This included a report from KPMG into the Star’s anti-money laundering and counter-terrorism financing (ALM/CTF) program, which allegedly identified to the board a number of risks posed by the junket operators and classified them as “high risk”.

This was in addition to several warning letters that had already been issued to Suncity, an investigator’s identification of “suspicious activity” at its service desk, and a caution by an in-house lawyer that the junkets had exposed Star to “unacceptable levels of risk”.

“What Your Honour has to recall is this is not some rowdy teenagers on the floor drinking underage on a Saturday at the Star, this is the largest junket with whom [the Star] deals … who it has, for the first time, given a bespoke client room, and is creating compliance risks … in circumstances where all the directors know one of the biggest sources of ALM risk is a junket,” ASIC’s Dr Ruth Higgins SC said.

During the second day of hearing, Higgins walked Justice Michael Lee through the information that was allegedly available to directors of Star – including chief casino officer Greg Hawkins and Matthias Bekier – in the weeks before the Suncity renewal in June 2018.

VIEW ALL

The most critical of that was the KPMG report, which found Star only had “limited information on junket operator’s source of funds or wealth, [and] due diligence of junket participants were limited, particularly in Queensland”, Higgins explained.

ASIC alleged a reasonably director, upon receiving the report, would have appreciated it highlighted “rudimentary and pervasive deficiencies in the due diligence process undertaken by Star in relation to junkets, notwithstanding the heightened risks that accompanied junkets and junket participants”.

While the junket operators may have been interrogated, Higgins alleged individual players were often not.

“In a sense that is not surprising because the junket is the umbrella organisation that facilitates the play by players, and the players are often in the air when the casino is notified they are coming,” she said.

Because players were not interrogated, Higgins claimed customers may not “be identified as high risk, due to a lack of transparency of the participants … and distribution of funds being unknown”.

In November 2017, Bekier approved a circulating resolution of the board to increase the Star’s net exposure under a cheque cashing facility (CCF) held by Sixin Qin and Alvin Chau without an assessment of whether they were persons of good repute and would be able to discharge their suitability obligations.

Higgins said that given the findings in the KPMG report, the directors should have understood the “systematic problems” and how they cast doubt on the board’s approval of Chau and Qin. This was particularly so for Qin, who had allegedly been accused of money laundering.

“The gist of [ASIC’s] allegation was it was incumbent on the board to request that management, at that point, in May 2018, undertake immediate investigations into the probity of Qin, Chau and their associated junkets and either terminate or suspend the business relationship between the Star and those junkets while those investigations were being completed,” Higgins said.

Higgins alleged this was particularly clear in Bekier’s case because not only had he received the KPMG report, but he had been informed of “suspicious activity within Salon 95” by staff at the casino.

Caution from investigator, legal team on junket risks

In mid-May, a senior investigator with the Star, Andrew McGregor, sent an email to company secretary and group general counsel Paula Martin and another general counsel with an attachment that was dubbed the “operation money bags information note”.

The document was largely covered under suppression orders, but Higgins said in open court that it contained information about a number of alleged incidents involving suspicious cash transactions from the service desk within Suncity’s junket, known as Salon 95.

One of the allegations was about a person, who was not a junket participant, collecting $45,000 in cash from the service desk.

McGregor said the document was to assist Star’s legal team “in preparing legal advice for the business in relation to the legal and regulatory obligations arising from the investigation and to prepare for any anticipated legal proceedings” that may arise.

In the report, McGregor stepped through “the unwillingness of the Suncity staff to provide him with information”.

He was able to search CCTV footage that showed several bags of cash dropped off at the service desk, including in a red-coloured suitcase, a blue Esky, and white and yellow plastic bags.

“There are red flags and red suitcases at this point,” Higgins said.

The day before McGregor’s email, in-house lawyer Andrew Power told Hawkins the junkets “exposed the Star to an unacceptable level of risk and constitutes a breach of the agreement of applicable law”.

The email was forwarded to Bekier, who, apparently having recognised the significance of it, listed it as a point of discussion for a meeting he had with former chairman John O’Neill.

The email was also forwarded to Martin, who requested she be copied directly onto any further advice provided to the Star on the topic, “given the likely pace of the matter”.

While Hawkins had “realised the gravity” of the situation, allegedly, his only action was to request that senior management “pop into” the Suncity room from time to time and make it known “as positively as possible” that it needed to be adhering to operating procedures.

“But Hawkins himself does not draw these irregularities in Suncity’s conduct to the attention of the board of Star and he doesn’t himself take any steps to terminate Star’s relationship with Suncity.

“Instead, on 13 June 2018, Hawkins approve[d] a new commercial relationship with Alan Iek,” Higgins said.

When the board was informed of the conduct of the junkets, Higgins alleged it was done with an “all sorted” attitude.

The proceedings are ongoing.