Pokie machines inside SkyCity Entertainment Group's Auckland casino.
SkyCity Entertainment chief executive Michael Ahearne began an investor call today by saying he would be limited in what he could say about a Department of Internal Affairs (DIA) prosecution over alleged breaches of anti-money laundering laws.
Then he talked for more than 20 minutes, responding to questions about when the company first knew about it, what it could mean for the business, why it was happening, how it could be avoided and that it might cost $8 million.
Did he answer those questions? It’s perhaps fairer to say he responded and analysts were left with little new information. The CEO, who leaves at the end of next month, was extremely guarded in his answers.
The casino business appears to have been taken by surprise. Justin Barratt, an analyst at CLSA Australia, asked when the company was first made aware of the proceedings. Ahearne indicated it came out of the blue.
“In relation to these proceedings, we were made aware over the weekend. We have had an audit under way for quite some time - [the] DIA has been undertaking an anti-money laundering audit,” he said.
Asked by the Herald after the 11am conference what he thought of Ahearne’s responses to analysts’ questions, Craigs Investment Partners’ senior research analyst Wade Gardiner also referred to the sudden nature of events. Nor was it known precisely what the DIA was suing SkyCity over, he said.
“They only got it [during] the weekend. It has not been filed in the High Court yet,” Gardiner said.
At the start of the call, Aharne emphasised how the business had gone further with anti-money laundering efforts/stamping out funds from counter-terrorism financing being used in its casinos.
“We no longer deal with junkets. We have limited the way customers can transact with us,” said the outgoing boss. Though he’s leaving the business at the end of next month, no new replacement has yet been announced.
He referred to the capacity and capability of staff who he referred to as “teams”, improving customer due diligence processes and more staff training.
Ahearne limited questions to today’s announcement, reminding analysts the half-year result would be out next week.
Asked if the company had talked to the New Zealand Gambling Commission, Ahearne said it was in contact with the DIA.
Asked by Macquarie analyst David Fabris how fast this could be resolved, he said: “Look, there’s a process from here. The department is expected to file proceedings this Friday in the High Court. We are committed to working constructively with the department to resolve this quickly. It would not be appropriate for me to give a time on that.”
Asked about investment in compliance and systems and if SkyCity had spent enough, Ahearne said: “Firstly, it is disappointing as an organisation that we’re in this place. We are committed to improving. We’ve made significant changes in 202, and we have more work which is under way.”
Marcus Curley of UBS asked about historical events and five separate causes of action, and for more colour about what the incidents relate to. Ahearne said he was not really going to comment on the details, “but they largely, but not exclusively, relate to historic[al] matters”.
Curley said gambling regulations were different in New Zealand, Victoria and New South Wales, and wanted to know how “things” would evolve with the DIA from here.
“[The] DIA [is] a high-quality regulator. We have a really good relationship with them. We are working constructively with them. I can’t be speculating on the future,” Ahearne said.
Adrian Allbon of Jardens asked about the time periods when the breaches occurred, but Ahearne said it wasn’t appropriate to answer or “give any more colour on that”.
Allbon noted Aherane had told of how the DIA was conducting an audit, so he asked about “enhancements” already put in place to ensure SkyCity complied with the law.
The business had developed a programme to meet requirements with significant investments and had implemented changes, but Ahearne said he couldn’t comment on specifics Albon sought. “But what I can say is, the work we’ve been doing is significant and the uplift is well under way.”
Allbon asked about the possibility of further prosecutions: “There could be more?”
But the CEO wouldn’t confirm or deny that.
Andy Bowley of Forsyth Barr asked about the number of contraventions, and why there were five.
“Look, it’s relevant to the act, but I’m not in a position to provide any more detail. It would be inappropriate,” Ahearne told him.
Bowley asked Aherne if there was anything to defend.
“We’re going to engage constructively with the department as soon as possible,” the CEO answered.
Craigs’ Gardiner asked if the company “could settle this and move on, or does it have to go all the way to a High Court hearing?”
Ahearne said SkyCity would be endeavouring to deal with this as quickly as possible and was co-operating with the DIA team. He thanked all for engaging in the call and said he would speak at the results briefing next Wednesday.
Today’s announcement is different from the September announcement from that company, analysts said afterwards. In September, the DIA referred host responsibility issues to the Gambling Commission.
Today, it was the anti-money laundering/counter-terrorism provisions of the law which are being incited.
Four separate regulatory processes are under way here and in Australia:
DIA director of anti-money laundering/counter-terrorism financing regulatory services, Mike Stone, said today the entity regulated casinos under the Gambling Act 2003 and acted as a supervisor under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
The regulatory requirements for casinos under these Acts are discrete and managed independently, Stone said.
“The department has recently completed a review of SkyCity’s compliance with the AML/CFT Act. This matter is going through due process and the department will release a media statement when it is in a position to do so,” Stone said.
SkyCity shares are trading on the NZX around $2.04, down nearly 2 per cent today and 20 per cent over the past 12 months.
Anne Gibson has been the Herald’s property editor for 24 years, has won many awards, written books and covered property extensively here and overseas.
Financial Times: 'When the generics come in there will be a huge price war.'