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Governance Associates Ltd

No. 2015-00176

PO Box 219
Toorak Vic 3142
Australia

Gambling in Australia in the age of AUSTRAC

www.associates.ag
P +1-268-734-8063
+61-3-9826-1516

Opinion
Gaming and wagering regulators invariably cite prevention of crime as a foundation policy that
drives their regulatory efforts of licensing probity, standards, certification, monitoring, audit, etc, etc.
Regulators may not cite revenue as being a foundation policy but it seems probable that revenue
integrity and collection is a cornerstone of regulatory effort.
Whereas, the Australian Financial Reports and Analysis Centre (AUSTRAC) is clearly motivated by
the prevention of crime (or at least the detection of crime). While AUSTRAC supports a formal
risk management approach, it would be a true cynic to suggest AUSTRAC is motivated by the
success whereas cynics may suggest industry success could be an aspect for provincial gambling
regulators.
Gaming machines
The Australian gaming machine industry has grown up from New South Wales clubs with a
presumed community mandate to multi-jurisdiction, mega-million dollar cash cows for large
corporate operators.
It is often claimed by opponents of gaming machines that State and Territory governments are
addicted to the revenue derived from gaming machine industries. With substantial restrictions on
State and Territory governments to raise revenue under current Commonwealth-State GST
arrangements, it is difficult to argue that governments are not attracted to the viability of their gaming
machine industries. Provincial regulators are of course also interested in the prevention of crime
as evidenced by technical standards, certification, licensing, and audit.
Wagering
Since Bryan Clark opened up a bag at Gardens Oval in the mid-1980s sports-betting has been a
feature of Australias wagering landscape. While most States had behemoth TABs to protect,
corporate bookmakers spread from the Northern Territory to the Australian Capital Territory and
later Tasmania. Today the remnants of the TABs - Tabcorp, and Tattersalls have dynamic sportsbetting components to their businesses.
Sports-betting is so prolific in Australia it has captured the attention of several international betting
firms, such as BetFair, bet365, Ladbrokes, Paddy Power Unibet, and William Hill; competing with
home grown brands Luxbet (Tabcorp), Crownbet, Weather Lottery, Club All Sports, TopBetta, and
others.
The dynamics of sports-betting industry economics means that tax rates are very competitive and
governments; on the basis of advice from their regulatory authorities and Treasuries; either establish
new low benchmarks or match lowest around and even cap total taxes. The relatively low tax base
About the author:
Alan Pedley was a gambling regulator in the Northern Territory of Australia from Apr-1990 to Dec-1998 overseeing
technical regulation of the worlds first regulated online betting operations at Centrebet; and all aspects on the
Territorys gaming machine industry.
Since Dec-1998 Alan has been consulting to government regulators worldwide in the fields of gambling regulation
(including online, telephone, wagering, and AML/CTF). He has developed dozens of standards in use by regulators
worldwide; conducts specially commissioned audits and examinations for regulators; and provides compliance and
AML/CFT consulting, independent reviews, and external auditor services to operators.

Governance Associates

Motivations of regulators

He is on the Editorial Board of Gaming Law Review and Economics; is a Member of the International Association of
Gaming Lawyers; Member International Association of Gaming Advisors; and approved by AUSTRAC as an external
auditor pursuant to the Anti-Money Laundering and Counter-Terrorism Financing Act.
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Governance Associates Ltd

PO Box 219, Toorak Vic 3142, Australia
No. 2015-00176

Governance
Associates

is presumably offset by employment and (hosting and comms) infrastructure investment and
perceived credibility. Still governments appear to compete to attract sports-betting operators to their
respective jurisdictions, which of course, is a normal and valid objective of provincial governments.

It could be perceived that wagering regulators freedom of crime has had limited effect especially
in the actual operations and money laundering potential, either through inadequate resources or
scope of bailiwick.
AUSTRAC
Enter the Financial Actions Task Force (FATF), AUSTRAC, and the Anti-Money Laundering and
Counter-Terrorism Financing Act 2006 (Cth). Given the Federal Governments hostility toward
gambling goes back to its attack on online gambling in 1999, where online betting-in-the-run and
gaming are restricted to this day; AUSTRAC is not about to be a barracker or otherwise support
gambling industries. Additionally, Australia is periodically evaluated by peer countries to determine
the effectiveness of anti-money laundering and counter-financing of terrorism regulation within its
gambling (and other) industries. AUSTRAC will not want to be the regulator exposed internationally
as over-seeing ineffective (AML/CFT) programmes.
In the public domain we see AUSTRAC has taken the following actions:
2010-06-02

2015-02-06
2015-05-27
2015-07-22

George Thomas Hotels (Campsie) Pty Ltd; George Thomas Hotels (Madison) Pty Ltd; George
Thomas Hotels Pty; George Thomas Hotels (Qld) Pty Ltd; and George Thomas Hotels
(Bradbury) Pty Ltd to appoint an external auditor;
ClassicBet Pty Ltd fined and to appoint an external auditor;
Canberra Southern Cross Club to appoint an external auditor; and
TAB Limited, Tabcorp Holdings Ltd, and Tabcorp Wagering (Vic) Ltd, Federal Court action.

Here we see gaming and wagering operators squarely in the sights of Australias AML/CFT
regulator.

AUSTRACs recent claims against the Tabcorp group reportedly

include: suspicious matters and beneficial owners, among others
these factors are not well understood by many gambling
operators and could lead to findings of non-compliance. Tabcorp
reportedly face fines up to $A 17M.

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At risk has been the reputation of hosting jurisdictions but over time what might normally constitute
reputational damage seems to have been shrugged off or over-looked by those who one would
expect to value reputation. The cases of the Karratha bank manager who dropped more than $A 15
million with International All Sports and of Sports Alive reportedly with debts north of $A 14 million,
where the Ombudsman found the regulator was simply misled (read able to be misled).

How to keep AUSTRAC at bay

The lesson to be learned is that gambling operators must start complying with all regulatory
requirements or potentially face legal consequences. On this note there is a legal requirement that
gambling operators must have Part A of their AML/CFT programmes subjected to an independent
review on a regular basis. An absence of legal action by AUSTRAC does not equate to compliance
with the Anti-Money Laundering and Counter-Terrorism Financing Act and AUSTRAC
requirements.
Operators are advised to seek expert guidance to implement a compliant AML/CFT programme
and have their independent review undertaken, by an appropriate expert, on a regular basis. Failure
to do so will not be an historic slap on the wrist it may attract serious financial and legal sanctions;
this is a new regulatory paradigm for Australias casinos, hotels, clubs, totalizators, lotteries, and
bookmakers.
These are the services Governance Associates specialise in!
gambling in australia in the age of austrac.docx

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