New Zealand DIA and SkyCity reach settlement in non-compliance case

The New Zealand Department of Internal Affairs (DIA) and SkyCity Entertainment Group have settled their dispute about the former's failure to comply with New Zealand's AML/CFT regulations.
Online casino in New Zealand
A subsidiary of SkyCity, SkyCity Casino Management (SCML), was the target of high court proceedings that the DIA announced in February. Alleged violations of the country's 2009 Anti-Money Laundering and Countering Financing of Terrorism Act are at the heart of this matter.

Five distinct "significant" Act compliance issues are outlined in the draft complaints. Nonetheless, SkyCity clarified that they mostly address past events and that the DIA has already received reports of certain situations.

According to SkyCity, an anti-money laundering and counter-terrorism funding strengthening program has been in operation since late 2021. In order to fix the past mistakes and improve compliance processes, this is being done. Investment in people and technology is part of this, as is the assessment of systems and processes to find ways they might be improved.

NZ$4.16 million fine looms for SkyCity
After considering all of this, SkyCity and the DIA have settled their differences. It also admitted to failing to meet its responsibilities as outlined in the Act.

The period from February 2018 to March 2023 was characterised by failures. Problems with the DIA's anti-money-laundering and counter-financing-of-terrorism (AML/CFT) risk assessment and compliance program, account and transaction monitoring, expanded client due diligence, and necessary relationship termination were all highlighted.

Still, the DIA pointed out that nothing points to SkyCity's involvement in money laundering or terrorism funding.

The parties will then propose to the supreme court that the case continue to a penalty hearing after the settlement is reached. Here, the amount of the penalty will be decided. They have agreed to pay a fine of $4.16 million (around $2.30 million, €2.34 million, or $2.54 million USD), but the court will ultimately decide.

According to Mike Stone, director of the AML/CFT department at the DIA, "This agreement is an impactful outcome." Without the drawn-out and expensive process of going to court, we were able to accomplish our goal.

"We are relieved that SkyCity was able to admit to the breaches and accept responsibility for what were substantial failings, even though we think these regulatory violations are severe."

Recognising and responding to shortcomings in New Zealand
Stone further acknowledged SkyCity's efforts to rectify the shortcomings following these incidents.

In his statement, Stone expressed his enthusiasm for the steps SkyCity has taken to improve its performance in this area and emphasised the company's public pledge to keep getting better. "Going forward, we intend to collaborate closely with SkyCity on its continuing compliance duties."

Among these initiatives is the creation of a specialised risk and compliance committee, the appointment of new directors with expertise in risk, and the renewal of the SkyCity board. A group chief risk officer has been appointed by SkyCity, and the company's internal auditing skills and external audit scrutiny have been enhanced.

Taking a broader view, SkyCity has said that it is now conducting more thorough due diligence on clients where necessary. Its host responsibility, risk and compliance, and financial crime teams are also expanding their capability.

According to SkyCity, there are other projects in the works that will enhance operations even more. For example, by the middle of 2025, all of New Zealand will be required to use carded play.

"We have made significant strides in improving our AML and CTF systems in recent years," stated Julian Cook, executive chair of SkyCity. This in no way diminishes the gravity of these breaches, and we express our disappointment at SkyCity's predicament.

"We take our duty as a casino operator seriously, as it is crucial in the fight against money laundering and terrorism financing. These have been ongoing problems, and I accept and apologise on behalf of the executive team and the board.

When it comes to meeting the expectations of our regulators, customers, shareholders, and the communities in which we operate, we have failed miserably. We have started providing the amount of change needed to meet, and we are dedicated to finishing.

Additionally, SkyCity has settled an Australian non-compliance action.
Days before SkyCity reached a comparable deal in Australia, it also announced a settlement in New Zealand.

In restitution for past AML/CTF infractions, SkyCity has reached an agreement with Austrac, the Australian Transaction Reports and Analysis Centre, to pay AU$67.0 million. At a hearing on June 7, SkyCity and Austrac will present separate papers to the Federal Court of Australia in an effort to get approval for the idea.

Although the case was first revealed in December 2022, concerns had been brewing for a while. Allegations of misconduct were brought to SkyCity's attention in June 2021, following the launch of an industry-wide compliance program in September 2019.

Austrac concluded that SkyCity Adelaide had shown "serious and systemic non-compliance" with Australian anti-money-laundering and counter-terrorism laws.

One problem is that the hazards of money laundering and terrorist financing were not properly evaluated. Additionally, SkyCity failed to set up an adequate structure for the supervision of AML/CTF projects by the board and senior staff, and it failed to include risk-based procedures and controls into these programs.

Other worries include failing to detect suspicious activity and establish an adequate mechanism to monitor transactions. Austrac further claimed that SkyCity did not have a sufficient enhanced customer due diligence program in place to investigate its riskiest customers further.

Consistent with New Zealand practice, SkyCity accepted the findings and penalties. Even though the group had set aside $45.0m to cover a potential civil penalty, the actual sum is much higher.

Changes in SkyCity's leadership
In light of this, SkyCity has begun reorganising its executive staff.

Jason Walbridge, a seasoned leader in the gambling industry, was named CEO of SkyCity in April; his tenure will begin in July. Michael Ahearne has departed the organisation, and Walbridge is taking his place.

In other news, CFO Julie Amey has left her position. Amey will formally step down as chief financial officer on September 25th, but he will remain in the role for another six months.

Andrew McPherson was also appointed chief information officer for SkyCity in March. He assumed the position temporarily in November.