Australia has some of the strictest anti-money laundering and counter-terrorism financing laws in the world. But that hasn’t stopped SkyCity (ASX: SKC) from allegedly committing numerous compliance violations with Australia’s gambling supervising body, AUSTRAC, slamming down on the business and is progressing a civil penalty order to see SkyCity Adelaide in front of Federal Court.

The civil penalty proceedings against SkyCity follows an investigation that began in September 2019 and orchestrated by AUSTRAC to inquire into the works of Australia’s conglomerate gambling operators, Crown Casino (ASX: CWN), the Star Casino (ASX: SGR), and finally today, SkyCity, where its intent was to make known any breaches and infringements that went intentionally unnoticed or unreported.

In the search for dishonesty and incompetence, the groundwork covered by the investigation unveiled deep systematic shortcomings that stipulated the Company “failed to establish an appropriate framework for Board and senior management oversight”, ultimately leading to extensive anti-money laundering and counter terrorism (AML/CTF) breaches that show no signs any of them were ever reported to governing bodies. It seems that the consequences of these behaviour may be more serious than what the Company’s Board first thought.

Evidence also showed that there were significant lapses in the company’s AML/CTF program, including a failure to identify changes in risk over time and failing to put appropriate systems and controls in place to mitigate any risk exposure – leaving to question whether it was an innocent oversight, or much worse, intentionally overlooked.

It’s important to remember that failing to comply with Australia’s anti-money laundering and counter-terrorism financing laws carries serious consequences. As part of its proceedings against SkyCity, AUSTRAC is actively seeking declarations from the Federal Court that will officially recognize SkyCity’s alleged violations.

At the end of the day, a Casino should ensure they have an up-to-date AML/CTF program that meets all relevant requirements, including identifying changes in risk over time and putting appropriate systems and controls in place to mitigate such risks.

The fact that SkyCity has been accused of such extensive violations of the law unfortunately comes as no surprise – especially if you take into account how very similar the circumstances are with the shakeup with rival, Crown Casino, that saw it in hot water for its links to international crimes syndicates and evidence the gambling house facilitated money-laundering. While it’s also concerning and somewhat laughable, despite being on notice since 2019, SkyCity supposedly still failed to implement adequate measures that could have avoided this situation – raising questions about the Company’s helm and its commitment to adhering to regulatory standards.

It’s now likely that SkyCity will face hefty fines as a result of the AUSTRAC’s allegations – though it remains unclear what other consequences they may be facing with the saga to play out further in the coming weeks.

SKC shares initially dropped 4% to $2.50 on open following the announcement, but has since recovered a portion of it to sit on $2.535 at the time of writing.