On February 16, SkyCity Entertainment Group will find itself at the centre of legal proceedings, marking a significant turn in a saga of compliance woes for the gambling operator. The looming legal battle stems from alleged violations of the New Zealand Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009 by SkyCity’s subsidiary, SCML, which holds the licenses for the company’s land-based casino operations in Auckland, Hamilton and Queensland.
The Department of Internal Affairs is the plaintiff in this high-stakes case, seeking to enforce the nation’s stringent regulations designed to prevent financial crimes. Should the Department succeed entirely or in part before the High Court, SCML could face severe financial repercussions. Penalties for the infractions could climb as high as NZ$8.0 million, the upper limit of liability under the current legislative framework.
In a revealing public statement, SkyCity acknowledged the impending legal action that comes on the heels of a thorough review of SCML’s adherence to the AML/CFT Act. Their compliance review unearthed a series of “significant” instances of non-conformity, involving five distinct causes of action. Although the precise details remain under wraps at this juncture, SkyCity disclosed that these predominantly pertained to previous failings, some of which were proactively reported to authorities by the organization itself.
SkyCity did not turn a blind eye to these compliance shortcomings. Since the tail end of 2021, the firm has zealously pursued enhancements to their money laundering and counter-terrorism financing controls, pouring resources into staffing, technological advancements, and systematic overhauls to ameliorate past deficiencies and elevate operational standards in this critical domain.
As SkyCity prepares to navigate the legal intricacies of the High Court, they have pledged to maintain a collaborative relationship with the Department to address and rectify the issues at hand. “SkyCity is disappointed that it has not met the standards to which it needs to hold itself, and this has resulted in the action taken by the Department,” the company stated. The sentiment expressed by the company implies a readiness to engage with the Department constructively and seek an expeditious resolution to these matters.
These proceedings cap off a tumultuous year for SkyCity, with 2023 buffeting the operator with a sequence of setbacks. One pressing concern for SkyCity has been the threat of casino licence suspension in New Zealand. In September, the Department of Internal Affairs made a move to suspend SkyCity’s casino licence, estimated to span an interruption of approximately 10 days, specifically targeting the SCML subsidiary. It is yet undetermined if the current proceedings are associated with this previous action.
Moreover, SkyCity has come under scrutiny in Australia. Towards 2022’s conclusion, the Australian Transaction Reports and Analysis Centre initiated legal actions against SkyCity concerning anti-money laundering failures at their Adelaide establishment. Subsequent to a mandate from South Australia’s gaming regulator—the Consumer and Business Services—SkyCity undertook a comprehensive evaluation of their money laundering countermeasures and terrorist financing prevention programmes in May 2023. To preempt anticipated penalties from AUSTRAC, SkyCity set aside a reserve of AU$45 million in August.
Leadership transitions have also featured prominently in SkyCity’s challenging year. The company announced that their chief executive, Michael Ahearne, would step down in March to return to Europe and dedicate more time to his family.
Financial forecasts at year’s end delivered yet more unwelcome news for SkyCity. Despite earlier projections of growth, the gaming company cautioned of a potential decline in adjusted EBITDA for the FY2024. The first five months of the financial year prompted SkyCity to peg the expected EBITDA between NZ$290.0 million and NZ$310.0 million, contradicting their former forecast of a modest increase and reflecting a downward revision primarily due to diminishing electronic gaming revenue in New Zealand and a lacklustre performance in Adelaide.
SkyCity, now entwined in legal and financial struggles, faces a pivotal moment that will test its resilience and capacity to adapt to stringent regulatory landscapes while navigating economic pressures. With the court proceedings imminent, the focus remains on SkyCity’s steps forward to restore compliance and confidence in its operations.
