Money laundering and terrorism financing are global problems that have direct social and economic impacts on Australia. A lesser-known method of facilitating these crimes is through exploiting pubs and clubs which operate electronic gaming machines (EGMs).
AUSTRAC, Australia’s AML/CTF regulator and financial intelligence unit, provides a guide for pubs and clubs to ensure that they understand and comply with their AML/CTF obligations.
Who does AUSTRAC regulate?
AUSTRAC regulates businesses in the financial services, bullion and gambling sectors that provide certain “designated services” listed in the Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006 (Cth) which have been identified as posing a risk for money laundering and terrorism financing.
This includes businesses that have entitlements under licence to operate EGMs. Such businesses must register with AUSTRAC and submit certain reports such as suspicious matter reports.
How do criminals exploit pubs and clubs with EGMs?
Proceeds of crime are often in the form of cash. Criminals take advantage of the cash intensive nature of pubs and clubs, combined with the anonymity and ease of access afforded, to launder illicit funds.
Criminals will seek out and attempt to take advantage of businesses operating EGMs that do not have the proper resources or processes in place to identify, mitigate and manage their ML/TF risks.
Some examples provided by AUSTRAC of how criminals exploit gaming businesses include:
- Offering to pay cash to a legitimate player who has accumulated credits or has winning tickets. The criminal then claims the legitimate credits or winnings as their own.
- Inserting large amounts of cash or credits into EGMs or multi-terminal gaming machines and engaging in minimal or no game play to appear like a real player, before cashing out.
- Deliberately using multiple cashiers or only using cash redemption terminals (CRTs) to avoid observation or monitoring by staff.
- Individuals or groups working to gain the trust of gaming staff, or colluding with staff to avoid detection or providing identification when collecting winnings.
AML/CTF obligations for pubs and clubs
All pubs and clubs that operate EGMs will have to comply with AML/CTF requirements, however the specific obligations will vary depending on the number of EGMs the establishment is licensed to operate.
Those businesses which are licensed to operate 15 or less EGMs will need to:
- Enrol with AUSTRAC.
- Keep enrolment details up to date.
- Keep certain records.
- Submit suspicious matter reports.
Businesses which are licensed to operate 16 or more EGMs will need to comply with the above requirements, and additionally will need to:
- Appoint a compliance officer.
- Conduct and maintain an ML/TF risk assessment.
- Adopt and maintain an AML/CTF program.
- Carry out customer due diligence (Know Your Customer) procedures.
- Implement and maintain ongoing customer due diligence.
- Undertake regular independent reviews of the AML/CTF program.
- Submit threshold transaction reports.
- Submit annual compliance reports.
Even if a business currently operates less than 16 EGMs, if they are licensed to operate 16 or more, the more extensive obligations will apply.
Further information and guidance on complying with AML/CTF obligations is provided in Section 2 of the AUSTRAC guide.
What happens if the obligations are not met?
If a pub or club fails to meet its obligations, AUSTRAC has a range of enforcement actions available to it including:
- A remedial direction to take specific actions to comply with certain parts of the AML/CTF Act.
- Infringement notices for contravention of obligations.
- Written notices requiring some action to be taken such as appointing an external auditor.
- An enforceable undertaking to AUSTRAC, detailing how the business will comply with its AML/CTF obligations.
- Applying for a civil penalty order from the Federal Court of Australia. The Court may then order the business to pay a penalty to the Commonwealth. This can be up to 20,000 penalty units, or up to 100,000 penalty units for a body corporate.
Pubs and clubs which operate electronic gaming machines may be exploited by criminals to launder proceeds of crime. These businesses need to be aware of and comply with their AML/CTF obligations or risk facing enforcement action, which may include steep fines.