‘Profit over compliance’: Star says it can afford $260m money-laundering fine

Soo Kim, Star Entertainment’s chairman and largest shareholder, said the casino operator could afford to pay a $260 million fine handed down on Wednesday after a Federal Court judge found it broke anti-money laundering and counter-terrorism financing laws.

In a break from previous statements by the company, Kim said Star will not require additional financing or share sales to meet the payment instalments ordered by the court. Star had argued in court last year that it might not be able to pay a fine of more than $100 million.

“We are fortunate to be in a financial circumstance that’s quite a bit different than even 12 months ago,” Kim said on Wednesday.

A rescue deal from Bally’s Corporation chairman Soo Kim has kept Star afloat.Dominic LorrimerIn his ruling, Justice Cameron Moore was damning about Star’s conduct in the anti-money-laundering case brought by finance regulator Austrac.

“In effect, Star put profit over compliance and did so on a large scale,” he told the court.

Moore assumed that the casino operator might need to raise further cash to pay the fine.

“Star’s profitability is such that it is likely to need to raise money to pay any penalty,” he said on Wednesday morning before Kim made his statements to the contrary.

Austrac chief executive Brendan Thomas welcomed the ruling, but lamented the potential damage from money-laundering.

“Due to The Star’s admitted deficiencies in monitoring, we cannot know how much money high-risk customers pumped through its casinos,” he said.

“But we do know the risks involving significant amounts of money and instead of closing the door to those risks, The Star’s operations exposed the casino and Australia’s financial system to them.”

The Star has acknowledged in its most recent annual report the existential threat the fine might pose for its business.

“Austrac submitted that a penalty of $400 million would be appropriate while The Star submitted that a penalty of greater than $100 million, payable in the 12 months following the hearing, would be challenging based on available liquidity options, including accessing equity markets,” it told investors in August.

Kim said Star should be able to pay the fine out of cash on hand, payments it expects to receive and from its casinos generating positive cashflow again this year.

The company is required to pay four instalments of $65 million each, with the first due next month and the final payment in May 2028.

Star’s shares went into a trading halt before the judgment was released, and remained halted as the company prepared a formal response to the ruling. They’re expected to resume trading on Friday.

The United Workers Union (UWU) argued earlier on Wednesday that the fine should be reviewed if it threatened the employment of the thousands of casino workers it represents.

“Nobody is suggesting that serious compliance failures should go unpunished. But accountability must not come at the expense of thousands of workers who had no part in those failures,” UWU director Pat O’Donnell, said.

“The uncertainty at Star over the years has caused enormous anxiety for our members, their families and the broader network of hospitality businesses that depend on these venues. It would be devastating if this uncertainty were to continue ricocheting through their lives.”

Justice Moore said the fine would have been even higher if not for the significant remediation efforts under way, and the fact that The Star had already paid fines for conduct that “significantly overlaps” with the conduct that was the subject of these proceedings by Austrac.

“It is important that Star be deterred from ever putting profit over [anti-money laundering] 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,” the judge said.

“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.”

Chairman Kim and chief executive Bruce Mathieson Jnr led a $300 million rescue package that saved The Star from financial collapse last year.

The rescue last year handed control of the casino business to Kim’s US casino operator Bally’s, and the Mathieson family pub empire emerged with a significant stake after contributing $100 million to the deal.

Star’s troubles started in 2021, when an investigation by The Age, The Sydney Morning Herald and 60 Minutes alleged Star had enabled suspected money-laundering, organised crime, large-scale fraud and foreign interference in its Australian casinos for years, even though its board had been warned its anti-money laundering controls were failing.

Further inquiries led to the loss of its casino licences, a legal battle with the corporate regulator, as well as Austrac’s legal action.

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