the financial matters detailed above are nevertheless relevant to the penalty-setting exercise.

527    Star is a large undertaking that earned, and continues to earn, significant revenue from its business activities. Any penalty should reflect that it is a large enterprise and needs a sizeable penalty for the purposes of specific deterrence and general deterrence. In the case of general deterrence, the penalty must be appropriate having regard to the size of Star.

528    However, it is also appropriate for me to take into account that Star faces material financial challenges in the short to medium term and will need support and restructuring before it will be a profitable and successful business in the future (if it ever will). Further, some of the conditions under which Star earned profits previously have changed. It will not be possible for Star to conduct its business in the same way as it has in years gone by, including because that would involve unacceptable ML/TF risks.

529    Star also relies on the financial matters set out above to support an order that the penalty be paid by instalments. I note that the liquidity analysis assumed [REDACTED]. Star relies upon Australian Securities and Investments Commission v Holista Colltech Ltd (No 2) [2024] FCA 516 at [38] (SC Derrington J) in which it was observed that it is the “fixture” of a penalty rather than its payment that is the focus of deterrence. I accept that, having regard to Star’s financial position on the evidence before the Court, any penalty should be paid by instalments.

9.6    Other matters relevant to general and specific deterrence

9.6.1    General deterrence and the casino industry

530    AUSTRAC submits that a significant penalty ought to be imposed on Star to achieve the objective of general deterrence. It refers to observations by Lee J in Crown, at [215]–[218], including about the scale of the casino industry, the fact that non-compliance with the relevant statutory obligations exposes the Australian community and financial systems to significant ML/TF risks, the need to ensure that compliance is not seen as optional or non-compliance seen as a viable mechanism for avoiding the costs of compliance, and the importance of sending a strong signal that failure to manage ML/TF risks (including by failing to manage the risks posed by junkets) will not be tolerated.

531    It is unnecessary to comment on each of the matters identified by Lee J in Crown. I accept that there is a need for a significant penalty in this case for the purposes of general deterrence in the casino industry.

9.6.2    General deterrence and the non-casino industry

532    AUSTRAC refers to particular areas of business of Star where there are non-casino providers of relevant services.

533    AUSTRAC submits that Star had, and continues to have, a significant EGM business accounting for between one-fifth and one-third of Star Sydney’s gaming revenue and just over half for Star Queensland, EGMs forming part of Star’s designated services. AUSTRAC points to evidence that the EGM business in Australia is very large: in FY 2024, there were over 87,000 EGMs across NSW earning over $8.4 billion in profit and 24,053 across Queensland with a “metered win” (the amount of money lost by players on machines) of over $1.511 billion.

534    AUSTRAC submits that there are ML/TF risks with using these machines, including by the use of cash, which it says is the primary method by which criminals obtain wealth from dealing in illicit commodities. Its submission is that given the number of transactions occurring through EGMs and their prevalence throughout Australia, general deterrence has a significant role to play in respect of that type of gaming activity alone. Given that the conduct in question is not related closely to the general use of EGMs, I do not consider this matter to be a significant factor.

535    AUSTRAC also notes that Star is a provider of betting accounts which are AML/CTF Act designated services, and that other gaming providers, including online sports betting agencies, also provide such designated services.

536    AUSTRAC also observes that Star provides international remittance services which are designated services, and that various financial institutions and other remittance service providers also provide designated services.

537    I accept that the manner in which Star provided designated services could be relevant to non-casino participants, and that this is a consideration.

538    AUSTRAC submits that a significant penalty would signal to providers of similar services that it would be an economically irrational choice not to make the necessary investments to facilitate compliance with their AML/CTF Act obligations.

539    I accept that the role of deterrence is not limited to the casino industry, as AUSTRAC submits, and that a significant penalty is appropriate to provide general deterrence.

9.6.3    Specific deterrence

540    AUSTRAC makes the following assertions in relation to specific deterrence:

(a)    Star is one of the largest casino operators in Australia. A penalty should be sufficient to act as an effective deterrent to Star against future non-compliance with its obligations under the AML/CTF Act and AML/CTF Rules;

(b)    the failings of Star were systemic and serious as well as innumerable;

(c)    Star’s oversight of its AML/CTF Program was deficient at all times during the Relevant Period;

(d)    whilst Star is taking steps to improve compliance, it had only completed 58% of its Remediation Plan as at May 2025;

(e)    a number of high-risk practices evolved at Star given the absence of appropriate ML/TF risk identification. In particular, it failed to appropriately identify, mitigate and manage the high ML/TF risks of junkets until it ceased dealings with junkets in October 2020 (despite continuing to conduct business with persons associated with junkets following this time as set out in Section 7.9 above);

