SkyCity Entertainment Group has today determined that it will recognize an AU$45 million (US$29.2 million) provision in its financial statements for the year ended 30 June 2023 in relation to an impending civil penalty from AUSTRAC.
As reported by IAG, Australia’s financial crimes watchdog commenced civil penalty proceedings against SkyCity Adelaide Pty Limited in the Federal Court of Australia in December 2022 for alleged serious and systemic non-compliance with the Anti-money Laundering and Counter Terrorism Financing Act 2006 (Cth) (AML Act).
Each of the contraventions alleged by AUSTRAC attracts a maximum civil penalty of between AU$18 million (US$11.7 million) and AU$22.2 million (US$14.4 million) per contravention.
SkyCity noted that, because AUSTRAC alleges that SkyCity Adelaide contravened the AML Act on an “innumerable number of occasions”, it is not possible to determine a maximum penalty for the alleged breaches.
The company has therefore determined to recognize a provision of AU$45 million, being an estimate of the potential exposure to penalties and legal costs associated with the proceedings. It also considers a wide range of parameters that could potentially be considered by AUSTRAC and the Court, SkyCity said.
“The proceedings remain at a relatively early stage with AUSTRAC and SkyCity Adelaide currently working towards agreeing facts and potential admissions before the Court identifies a process for any remaining disputed issues and any potential penalty to be determined,” it explained.
“Estimating the potential exposure to penalties with any degree of accuracy at this stage of that ongoing process remains challenging, particularly given the outcome is highly dependent on a range of factors which are not yet known.
“The size of any penalty SkyCity Adelaide is exposed to could vary materially from the amount of the provision and significant uncertainties remain. Any eventual civil penalty applied to SkyCity Adelaide in relation to the proceedings may be significantly higher or lower than the provision. The timing of any civil penalty to be paid by SkyCity Adelaide is also uncertain.
“SkyCity Adelaide will continue to cooperate with AUSTRAC more generally, particularly in relation to the ongoing implementation of enhancements to its Adelaide AML/CTF control frameworks.”
SkyCity also revealed via an early Monday filing that it would recognize an AU$45.6 million (US$29.6 million) impairment to the value of the SkyCity Adelaide casino licence following completion of its annual impairment review.
Both the provision and the impairment are non-cash in nature and do not impact the company’s normalized earnings in its FY23 financial statements, due for release on 23 August. Those earnings, SkyCity said, remain in line with forecasts of normalized Adjusted EBITDA of between NZ$300 million and NZ$310 million (US$195 million and US$201 million).
AUSTRAC recently reached an agreement with Australia’s Crown Resorts over similar charges, with the casino giant agreeing to pay an AU$450 million settlement for historical AML failures.