Good morning everyone and thank you for the opportunity to speak with you today here on the land of the Kombumerri people of the Yugambeh Nation.

I want to talk about navigating the future and the evolving anti-money laundering and counter-terrorism financing regulatory landscape for clubs. 

More importantly, I want to talk about what that means for you, as directors and senior leaders who are responsible not only for the success of your businesses but also for protecting your businesses and the community from criminal harm.

Clubs are community anchors. You run legitimate businesses that provide sport, community programs, and social connection. 

But that legitimacy is exactly what makes you attractive to criminals who are always looking for ways to clean or spend dirty money. If you let your guard down, they will get in.

Serious and organised crime costs Australia more than $68 billion every year. 

Each dollar of dirty money has created harm – whether that’s drugs, scams, fraud, child exploitation, or human trafficking.

The Australian Criminal Intelligence Commission’s latest wastewater report found Australians consumed more than 22 tonnes of meth, cocaine, heroin and MDMA in the last snapshot period – the highest since 2016.

This report picks up drug use in every part of Australia. No town is immune and where people are buying drugs, people are laundering money. It’s that simple. 

The illicit drug market alone is worth around $12 billion annually, all of which needs to be laundered and reinvested into more crime or spent and enjoyed by criminals who have created harm to generate profit.

Another increasing crime type is illicit tobacco. This is generating vast amounts of profit – some reports estimate the black market is worth up to $10 billion.

Illicit tobacco is everywhere. It’s likely being sold openly at your local tobacconist and just like drugs, the profits need to be laundered so they can be reinvested or enjoyed.

You can read the news on any given day and hear about the latest bust, which invariably involves seizures of huge amounts of product as well as millions in cash and assets. 

We’re involved in almost all of these operations, following the money that criminals are trying to legitimise. I can tell you the people moving money for illegal tobacco are the same ones doing it for the drug trade. These are serious criminals causing real harm to our community.

We are in the midst of the most significant overhaul of Australia’s Anti Money Laundering laws in a generation and step by step we’re laying the groundwork as the laws come into force. 

Key changes include:

• Reforms to the tipping-off offence, which are already in place
• New information gathering powers, also already in place
• New obligations for currently regulated businesses, like yourselves, from 31 March next year
• And tranche 2 entities coming under the regime on 1 July – designated services such as lawyers, accountants, real estate agents, conveyancers and dealers in precious metals and stones.

Partnership and cooperation underpin the Anti Money Laundering regime. Only by working together can we reduce the harm that financial crime inflicts.

On this note, we’ve recently published the AML/CTF Rules which support the Act. 

They were developed in consultation with industry and shaped strongly by stakeholder feedback.

The next milestone will be delivering guidance and risk indicators for tranche 2 businesses and then starter kits that will help smaller or less complex businesses to establish their AML/CTF programs.

For you as existing entities, the changes mean increased obligations and increased scrutiny but also a more flexible focus on managing risk.

AUSTRAC is moving away from tick-box compliance toward an outcomes-based model. 

That means our focus is on whether your systems are genuinely mitigating the risks in your business, not just whether you’ve filled out forms correctly.

This places greater emphasis on risk assessments and every business will need one. 

You will need to understand:

• the risks associated with your products and services
• the channels through which you provide them
• the types of customers you serve

A template won’t cut it. If your AML program doesn’t reflect the reality of your business, it leaves the door open to exploitation.

Let me be blunt: AUSTRAC has seen too many cases where gambling businesses – including pubs and clubs – have taken a ‘tick and flick’ approach. 

Programs were copied from templates without tailoring. Boards signed off without understanding the detail.

The enforcement actions against the casinos demonstrated the huge regulatory fallout when boards ignored risks for the sake of profit. 

Crown Casino for example was fined $450 million after continuing to deal with junket operators it knew were linked to organised crime.

While casinos operate at scale, clubs – especially the large clubs – have similar business models. 

We’ve seen cases where:

• cash was allowed to flow through gaming machines with little oversight
• suspicious behaviour went unreported
• and boards were unaware of the real risks listed in their own AML programs.

These areas need to be addressed across the sector and I want you to consider the impact of regulatory action if you do nothing.