(f)    Star Sydney and Star Queensland were vulnerable to the risk of criminal exploitation given the absence of appropriate risk-based systems and controls in their Part A Program and the lack of transparency as to the source and ownership of money being moved in and out of the casinos;

(g)    Star failed to appropriately monitor billions of dollars in transactions, which impacted its ability to identify and disrupt possible suspicious activity;

(h)    Star continued to deal with certain High Risk Customers without adequate consideration as to whether an ongoing relationship was appropriate, having regard to the ML/TF risks, further exposing it to being exploited by organised crime;

(i)    Star’s Board and senior management were closely involved in, or aware of, systems and decisions which facilitated the contravening conduct;

(j)    deficiencies in monitoring customers also inhibited law enforcement investigations, prosecutions and the recovery of proceeds of crime;

(k)    by reason of the KPMG Report, Star was aware from the time of that report of the deficiencies in its AML/CTF Program;

(l)    the contraventions persisted over six years from 30 November 2016;

(m)    the deficiencies with Star’s Part A and Part B Programs were systemic in circumstances where the Part A Programs were not subject to appropriate assurance, review or oversight;

(n)    Star derived significant revenue during the period in which its AML/CTF Programs were non-compliant including revenue from high-risk business channels; and

(o)    Star failed to self-identify the extent of its non-compliance and continued (until August 2021) to claim that it was compliant.

541    I accept these matters and take them into account in setting an appropriate penalty.

9.6.4    Relevance of State regulatory obligations to specific deterrence

542    AUSTRAC acknowledges that the penalty required to achieve specific deterrence cannot be considered in isolation from other circumstances relevant to Star including fines imposed in respect of similar conduct by State regulators.

543    Star submits that as a result of the Bell Inquiry and the Gotterson Inquiry, there have been public findings of wrongdoing, disciplinary actions and $200 million in fines for substantially the same, or similar, conduct by Star as is alleged in this proceeding, including its governance, establishment of remittance channels, junkets and other international rebate and referral programs, transaction monitoring, excluded customers, KYC, ECDD and ongoing customer due diligence, information management systems, training and resourcing of AML functions, remediation and uplift of AML/CTF capability, privilege issues and the KPMG Report and the context for development of high-risk channels.

544    Star also observes that this has had the effect of Star’s casino licences being suspended, and that Star is subject to increased controls including mandatory carded play, uplifted controls (resulting in increased patron exclusions) and operating restrictions. Star Sydney has also been subject to increased casino duty rates payable in NSW. It says that these controls have had a significant impact on Star’s financial performance from FY2022 onwards.

545    It also says that the findings have had a general deterrent effect on other participants in the Australian casino market and reporting entities generally. Given this, it says that the overlap between the conduct the subject of the findings and the conduct the subject of this proceeding is such that the penalty here should be reduced to serve the purpose of deterrence.

546    I accept all of these matters and take them into account in considering an appropriate penalty.

10.    APPROPRIATE PENALTY

547    There is no doubt that the contraventions in the present case are very serious and a significant penalty is warranted. That is common ground between the parties.

548    The present case is one where the number of contraventions is very great indeed, and the maximum penalty is so large as to not be meaningful. The number of contraventions of s 81 is incalculable (but undoubtedly very large indeed). The number of contraventions of s 36 is 1,190 for Star Sydney and 327 for Star Queensland. The maximum penalty for s 36 contraventions alone is therefore a large multiple of the penalty sought by AUSTRAC, and with the inclusion of the s 81 contraventions the maximum penalty becomes a very large (and incalculable) multiple.

549    One matter to note is the significant role that was given in submissions to prior penalty decisions. Both parties made submissions as to how the present case compared to Crown and SkyCity. AUSTRAC, as well as highlighting significant points of comparison in its written submissions, provided an Annexure to its written submissions which set out in some detail over the course of 21 pages the asserted similarities and differences between Star, Crown and SkyCity. That Annexure reveals some points of similarity but also many points of difference between the circumstances in the three cases. The points of difference are significant. Moreover, AUSTRAC draws on a number of points of difference between the present case and Crown in the body of its written submissions. The intention appears to be to emphasise that on various measures Star’s conduct is more serious than Crown’s. For example, AUSTRAC refers to:

(a)    the joint position in Crown that none of Crown’s contraventions of s 81 were the product of any deliberate intention;

(b)    that there were fewer s 36 contraventions and affected customers across the relevant period in Crown;

(c)    that Crown did not have contravening conduct in relation to excluded customers;

(d)    that Crown’s use of the Hotel Card channel was much more limited in time than Star’s; and

(e)    that Star had the opportunity to observe the issues that had been raised in relation to Crown but chose to focus on how to build its business from former Crown business.

