Mounties, one of the largest club operators in New South Wales, is at the center of a major regulatory storm as AUSTRAC initiates Federal Court civil proceedings for alleged serious and systemic breaches of Australia’s anti-money laundering and counter-terrorism financing rules. This case shines a spotlight on the vast sums funneled through poker machines, the vulnerabilities of cash-intensive gaming venues, and the persistent compliance gaps that continue to draw the attention of Australian regulators. As the Federal Court weighs the evidence and the sector watches closely, the outcome promises to reshape expectations for anti-money laundering oversight across the entire gambling industry.

AUSTRAC Allegations: Mounties and Systemic AML Failures

AUSTRAC’s action against Mount Pritchard & District Community Club Ltd, commonly known as Mounties, marks one of the most significant enforcement efforts targeting the Australian club sector in recent years. Operating ten venues, including eight sites with approximately 1,400 poker machines, Mounties generates hundreds of millions of dollars annually. Such a scale comes with immense anti-money laundering obligations—and, according to AUSTRAC, a range of failures that left the business open to criminal exploitation.

At the heart of the regulator’s case is the claim that Mounties operated gaming services without a fully compliant AML/CTF program, as mandated by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and its associated Rules. This failure, AUSTRAC alleges, spans several dimensions:

• Deficient risk assessment: The program failed to adequately assess money laundering risks specific to Mounties’ size, structure, and high cash turnover.
• Inadequate staff training: Employees were not provided with sufficient, risk-based training to identify suspicious transactions or behaviors.
• Weak transaction monitoring: Systems and controls for monitoring gaming transactions were not robust or tailored to known financial crime typologies in the sector.
• Insufficient enhanced due diligence: Higher-risk customers and activities were not subject to appropriately enhanced scrutiny or additional information-gathering.
• Lack of independent review: The AML/CTF program had not been subject to an independent review meeting the AML/CTF Rules requirements.
• Inadequate oversight of outsourcing: Critical parts of Mounties’ AML program were outsourced to a third party (Betsafe), but without sufficient management oversight or assurance of compliance.

AUSTRAC also highlights specific failures in customer monitoring, particularly in identifying, mitigating, and reporting higher-risk gaming activity. These weaknesses are seen as especially serious given the history of criminal exploitation of Australian poker machines and the broader vulnerabilities of the sector.

Regulatory Framework and Risk in Australia’s Club Sector

The Mounties case unfolds within Australia’s rigorous AML/CTF regulatory framework, designed to address the unique risks posed by cash-heavy industries. The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 establishes mandatory requirements for reporting entities—including clubs with gaming machines—covering customer due diligence, transaction monitoring, reporting, record-keeping, and the maintenance of a comprehensive AML/CTF program.

Australia’s AML regime applies a risk-based approach, meaning that businesses must understand and respond to their specific money laundering and terrorism financing threats. Guidance from AUSTRAC and national risk assessments repeatedly flag the gambling sector as a hotspot for illicit cash flows, especially when compliance controls are weak. The 2024 Money Laundering in Australia National Risk Assessment confirms that while clubs and pubs are classified as a medium risk overall, those with significant cash turnover and inadequate controls are exposed to heightened criminal abuse.

The sector’s vulnerabilities are starkly illustrated by past investigations, including the 2022 NSW Crime Commission’s Project Islington report. It found billions of dollars in suspected illicit funds were likely gambled through New South Wales poker machines in just one year, underscoring how gaming venues can function as entry points for the proceeds of crime when anti-money laundering protocols fall short.

Crucially, while the law allows clubs to outsource parts of their AML/CTF program—such as training or transaction monitoring—the responsibility for compliance cannot be delegated. Each reporting entity remains legally accountable for its AML obligations, regardless of any service provider arrangements.

Inside the Alleged Failures: Mounties’ AML/CTF Shortcomings

Examining the allegations, AUSTRAC identifies Mounties’ compliance failures as both technical and cultural. The club’s risk assessment processes reportedly failed to capture the true exposure presented by their scale and customer base. Mounties did not conduct adequate reviews of the money laundering risks inherent to operating hundreds of poker machines, nor did it effectively adjust controls to respond to emerging threats or evolving criminal typologies.

Staff training, a cornerstone of any effective AML regime, was another area of deficiency. Employees handling large volumes of cash and interacting directly with customers require up-to-date, practical training to spot red flags and understand the reporting process for suspicious activity. AUSTRAC contends that Mounties failed to ensure staff were properly prepared, leaving frontline personnel without the tools needed to combat sophisticated laundering techniques.