Looking at what clubs are reporting to us. We have seen some increase in suspicious matter reporting.  

The biggest uptick happened between 2021 and 2022 – when we went from 640 reports to 2,526.

Up until 2021 suspicious matter reports were few and far between. 

When I looked back at 2016, AUSTRAC only received 184 reports that single year. 

This year, so far, we’ve received 2,409 reports, that’s a slight increase again. However that equates to only a few reports each year from every business. 

It’s a big increase but it’s not nearly enough. 

Only a small fraction of the sector are reporting suspicious behaviour.

The data shows that 10 businesses have submitted around half of all these reports this year. Congratulations to those businesses. 

Only 7% of enrolled pubs and clubs submitted a report this year. 

For a sector that generated $8.4 billion in poker machine profits in the 2023-24 financial year, we expect many more reports than this and we expect all clubs to be submitting them. 

The banks for example, send us hundreds of thousands each year.

As I said, money laundering happens in every town and the low number of reports signals to AUSTRAC that your Anti Money Laundering program isn’t doing what it’s supposed to. 

We are serious about improving reporting and ensuring that people are focused on reducing money laundering. We have been focusing heavily on gambling in Australia because our intelligences tells us there is dirty money there. We have taken action against Crown Casino, Sky City Casino, Star City Casino, we are investigating Sportsbet, The Ville Casino and Mindil Beach Casino. 

AUSTRAC is in the midst of seeking civil penalties against online gambling provider Entain and we recently announced civil penalty proceedings against Mounties.

In the 2019-2023 period, Mounties recorded electronic gaming machine deposits of more than $4 billion. This is a cash flow comparative to a mid-tier financial institution. Also equivalent or larger than some of those casinos I mentioned. 

High volume equals high risk exposure and that sort of scale requires a sophisticated Anti Money Laundering system.

Even if most play is legitimate, the fact that billions flow through a club means boards need to demand detailed reporting.

We’re alleging that Mounties failed to carry out an appropriate, independent review of its AML/CTF program for more than a decade, that its program was outdated and incomplete, its transaction monitoring system wasn’t capable of detecting suspicious activity and that it wasn’t assessing or documenting its Money Laundering risks.

On top of that we’re saying Mounties staff weren’t properly trained – frontline employees were unable to identify or escalate suspicious matters. 

We allege Mounties board and senior management failed to ensure compliance.

I’ll give you an example of what this looks like on the ground.

In our statement of claim we allege that one of Mounties high risk gamblers engaged in gambling activity that should have raised red flags. 

The individual visited the club almost daily and habitually inserted large sums of cash without playing it. 

Their employment status and personal circumstances didn’t match up – the customer profile simply didn’t warrant access to this amount of cash.

This person was not the only one – we identified 10 customers with a combined poker-machine turnover of nearly $140 million. 

Not a single suspicious matter report was filed in relation to these people.

Imagine someone walking into your club, dropping tens of thousands of dollars in cash into a machine and barely having a spin before cashing out.

That’s not a regular punter – it’s a classic wash pattern we see in money laundering. 

Whether the person is actively cleaning the money or just enjoying a punt with illicit funds is beside the point. 

The use of illicit proceeds to pay for goods or services is a crime.

AUSTRAC’s National Risk Assessment rated pubs and clubs that operate poker machines as medium risk for money laundering. Why? Because:

• clubs handle significant volumes of cash
• transactions can be rapid and high-value
• criminals see community venues as less tightly scrutinised than major casinos

Combine that with pressures from digitisation, competition with online platforms and evolving payment channels, and the vulnerabilities multiply.

You will have read the NSW Crime Commission Report into pubs and clubs. In 2020-21, the Commission calculated that $95 billion was gambled through poker machines. 

The report pointed to criminals cashing in and out of the machines, regular heavy play by suspicious individuals, loan sharking and predatory lending.

If you think these risks don’t apply to you, you’re mistaken. 

Some of the feedback I’ve had is along the lines of, ‘Oh we’re a regional club in a small town, there are no criminals here.’

But that’s not correct.

If you’ve got poker machines and you’ve got a weak AML/CTF program then you are a prime target. 

