Under the previous minister, Victor Dominello, it had not been business as usual for the agency at all. Dominello, a self-confessed digital geek, had urged Liquor and Gaming NSW to channel resources towards identifying and prosecuting instances of money laundering as he built a case for mandatory cashless gaming. The agency initially resisted on the grounds it lacked resources and that money laundering was an issue for the Australian Transaction Reports and Analysis Centre, or AUSTRAC. But Dominello persisted. He felt the agency was not so much captured by industry as conditioned by successive ministers who did not want to put the industry off-side.
“There were outstanding people in the agency,” Dominello says. “But culturally, you don’t take on the clubs and pubs. They reminded me of a dog that’s been muzzled.”
In late 2021, Liquor and Gaming bowed to Dominello’s exhortations by hiring data and analytics expert Anne-Maree Quarmby to sift through the gaming data that pubs and clubs collected for tax reasons and see if it could be repurposed to identify suspicious transactions. She developed an algorithm that identified transactions where the money pulled out of a machine was very close to or identical to the amount that had gone in, over a short period of time, and over $500.
Meanwhile, investigators with criminal intelligence backgrounds were diverted from their work with other regulatory agencies to work on money laundering full-time – using the data that Quarmby identified as potentially suspicious and collecting CCTV footage and other evidence to determine whether it was indicative of money laundering or something else.
Their work fed into a tripartisan operation with the NSW Crime Commission and Australian Criminal Intelligence Commission called Project Islington. The investigators sent thousands of hours of CCTV footage and many thousands of data reports to the crime commission, while continuing to work on specific investigations with the NSW Police. The role of the police was to prosecute individuals, while L&G could bring complaints against venues.
Suspicious transaction reports tendered to parliament indicate that some clubs and hotels were flagged more often than others, with numerous transactions ranging up to $4900 cashed out with little to no play. Patrons need to get a cheque for payouts greater than $5000. Typically, suspicious transactions were grouped in bands of an hour or less of play. In just one example, nearly $20,000 was loaded onto and cashed out of two games over a period of 10 minutes at Bankstown Sports Club in October 2021, without a single stroke of play.
Most of the venues were co-operative with investigators. They did not want criminals on their premises and straight money laundering did not profit their businesses anyway.
One gaming manager reported a suspicious incident in which one patron amassed $90,000 in uncollected winnings over three days, after placing $100 notes into multiple machines at a time and converting the value on the machines to a ticket each time it reached $3600, but not cashing it out. On the third day, a separate patron brought the winning tickets to be cashed while the gambler was caught on CCTV watching from a distance. They left the club separately and got into the same car.
In another case, a patron observed cashing out money without play on a variety of member and visitor cards emerged as the proprietor of a massage business. “She could be using the cash money from her business to attempt to turn it into clean cash, or she could be just exchanging her cash for $100 notes,” the investigator observed.
A lot of the play that appeared to be suspicious was the work of link chasers, who keep abreast of which jackpots are due to go off and then flood all the linked machines in that venue with members of their syndicate. L&G investigators suspected that some venue staff were receiving kickbacks for keeping the syndicates informed when a jackpot was due to go off.
One surveillance operation followed a person of interest from her home to an RSL club, where 20 to 30 other people were already waiting. When the doors opened, they occupied all the blackjack, roulette, baccarat and SicBo machines. The person of interest played on two blackjack machines simultaneously, feeding $100 notes and constantly observing the link jackpot which was sitting at $22,653 and due to go off between $10,000 and $25,000. Another player was playing three machines. The activity took place in front of staff and beneath a sign stating the house policy, that people who played multiple machines to exploit links would be reported.
In an undated document, Quarmby wrote a summary of the investigators’ key findings. There were limitations to the data, she wrote, and in most cases physical observation was required as well. Behaviour that appeared indicative of money laundering could also be due to problem gambling, tax evasion, loan sharking or semi-professional gambling. Not all link chasers were money launderers, but the correlation between them should not be ignored.
Quarmby concluded that there was an information gap in the analysis. Some criminals were willing to lose more to clean their money, and those transactions were not picked up by the algorithm. Some venues were willingly blind and possibly colluding with the criminals, and not co-operating with investigators. Some types of money laundering – such as working to a zero-sum outcome on the roulette table by placing even bets – were not being detected.
“This work should be considered preliminary analysis,” she wrote. “Further research is required to determine more accurate indicators, particularly across varying organised crime groups.”
While the money laundering team continued its work, political machinations were occurring behind the scenes. Dominello had broken a cardinal rule by antagonising the industry with his push for a cashless card and he believed lobby groups were white-anting his support with the Nationals and Liberal backbenchers in an effort to have him removed from the portfolio.