550    As discussed earlier, it is seldom useful to undertake such a process of comparison with some other penalty case, and even less so when the previous case involves an agreed penalty. The analysis undertaken by AUSTRAC (and the more limited rival analysis undertaken by Star) merely serves to illustrate that there are many differences between the cases both in the circumstances of the contravention and the circumstances of the contravener. There are differences in the particular provisions contravened, differences in the types of conduct and the nature of the contraventions, many differences in the facts, differences in the knowledge of senior people, differences in cooperation and remediation, differences in penalties already paid and the extent to which this was considered, differences in the financial position, and many other differences. To attempt to fasten on the agreed penalty in Crown, for example, and then seek to determine some relationship between the circumstances of that case and the circumstances of the present case such that the penalty against Star can somehow be fashioned so as to be brought into some relationship with the agreed penalty in Crown would be an incorrect and inappropriate form of analysis for the Court to undertake.

551    Even if it were appropriate as a matter of principle to undertake some comparison between the present case and a prior agreed penalty case, the circumstances of each case are so detailed and complex, and the differences between them so material, that the comparison would require a minute analysis that would need to make numerous adjustments to the penalty to make it “comparable”. Such an exercise would be alien to the proper approach to setting a penalty.

552    Therefore, I do not propose to have further regard to the penalties in Crown or SkyCity, or attempt to work out how the penalty in the present case should relate to the penalty in those cases.

553    This matter is of some relevance because AUSTRAC places considerable weight on Crown in supporting its proposed penalty of $400 million. AUSTRAC’s explanation for the appropriateness of its proposed $400 million penalty is relatively brief. In support of its proposed penalty, AUSTRAC submits that Star’s conduct “warrants a penalty at the higher end of the appropriate range”. AUSTRAC does not identify the basis for contending that there is a “range”, or what the range is. Given that all previous significant penalties pursuant to s 175 of the AML/CTF Act are agreed penalties, it is not readily apparent how AUSTRAC could discern a “range”.

554    AUSTRAC also submits:

A total penalty which is less than $400 million and is, say $100 million, is wholly inappropriate. It does not reflect the seriousness of the conduct and represents no more than the “cost of business”. While parity is not determinative, the decision of Crown is instructive where the penalty ordered was $450 million, notwithstanding Crown’s assertion that it did not have the capacity to pay that sum at the time it was ordered. While Crown was, at all relevant times, larger than Star, no finding of deliberateness was sought by the parties and Lee J accepted that the amount ordered to pay was at the lower end of the spectrum. As it is, Star’s conduct warrants a finding at the higher end of the range while reflecting that Star is, and always has been, a smaller entity than Crown. A penalty of $400 million reflects both considerations.

555    AUSTRAC thus anchors the figure of $400 million with a comparison to Crown, having regard to the differences in both the circumstances of the contraventions and the circumstances of the contraveners.

556    A comparison with Crown is not the only matter relied upon by AUSTRAC. AUSTRAC advances a number of reasons why a large penalty is appropriate. But none of the other matters relied upon are tied to any particular figure: i.e. why the penalty should be $400 million rather than any other figure.

557    In arriving at a penalty in the present case, I have had regard to, and have weighed, all of the factors and other matters set out earlier in these reasons.

558    I have concluded that the penalty of $100 million proposed by Star is too low and that the penalty of $400 million proposed by AUSTRAC is too high. In reaching that conclusion, I have had regard to all of the matters set out above, but I refer to the following matters not in any sense as exhaustive of the matters I have considered, but so as to render that conclusion explicable.

559    The conduct of Star involved serious failures to comply with its AML/CTF obligations in a widespread and systemic way, and over a lengthy period. There were numerous ways in which Star’s designated services and channels exposed the community and financial institutions to an unacceptable risk of ML/TF. Star’s Joint AML/CTF Program failed to identify that risk or contain appropriate measures to manage it. Star’s Joint AML/CTF Program had other deficiencies. Star likewise failed in a significant way to monitor its customers with regard to the ML/TF risks created by the provision of designated services to those customers.

560    Those failures were not isolated or episodic. They were not mere oversights from time to time. They were not mere failures of low-level employees unknown to senior management. Rather, a very significant part of Star’s business was dependent upon services that facilitated a relatively seamless movement of money into and out of the casino business (including from overseas) in a way that gave rise to a high risk of ML/TF. Star did not appropriately recognise that risk or take appropriate steps to address it, which may have required either the cessation of the particular business practice or else a significant degree of verification of the individuals involved and their source of funds, which would have tended to inhibit the business. Further, a significant part of Star’s business was dependent upon turning a blind eye to customers who presented a high ML/TF risk.

