Source : THE AGE NEWS
A leaked recording of Star Entertainment Group’s most senior executives has captured its Sydney casino boss and the firm’s chief executive complaining of the risk and compliance measures forced onto the scandal-ridden firm by regulators as it attempts to retain its licence in NSW and Queensland.
The fiery discussion involving Star’s top executives and compliance managers gives rare insight into tensions between the firm’s commercial ambitions and regulatory obligations.
It is revealed as multiple company insiders warn the casino company is at risk of eroding vital integrity measures under the leadership of chief executive and billionaire pokies baron Bruce Mathieson Jr.
Details of the discussion were leaked to this masthead by two Star Sydney insiders and capture Sydney casino boss John Koster grilling compliance managers while complaining staff were doing beyond what was necessary for the casino to regain its licence.
Meanwhile, an exasperated Mathieson jnr is recorded telling fellow executives the business required further “relief” from regulators to survive and claiming fines for misconduct were “disproportionate to what is happening”.
Star was asked to pay $10 million in fines over system failures in financial crime risk operations in June and was ordered to pay $500,000 for allowing an underage boy to gamble. Over the past four years, Star has paid hundreds of millions of dollars in fines for its historical misconduct and breaches of its internal processes.
“We get these fines, which I think are just disproportionate to what is happening, and … all we’re doing is existing to pay a fine,” Mathieson jnr said.
“We keep on restricting ourselves tighter and tighter. We’re coming to a pretty critical time with obviously licences and all that sort of stuff, but it should be quite obvious to everyone that unless we can breathe … every time we get up to breathe, we cop another hit.”
Star Entertainment lost its licence to operate the Sydney casino in October 2022 following a NSW government inquiry that heard evidence about anti-money laundering failures inside its flagship precinct.
The licence has since been overseen by Nick Weeks, a special manager who also controls Star’s licences on the Gold Coast and in Brisbane. Star wants the NSW casino regulator to hand its licence back, but that is subject to a range of conditions including financial stability and sufficient anti-money laundering and counter-terrorism processes.
A transcript of the meeting also reveals Star wanted the NSW regulator to stop requiring Star to monitor Centrelink card holders and how much they spend daily, arguing it caused a major backlog in its transaction monitoring system and didn’t find many causes of fraud.
On Saturday, a joint investigation by this masthead and The Australian Financial Review revealed a trove of leaked internal correspondence detailing serious concerns about Star’s compliance and problem gambling systems. Eight Star insiders, speaking on condition of anonymity, also warned of an erosion of governance standards under Mathieson jr’s leadership.
The discussion captured in the meeting of executives highlights how Star’s issues with compliance and risk management extend from Brisbane to its flagship casino in Sydney.
Mathieson jnr wrote to staff on Saturday and said the business was continuing to speak with stakeholders about the “matters raised” in this masthead’s investigation.
Star did not respond to questions about the meeting, saying the company’s focus was on the release of its results and annual report on Monday.
In response to the weekend’s revelations, NSW casino regulator Philip Crawford has also ordered Weeks to conduct an urgent review.
He said Weeks had last week provided him a report detailing governance issues as he weighed whether to return Star its gaming licence in Sydney.
“The NICC’s concern has always been to ensure NSW casinos uphold community expectations by maintaining responsible and compliant operations which are resistant to criminal infiltration and equipped to minimise gambling harms,” Crawford said.
“However, the NICC has requested a supplementary report from the manager to outline any additional matters arising from the article that are relevant to The Star’s NSW operations.”
Star’s monthly meeting was attended by a range of executives including Mathieson jnr, interim chief risk officer Charles Diao and Koster. Its purpose was to discuss future challenges and processes.
Koster is a former senior executive at Bally’s who was put in charge of the flagship Sydney casino in March after Bally’s took a 38 per cent stake in Star in December. The Rhode Island-headquartered company’s chairman, Soo Kim, is also chairman of Star.
Mathieson jnr is the son of publican Bruce Mathieson and a former director at Endeavour, which owns the Dan Murphy’s bottle shop business and a string of pubs with pokie machines.
He became chief executive of Star following the completion of a $300 million takeover with Bally’s, which lifted his family’s stake in the business to 23 per cent.
The meeting conversation quickly diverted into a heated debate over the purpose of critical compliance measures that were designed to help Star win back its casino licence, which it lost in 2022 following revelations it had allowed financial crime to take place inside its venues.
