Patricia Bergin’s report into Crown Resorts has left the Victorian gambling regulator in a difficult position – and facing the prospect of having oversight of the Melbourne casino, the biggest in the country, stripped away from it.
If a new casino regulator is set up, as the Victorian premier Daniel Andrews proposed on Wednesday, it is likely to be a far different beast to the current authority, the Victorian Commission for Gambling and Liquor Regulation.
To be effective, it will need to be far more aggressive, interventionist and transparent.
On Wednesday, Andrews defended the commission against the perennial attack that it has failed to regulate Crown – an attack that, on the evidence on the public record, unfortunately appears to be correct.
But at the same time he also said that “casino regulation may need its own bespoke authority”.
“That may be something that we need to do,” he said.
A look at Bergin’s report shows why he might think that.
While her inquiry took place in New South Wales, under the authority of the state’s Independent Liquor and Gaming Authority, much of the money laundering and criminal activity she discusses in her report allegedly took place at Crown Melbourne, which is under the jurisdiction of the Victorian commission.
Her report, tabled in NSW parliament on Tuesday, reveals its failings.
For a start, footage of hundreds of thousands of dollars being unloaded from shopping bags in high-roller rooms, which the inquiry considered was evidence of money laundering, was taken at Crown Melbourne.
Bergin also found Crown facilitated money laundering through two subsidiaries, Southbank and Riverbank.
Southbank was linked to the Melbourne casino – it’s the name of the suburb from which the squat money pit glowers over the Yarra River – while Riverbank was linked to the Burswood Casino in Perth.
Embarrassingly for the VCGLR, not only did millions of dollars flow in alleged suspect transactions flow through Southbank’s bank account. It had also approved the use of the account, and then apparently failed to monitor it properly.
In 2001, the Office of Gambling Regulation, as the Victorian regulator was then known, told Crown it could use the bank account to provide “privacy” to patrons depositing money with the casino, on condition the casino provided quarterly reports detailing deposits into it.
“Although this occurred for a relatively short period it then developed into the current regime of the quarterly reports to the regulator of only the total assets and total liabilities of Southbank,” Bergin said in her report, tabled in NSW parliament on Tuesday.
“There was thus no regulatory visibility of the actual deposits made into the account as was originally envisaged by the Office of Gambling Regulation.”
When it comes to the junkets that brought in big-spending “whale” customers, usually from Asia, this business was part of the “VIP International” segment of Crown, which was also part of the Melbourne operation.
Some of the operators of these junkets were, Bergin found, linked to organised crime.
For some time, Crown allowed one of the junkets that Bergin said was linked to organised crime, Suncity, to operate its own high-roller room at Crown Melbourne – the same room where some of the footage of money being ladled out of shopping bags and exchanged for chips was taken.
The Victorian commission never directly regulated these junket operators – instead, it required Crown to have an “approved system of internal controls” to make sure they were appropriate people.
Bergin’s report shows that the “internal controls” that the VCGLR approved comprehensively failed.
A look back at the regulator’s periodic reviews of the Melbourne casino licence is also revealing.
The very first review, in 1997, was just 33 pages long, including appendices, three pages of which were devoted to taking a narrow view of what was to be investigated.
Setting a pattern for reviews to follow, difficult questions about the suitability of a shareholder were shunted off to be considered later because the allegations in question were still before the courts.
The next review, in 2000, managed to stretch to 67 pages. By then, the shareholder was no longer an associate of the casino, so the investigation was dropped.
VCGLR investigators continue to struggle to investigate. The regulator’s 2018 review of the licence did not deal with the arrest of Crown staff in China in 2016 for gambling promotion – something that Bergin’s inquiry also focused on – because its investigation was continuing.
It continues to this day and if it goes on until July will have been running for four years.
Driven by the inquiry unfolding over the border in NSW, the VCGLR has taken some action, but it’s been both late and small compared to the bombshell dropped by Bergin.
Its regular review of the licence, due in 2023, has been brought forward to this year. And in October it issued Crown with show cause notices as to why it should not be found in breach of its licence obligations over its dealings with junkets – something that at most can result in a fine of less than $1m.
Bergin’s review of regulation only dealt directly with the ILGA, which commissioned her inquiry, and the VCGLR has yet to respond to her report.
But her lessons can also be applied in Victoria.
The current model in both states is based on something called the “regulatory pyramid”, where most members of the regulated population are trusted to do the right thing within guidelines and enforcement is reserved for the real wrongdoers at the tip of the pyramid.
It’s extremely fashionable among regulators, possibly because it is an almost perfect recipe for doing very little.
To Bergin, however, it is based on “a rather naive belief that it would be inconceivable for the casino licensee to act improperly in the face of ongoing risks because it may damage its corporate reputation or its capacity to continue holding its licence”.
She recommended ripping up the current regime and establishing a stand-alone authority dealing only with casinos, armed with the powers of a standing royal commission and the power to make decisions that are politically unpopular and cannot be overruled by cosy backroom dealmaking between casino operators and the executive government.
In Victoria, such a beast would look very different to the current commission. It might even be able to effectively regulate a casino that, Bergin’s report tells us, has so far been completely untamed.