That wastewater report I mentioned – it shows drug use everywhere. And if someone in your community is buying drugs or illegal tobacco then someone is laundering money there also. 

Every club operating poker machines is exposed to criminal money. 

Whether that is a local drug dealer spending their dirty money on a night out or a syndicate actively laundering money – it is illegal and it enables people to benefit from crime. 

Your members might be battling an addiction to those drugs. 

Their house could have been robbed or their family harmed in the course of the illegal activity that created the profit. 

Do you then want to profit from those criminal funds?

We need to ensure poker machines cannot be used to embed dirty money into the legitimate economy.

Clubs are out to provide community services and make our communities better places to live – essentially that is also what the Money laundering act is trying to achieve.

As directors, you carry ultimate responsibility. Outsourcing programs and services doesn’t remove that – you need to satisfy yourself that your club is compliant in the same way you do for tax, WHS or food service obligations.

Ignorance is no excuse. A culture of compliance has to start in the boardroom and that means asking the hard questions. 

If your program hasn’t been tested recently, now is the time. 

If you haven’t seen updated suspicious matter reports, ask why. 

If your board papers don’t include money laundering risks, then insist that they do.

Boards are responsible for ensuring the company’s Money Laundering program meets legal requirements, that it is designed, implemented and maintained in accordance with the law.

It’s not enough to complete a risk assessment, you need to really understand risk, be invested in that and discuss those risks regularly with your chief money laundering officer.

Be clear on governance lines and establish who your Anti Money Laundering compliance officer is and whether they have the right budget, authority and independence to do their job effectively.

Consider the people, systems, training and technology you need to support them.

Take an operational snapshot - look at your transactions and get reports on those transactions so you can better understand what might be suspicious.

Who are your high-intensity customers? what proportion of deposits are from high-risk customers and how many suspicious matter reports are being filed?

I’ve seen directors pore over profit sheets but completely disregard the fact a large percentage of it is suspicious. 

Satisfy yourselves that staff are performing appropriate customer due diligence and taking action on customers that look risky.

Be familiar with and understand what it is you are reporting to AUSTRAC because we do expect you to report suspicions to us. 

Look closely at your audit reports and dig into how many customers are being screened and onboarded correctly, what percentage of exception rates you’re seeing, what your transaction monitoring alerts and suspicious matter reports are showing you.

If you’ve got the controls right, there is a wealth of data that is going to paint a picture of who is coming into your venue and spending money.

You are expected to actively engage with AML/CTF compliance because it is essential to the health of your business and because you can be held personally liable for failing to exercise proper oversight.

The gambling sector remains a priority for AUSTRAC this year and enforcement action will continue where businesses are negligent. 

But we are also investing heavily in digital systems, new staff and intelligence capabilities to work with you more closely and implement your new obligations which begin 31 March next year.

Clubs will need to consolidate their Money Laundering programs into one streamlined version, adopt a flexible risk-based approach and tailor their systems and controls to reflect the specific size and exposure to money laundering risks inherent in each venue.

You will need a targeted risk assessment and you will be required to document and act on the specific money laundering risks you face with an emphasis on risk-based controls for activities like operating gaming machines.

And as I mentioned we want to see enhanced board oversight and boards paying attention to Money Laundering. 

You can’t outsource responsibility for compliance. 

You need to be getting regular reports and ensuring the controls are working effectively.

Capture your suspicious actively appropriately – we want to see those reports coming in.

The focus is on outcomes rather than ticking boxes so do meet your obligations with genuine effort and work with us to prevent your business being exploited and your communities being harmed.

We’ve seen positive examples of casinos that have re-designed business models to operate sustainably without reliance on junkets or risky revenue streams. 

Clubs have the same opportunity: to hard-wire compliance into operations and to run businesses that are not only successful but also safe from criminal infiltration.

In turn, we are committed to sharing outcomes from law enforcement investigations that originated with industry reports.

So my message to you today is this:

• Don’t turn a blind eye to your obligations
• Protect your club by protecting your community
• Take the time now to understand your risks and close the gaps

AUSTRAC is ready to work with you – to raise standards, to educate and to collaborate. 

Together, we can detect, deter and disrupt the criminals who want to exploit your businesses. Thank you.