Australian Financial Watchdog Intensifies Oversight on Money Laundering in Pubs and Clubs

Authorities in Australia are intensifying efforts to identify operators cutting corners, extending their scrutiny to the pubs and clubs sector. Despite the increased oversight, the risk level for money laundering in these venues appears to be lower than in other sectors. According to Australia’s financial watchdog, casinos have a ‘high and stable money laundering vulnerability,’ whereas pubs, clubs, and corporate bookmakers are rated ‘medium and stable.’

The Australian Transaction Reports and Analysis Center (AUSTRAC) recently issued its annual report on money laundering, noting that there are approximately 4,103 pubs and clubs enrolled with the watchdog as of May 2024. Authorities have been diligently working to mitigate gambling harm and prevent the exploitation of these venues.

Despite these efforts, AUSTRAC finds that ‘pubs and clubs are likely used by a small number of criminals to launder funds at scale […] they present a money laundering vulnerability as illicit funds can easily be transferred between various gambling formats in one venue. This can complicate tracking and tracing of fund movements.’

The report highlights money laundering methodologies in these venues, including ‘high-volume cheque payouts, machine payouts with little or no play, collecting the machine credit in the form of a ticket, cheque payout or funds transfer, cheque-buying, collecting payouts from EGMs played by third parties’ and ‘buying and selling winning tickets.’

Industry veteran Geoff Wohlsen agrees with the watchdog’s assessment that Electronic Gaming Machines (EGMs) in pubs and clubs “probably don’t pose a high risk for large-scale money laundering.” He states, “First, the cash load limits make it very difficult for large-scale high-volume laundering. Secondly, even large clubs in New South Wales operating large installations of over 400 machines tend to know their customers now, and compliant venues are right onto potential suspicious actions. Pubs operate smaller and more intimate installations, making it easier to patrol player activity,” says the co-founder of Wohlsen Consulting.

AUSTRAC indicates that the money laundering vulnerability of pubs and clubs ‘primarily stems from a high volume and value of transactions (including cash transactions) and exposure to high-risk customers.’ However, Wohlsen notes that this can be easily identified.

“The most vulnerable aspects of EGM operations in pubs and clubs were rightly identified in the report as including the secondary market for winning vouchers and anonymous card cash loading. Effectively, a perpetrator might be tempted to load several cards with cash and use player cards as de facto cash. But venue systems will show this pattern pretty quickly, and CCTV should identify those who are loading up.”

Despite these reassurances, AUSTRAC notes that ‘large-scale money laundering through EGMs, while occurring, is not widespread.’ However, it also highlights that ‘the true extent […] is an intelligence gap.’ The report suggests that ‘it is likely that they are used by a small number of criminals laundering large amounts of illicit funds’ and that ‘pubs and clubs will continue to pose a medium money laundering vulnerability over the next three years.’

Regarding future oversight, Wohlsen suggests that AUSTRAC is likely to increase its activity in pubs and clubs. “I think AUSTRAC will be far more active in pubs and clubs than they have been to date. We have over 4,000 registered venues offering gaming facilities, so it’s a large, diversified spread of venues. No doubt AUSTRAC might start at the large pub groups first with corporate offices and then move to the large club environment, as well as focusing on high-risk areas of Australia,” he indicates.

By fLEXI tEAM