In December 2021, it happened. Premier Dominic Perrottet stripped Dominello of responsibility for gambling and the regulatory cluster that included Liquor and Gaming, Fair Trading and SafeWork was broken up, with Liquor and Gaming going to the new gaming minister, Kevin Anderson.
The significance of the change was not lost on the L&G investigative team. Quarmby’s three-month update a few weeks later noted that $7.98 million in suspected money laundering activity had been detected over the reporting period and identified 211 persons of interest, and there had been an increase in proactive reporting by venues. But there was uncertainty over whether this work would continue under the structure due to commence in April, as most of the investigations and intelligence staff were on temporary contracts.
“Recent [machinery of government] changes have placed doubt over the continuity of these positions and has subsequently reduced the ability for L&G to create strategic plans in the [anti-money laundering] space,” Quarmby advised.
Anderson denies intervening in the work of the L&G investigative unit. “Compliance is a matter for liquor and gaming and I have never directed or interfered in that space,” he says. But there was a palpable change in the regulatory culture. Shortly after Anderson took on the portfolio, the chief executive of ClubsNSW Josh Landis posted a picture of himself with the minister at the ClubsNSW conference, with a pointed caption. “It’s so great to have a minister who doesn’t just understand the industry they regulate it but loves it and is part of it,” he wrote.
By this time, the NSW Crime Commission had begun its own investigation to quantify the amount and nature of money laundering through poker machines in pubs and clubs. But in April 2022, many of the L&G investigation and intelligence staff were moved to other duties. There was no active analysis of the data generated by the machines and surveillance footage was no longer being obtained to shed light on abnormal transactions. When Greenwich issued his call for papers in May this year, it emerged that some 125 documents including profiles of persons of interest had never been forwarded to the crime commission at all – an omission that the agency describes as an oversight or an assessment of its relevance that was made in good faith.
The crime commission found that the data collected by the clubs for tax purposes was not detailed enough to identify money laundering and the algorithm identified too many false positives.
For one, it did not show if an individual had fed notes into a machine and cashed it out on a barcoded ticket and played again, which they might do if they wanted to change machines for superstitious or other reasons. It was also incapable of showing the source of the funds and whether they were obtained illegally.
The Crime Commission said this was itself an argument for a cashless card. One of its other recommendations was for poker machine data to be enhanced.
Crime Commissioner Michael Barnes subsequently wrote to Greenwich that although money laundering appeared to be a plausible explanation for the suspicious transactions, that argument did not withstand rigorous analysis. “The Commission and NSW Police undertook over 10,000 hours of investigations into the persons nominated by L&GNSW as being involved in money laundering based on the L&GNSW understanding of the CMS data,” Barnes wrote. “These investigations showed that there was insufficient evidence to assert that the people identified by L&GNSW were involved in money laundering …“
The commission ultimately concluded that a large proportion of the money churned through poker machines in NSW was the proceeds of crime – which itself constituted money laundering – but that it was being spent and not cleaned. That finding was then seized upon by the industry to downplay the notion that venues were facilitating organised crime.
“The NSW Crime Commission Report has found no widespread evidence hotel gaming machines are being used to clean ‘dirty money’,” said Australian Hotels Association NSW director of policing John Green. “And we have never been supportive of an unproven, untested and un-costed cashless gaming system.”
L&G’s Complaint and Escalation Panel met for 100 minutes on July 8, 2020 and browsed through the outstanding investigations pertaining to Parramatta Leagues Club, Canterbury League Club, Bankstown Sports, Fairfield Memorial RSL, Mounties, North Sydney Leagues Club, South Sydney Junior Rugby League Club, Canley Heights RSL and Sporting Club, Cabra-Vale Ex-Active Serviceman’s Club.
Each matter related to whether that club was fit and proper to operate, given the suspected money laundering occurring on its premises. Further L&G investigations were due to begin. But in each case, it was determined that it would be more appropriate to wait until the police had investigated.
No information has yet been received by Liquor and Gaming that NSW Police have pursued any of the matters referred. Police declined to comment.
L&GNSW said in a written statement that outside its involvement with Project Islington, the agency did not have specific jurisdiction to investigate money laundering, which was primarily a matter for AUSTRAC and police. The minutes from the Compliance and Escalation meeting reflected the agency’s resolution to wait for police and the crime commission to complete their investigations, in keeping with its regulatory remit.
“There was no change in policy,” the statement said. “While [Central Monitoring System] data is collected on an ongoing basis by L&GNSW for the primary purpose of calculating gaming tax, as per the findings of the Project Islington final report, CMS data has been deemed unreliable in identifying evidence of money laundering.”
The week after the panel met, one lonely investigator wrote to the clubs: “Complaint withdrawn … Where there is existing evidence of a breach of L&G regulation no further investigation is required, and the existing investigation into whether the club is ‘fit and proper’ to continue to operate is no longer a focus of L&G.”
That investigator is no longer employed by the agency.
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