Star Entertainment has warned that a proposed $400 million penalty from AUSTRAC could threaten its survival, as the Federal Court examines the casino operator’s ties to criminal-linked junket activities and systemic anti-money laundering failures.

Links to suncity and organised crime:

The proceedings, which commenced on Wednesday, June 4th, quickly moved behind closed doors to allow for private examination of Star’s chief financial officer Frank Krile. Star and AUSTRAC agreed to keep the session confidential due to sensitive financial disclosures that could impact Star’s ongoing negotiations with lenders and its volatile share price. Krile, who joined Star in December from Lendlease, was questioned about the group’s financial state and its capacity to absorb a massive fine.

A central issue in the case is Star’s extensive partnership with Suncity, a Macau-based junket operator with known criminal connections. The court was told that Suncity handled more than $70 million per week in turnover at Star Sydney between 2016 and 2020. Over that period, AUSTRAC said, Suncity moved $11.8 billion through Star’s Sydney casino and another $2.9 billion through its Queensland venues.

Simon White SC, counsel for AUSTRAC, argued the $400 million figure is fitting, not excessive, given the breadth of misconduct. “Four hundred million dollars is not an oppressive penalty. In this case, it’s an appropriate penalty,” White told the court, describing Star’s failures as “manifest.”

Among the more alarming revelations was Star’s ongoing business with Alvin Chau, Suncity’s former chairman, until his arrest in Macau in 2021—two years after internal reports and external media coverage had raised alarms about Suncity’s links to Chinese organised crime and money laundering.

Casino operations lacked oversight:

AUSTRAC alleges that between November 2016 and October 2020, Star permitted 117 high-risk clients to filter billions in suspect funds through its casinos in Sydney, Brisbane, and the Gold Coast. White presented evidence that Star granted a $266.7 million cheque cashing facility to one customer with confirmed links to foreign criminal syndicates, who was also permitted to wire $250,000 to another individual with no gambling history at Star.

Suncity was provided with exclusive access to Salon 95, a high-roller room where they ran a private service desk, reportedly beyond Star’s direct oversight. This space facilitated transactions using bags filled with cash—ranging from suitcases to backpacks and even cooler boxes. According to White, Star employees repackaged large sums in separate bags, concealed transactions from CCTV using blankets, and handed out cash to people unassociated with any gambling activity.

Concerns were voiced as early as March 2018 by Star’s then-general counsel corporate, Oliver White, who opposed the creation of the off-the-books service desk. However, management insisted he “reconsider,” ultimately allowing it to proceed.

Star has acknowledged many of AUSTRAC’s claims and now pleads for a reduced penalty of $100 million—arguing that amount is the most it can afford without facing liquidation. “This lending information is critical to the just and proper determination of these proceedings, particularly given the prominence of the question of Star’s capacity to pay,” said Star’s barrister, Emma Bathurst.

The company’s financial troubles are well-documented. In April, Star disclosed a loss exceeding $300 million for the six months ending December 31. A $300 million rescue package from Bally Corporation, including $100 million from the Mathieson family, was finalized that same month to avert collapse and transfer control to Bally’s.

According to the AFR, Prallel, the Australian Securities and Investments Commission recently concluded its case against several of Star’s former executives and directors. The case addressed their failure to address the risks associated with junkets catering to wealthy Asian gamblers. A decision from the Federal Court in that matter is expected later this year.

Justice Cameron Moore continues to preside over the AUSTRAC case, with hearings scheduled to continue Thursday. As proceedings unfold, White emphasized: “There was a deliberate courting of (money-laundering-terrorism-financing) risks and likely contraventions,” adding that Star’s leadership had abdicated its duties.