At one point in the meeting, Koster urged Star’s management to stop doing “unnecessary garbage”.
“If we don’t need to do something, don’t do it. Don’t add to what we’re required to do,” he said. “We’ve constricted ourselves inside the requirements of the [internal control manuals]. If you guys are talking about adding more stuff on top of what we got, and it’s not a regulatory or ICM requirement, you’re going to have to think about that again quickly.”
Koster also discussed implementing KPI bonuses to make sure no unnecessary prevention of play notices were being executed and that they were being prioritised from most valuable to lowest based on the average bet they played over a session (average daily wager).
Prevention of play, known as a POP, is a temporary measure put in place to ensure a person can’t gamble inside the venue. They are coded based on different reasons for the temporary ban.
“We go to the highest customer. As soon as that highest one comes back, we take care of that,” he said. “My direction to the financial crime team, which is supported by my boss and another boss, is that you guys start that process on the most important customer. How many times do I have to say this?”
At another point in the discussion, Koster said the source of wealth checks were taking far too long. The process, he argued, should take days, not weeks.
“This has to get fixed,” he said. “This is unacceptable … there’s no way anybody should get popped anymore. Nobody should get popped unless they have refused to give us a source of wealth information, or we have to go back to them because for some reason they didn’t give us whatever we needed to begin with,” he said.
“This has to get cleaned up and if somebody says to me the backlog has to be addressed and we have to jump from one customer to another customer and then back to this customer, I don’t understand that. The good news is our POPs now seem to be falling behind our reactivations, which is the first time that that’s ever happened. So that’s a beautiful thing.”
Star’s precincts across Brisbane, the Gold Coast and Sydney operate according to strict internal control manuals – a rulebook that explains how to run the business safely. A large portion of the monthly meeting was related to how the casino monitors transactions, which forms part of its ICM.
The group discussed an alternative methodology to improve the backlog of suspicious matter reports, but also revealed they tried to ask the NSW regulator to remove a rule that related to transaction monitoring and tracking concession cardholders.
Time to complete processes is a critical focus and Star has already loosened rules around source of wealth checks, potentially making it far easier for people to gamble under multiple identities. The company now uses single source verification checks for customers instead of fuzzy logic verification, a method that uses algorithms to go through data and identify matches by calculating a similarity score.
“Speed is what we need. We keep on having paralysis of analysis,” Diao said. “We just have to stand our ground and tell [Weeks’ team] that it’s not productive.”
Koster was scathing of Star’s fraud scoring model, which is used to track the government concession holders and track whether they start spending thousands. “I would call out the people that are asking us to do this and point to that – what are you looking for? There’s nothing here,” he said.
Mathieson jnr responded: “Let’s be honest, it’s [Nick Weeks’ team] who is. It’s a lot of effort for what. I think we’re all asking that question.”
Koster stopped the meeting at various points to ask whether Star was taking steps beyond the obligations of its ICMs.
“I think we should avoid doing that – personal opinion,” he said.
Mathieson jnr said he did not disagree and asked whether he needed to draw a line with Weeks.
He argued that a fine issued to Star for allowing a 16-year-old boy to gamble tens of thousands of dollars using a fake ID showed how Sydney’s carded play system was being weaponised.
Unlike in Queensland, patrons are required to use a mandatory identification card if they wish to gamble in Sydney.
“There’s got to be at some point in time we actually [draw a line],” he said. “I’m just mounting an argument at this time, and it comes off a lot off the back of this fine last week. I know it’s a fine for an underage thing, but it’s still a weapon. It feels like it’s weaponising the 100 per cent card of play. It’s fantastic what’s been achieved, but now we’re penalised for what it’s delivering, not being sort of steered for benefit.
“The only way to get anywhere is … once we find out our licence scenarios … to go back and ask for some sort of regulatory relief.”
Star has already received regulatory reprieve from the NSW government. The state government has twice delayed plans to bring cash limits from $5000 to $1000 per day.
In late 2023, it received a critical $310 million tax reprieve in exchange for a commitment to protecting the roles of 3000 workers at its Sydney precinct.
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Nick McKenzie is an Age investigative journalist who has three times been named the Graham Perkin Australian Journalist of the Year. A winner of 20 Walkley Awards, including the Gold Walkley, he investigates politics, business, foreign affairs and criminal justice.Connect via email.
Zoe Samios was a media and telecommunications reporter at The Sydney Morning Herald and The Age.Connect via X or email.