561    In effect, Star put profit over compliance, and did so on a large scale. Without being in any way exhaustive, particularly serious examples of this may be found in Star’s treatment of certain High Risk Customers and Excluded Customers, who continued to be welcome at Star casinos, and indeed actively encouraged to attend, notwithstanding that members of Star senior management were on notice that those customers were likely involved in organised crime and likely engaging in money laundering at Star casinos. That conduct was egregious.

562    As observed earlier, Star’s conduct has caused significant harm. As a result of Star’s non-compliance with the AML/CTF Act, the Australian and global community and financial system have been exposed to systemic ML/TF risks over many years, and it may be inferred that Star caused not insignificant loss or damage to the Australian community and financial system. This has undermined the ability of AUSTRAC and law enforcement agencies to trace money to its source, resulting in a loss of opportunity to disrupt unlawful activity and recover the proceeds of crime. Other harm has been identified in more detail earlier in these reasons. It may be inferred that Star’s contraventions permitted amounts of money to be laundered through the various facilities which Star provided or permitted. These are very serious matters.

563    Unless appropriately deterred, there is a strong financial incentive to engage in the conduct the subject of the contraventions. Casinos can stand to benefit handsomely if the inflow of money, including cash, from domestic and overseas sources can occur with limited friction and limited scrutiny. The conduct identified above involved very large sums of money indeed. For example, the revenue from junkets alone was over $1.4 billion in the Relevant Period, and the profit from junkets in the pre-COVID years exceeded $100 million. Likewise, the revenue from High Risk Customers alone over the Relevant Period was approximately $1.33 billion on Star’s own calculation. That is, of course, not a measure of benefit from the contraventions, but illustrates the potential to earn profits from a non-compliant approach to AML/CTF obligations. Although it is not possible to calculate the precise benefit to Star from the contraventions in the present case, it is clear that Star gained significant benefits from the contravening conduct.

564    These matters, and other matters identified in detail in the course of these reasons, warrant a very significant penalty. It is important that Star be deterred from ever putting profit over AML/CTF compliance. It is important that other entities are sent the message that conduct of the sort engaged in by Star will attract a significant penalty and is not worth the risk.

565    However, it is also necessary to take into account what has happened to Star since the Relevant Period, as well as Star’s financial position. As detailed earlier, Star has been the subject of two inquiries. Those inquiries considered the suitability of Star Sydney and Star Queensland to hold their respective casino licences and considered, inter alia, much of the conduct the subject of these proceedings, where that conduct was an important aspect of the conclusions reached. Those inquiries had two consequences. The first is that Star has received penalties of $200 million for conduct that significantly overlaps with the conduct the subject of these proceedings.

566    The second is that Star’s casino licences were suspended and Star has been under the supervision of a manager. Star has, as a result, been under close supervision as it undertakes the process of improving its management, culture, systems and processes. In that regard, Star has undertaken the substantial steps which were detailed earlier in the section dealing with cooperation and contrition. That includes:

(a)    the forecast investment of $371 million in remediation and compliance;

(b)    the replacement of the Board and senior executive team;

(c)    the cessation of the junket business, the suspension of rebate play, restrictions on third-party payments and international remittance providers, and the phased implementation of mandatory carded play; and

(d)    the revisions to the Joint AML/CTF Program, governance and oversight, and internal and external assurance (amongst others).

567    As a result of these matters, it is not a case of business as usual for Star. Star is now under much tighter regulatory scrutiny. It has had to make material changes to its business. The prospect of Star engaging in a repeat of the conduct the subject of these proceedings is significantly reduced. Further, Star has already paid a significant price for the contravening conduct.

568    These matters reduce the penalty that otherwise would have been required in these proceedings to serve the object of specific deterrence.

569    They also have an impact on the penalty required for general deterrence. These reasons will make plain that, but for the State regulatory response to the conduct, including the levying of significant penalties, the licence suspension and the resulting onerous requirements and controls, the penalty for Star would have been higher. That is a relevant consideration for any person contemplating their compliance with the AML/CTF Act.

570    In relation to Star’s financial position, whilst I do not give it any determinative weight, I take it into account in considering whether the penalty will serve as a meaningful disincentive against the repetition of the conduct. I consider that Star would not lightly incur another penalty of the amount to be ordered. I also take it into account in ordering that the penalty be paid by way of instalments. Star’s profitability is such that it is likely to need to raise money to pay any penalty. Its ability to pay the penalty should not be jeopardised by requiring it to be paid all at once (as AUSTRAC proposes).

571    When considering the matter of apportionment, AUSTRAC submits that a larger penalty should be imposed on Star Sydney than on Star Queensland for the following reasons:

(a)    Star Sydney’s revenue from junkets was far greater than Star Queensland’s, being $1.3 billion compared with $267 million;

(b)    the conduct at the Suncity Service Desk (Salons 95 and 82) occurred at Star Sydney;

(c)    a significantly larger volume of funds was transacted by Channel Customers at Star Sydney as compared with Star Queensland: AUD$556.9 million, HKD$107.6 million and USD$3.3 million as compared with AUD$59.3 million and HKD$500,000; and

(d)    Star Sydney had greater revenue and EBITDA than Star Queensland throughout the Relevant Period.

572    One matter going the other way is that the conduct in relation to the Excluded Customers occurred at Star Queensland rather than Star Sydney.

573    On the basis of these matters, AUSTRAC submits that the penalty for Star Sydney should be three times the penalty for Star Queensland. I agree with these proportions, having regard to their relative size and extent of involvement in the conduct.

574    Having regard to these matters, and all of the other matters identified in the course of these reasons, I have concluded that the appropriate penalty is $260 million in total, with a penalty of $195 million for Star Sydney and $65 million for Star Queensland. This should be paid in four equal instalments over 19 months, with the first instalment paid within 28 days and subsequent instalments payable every six months thereafter. I have taken the time value of money into account in fixing the amount of the penalty, in the sense that the penalty would have been smaller if I had ordered that it all be paid within 28 days as AUSTRAC proposed.

11.    DECLARATIONS

575    AUSTRAC seeks that declarations be made under s 21 of the Federal Court of Australia Act 1976 (Cth).

576    AUSTRAC says that declarations are appropriate and would assist AUSTRAC in carrying out the duties conferred on it by the applicable legislation, assist in clarifying the law and make clear the seriousness of the conduct engaged in.

577    The parties agree on the relevant principles:

(a)    the relief must be directed to the determination of legal controversies, and not to abstract or hypothetical questions: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; [1992] HCA 10 (Ainsworth) at 582 (Mason CJ, Dawson, Toohey and Gaudron JJ);

(b)    the party raising the question must have a real interest to raise it: Ainsworth at 582 (Mason CJ, Dawson, Toohey and Gaudron JJ);

(c)    there must be a proper contradictor: Ainsworth at 582 (Mason CJ, Dawson, Toohey and Gaudron JJ);

(d)    the utility of the declarations must not be in doubt.

578    In relation to the fourth limb of this test, Star noted that the Federal Court has accepted that declarations may serve a purpose in marking the Court’s and the community’s disapproval of wrongful conduct and in deterring other wrongdoers: Australian Securities and Investments Commission v Axis International Management Pty Ltd (2009) 178 FCR 485; [2009] FCA 852 at 495–496 [42] (Gilmour J).

579    In its reply submissions, Star accepts that AUSTRAC is entitled to the declaratory relief in the form proposed by orders 1–6 in Annexure A to its closing submissions, subject to AUSTRAC succeeding in relation to the contested legal issues in the proceeding. Star notes that in the event that Star is successful in relation to one or more of the contested legal issues, the declarations as proposed will require amendment.

580    I accept that it is appropriate to make declarations largely in the form sought by AUSTRAC, subject to amendment to account for the outcome of the contested legal issues.

12.    COSTS

581    AUSTRAC submits that it ought to recover its costs of and incidental to the proceedings as is typical in regulator-brought civil penalty proceedings. Star accepts that it ought to pay AUSTRAC’s costs of the proceeding.

13.    CONFIDENTIALITY

582    There is some confidential material referred to in these reasons for judgment, primarily in the section dealing with Star’s financial position. There are some other matters in this judgment that may have been the subject of earlier confidentiality orders, although I note that those confidentiality orders appear to identify some material that is in the public domain, including by way of the publicly available report of the Bell Inquiry. I consider that the matters that are not redacted in the public version of these reasons for judgment are necessary to disclose to understand these reasons for judgment. There is a public interest, particularly in relation to the role of general deterrence, in these reasons being public.

583    In the first instance, I will make available a public version of these reasons for judgment which redacts certain material in Section 9.5 above. However, I shall request the parties to confer about whether that material remains truly confidential such as to justify redactions in a published judgment. In particular, it is likely that some financial information is no longer current. Any joint or individual position from the parties should identify why redacted information sought to be kept confidential should be redacted in a judgment. It is desirable that redactions be minimised where practicable.

584    I shall also grant liberty to apply in relation to issues concerning confidentiality.

Associate:

Dated:    28 October 2026