The club’s transaction monitoring systems are described as insufficiently risk-based. Modern gaming venues are expected to deploy tailored technology and analytics that can identify suspicious play patterns, frequent buy-ins and cash-outs, and transactions inconsistent with a customer’s known profile. AUSTRAC alleges that Mounties’ controls did not detect or escalate these risks, creating significant blind spots.

Enhanced due diligence, mandated for high-risk scenarios such as frequent high-value play or cash-intensive transactions, is another gap. AUSTRAC claims Mounties did not apply rigorous checks to customers whose behavior warranted closer scrutiny, missing opportunities to detect and prevent criminal exploitation.

An additional compliance failure relates to the lack of an independent review of Mounties’ AML/CTF program. Regular, objective assessments by qualified parties are required under the AML/CTF Rules to test and strengthen a business’s controls. Without such reviews, weaknesses can persist unaddressed, and regulatory breaches become more likely.

Finally, Mounties’ reliance on a third-party service provider, Betsafe, for key AML/CTF functions is scrutinized. While outsourcing is common in the sector, AUSTRAC insists that clubs must remain closely involved in the design, implementation, and ongoing monitoring of their AML program. The allegations indicate that Mounties did not adequately supervise its provider or ensure the outsourced program was fit for purpose.

Money Laundering Methods and the Importance of Robust Controls

The Mounties case illustrates how the design and enforcement of AML/CTF controls must keep pace with the methods used by those seeking to exploit the gambling sector. Poker machines, with their rapid transaction speeds and cash-based play, are especially attractive to money launderers who wish to disguise the source of illicit funds or integrate criminal proceeds into the legitimate economy.

Common typologies include “smurfing,” where criminals break large amounts of cash into smaller transactions to avoid detection, and cycling, where money is played through machines with minimal risk and then cashed out as “winnings.” Other methods involve using proxies, recruiting multiple individuals to play or cash out on behalf of the true source of funds, or taking advantage of venues with lax due diligence to move criminal proceeds across venues or state lines.

For compliance officers and club management, recognizing and disrupting these techniques requires more than simply installing transaction monitoring software. It demands a culture of vigilance, a well-trained workforce, and real-time data analysis tailored to the venue’s risk profile. High-value transactions, unusual playing patterns, repeated refusals to provide source-of-funds information, and other warning signs should trigger enhanced review and, where appropriate, suspicious matter reports to AUSTRAC.

Regulatory guidance and industry best practice urge clubs to:

• Continuously update and test AML/CTF programs in response to new criminal methodologies
• Provide ongoing, role-specific staff training
• Ensure independent reviews are conducted at regular intervals and acted upon
• Maintain tight oversight of any outsourced functions, with clear lines of accountability
• Engage senior management and boards in AML governance, ensuring a top-down commitment to compliance

AUSTRAC’s action against Mounties is a clear signal that the regulator expects no less, regardless of an operator’s size or the perceived convenience of outsourcing compliance functions.

Raising the Bar: What Mounties Means for the Gambling Industry

AUSTRAC’s decision to pursue civil penalty proceedings against Mounties is being closely watched by the entire gambling industry. The outcome will likely set important precedents for how clubs, pubs, and gaming operators manage their AML/CTF obligations, particularly around outsourcing, independent review, and the responsibilities of boards and executives.

Lessons from this case for gambling and gaming providers include:

• AML is not a box-ticking exercise: Effective compliance requires a dynamic, risk-based approach that is embedded in the culture and daily operations of the business.
• Outsourcing is not abdication: While third-party providers can offer technical expertise, the legal accountability remains with the club or operator. Due diligence on providers, ongoing monitoring, and clear oversight are essential.
• Independent reviews are critical: Objective, periodic assessment by qualified professionals helps identify weaknesses, verify controls, and drive continuous improvement.
• Training must be practical and ongoing: Staff at all levels need tailored education to recognize and respond to current money laundering threats.
• Leadership must be engaged: Boards and executives play a pivotal role in setting the compliance agenda, allocating resources, and maintaining a strong tone from the top.

As the Federal Court assesses the evidence, Mounties and other clubs face a future in which regulatory expectations are rising and the cost of non-compliance—both reputational and financial—has never been higher. AUSTRAC’s action sends an unambiguous message: only those organizations that invest in robust, well-governed AML/CTF programs will be fit to operate in Australia’s modern gambling landscape.

Related Links

• AUSTRAC: Enforcement Actions
• AML/CTF Act 2006 (Federal Register of Legislation)
• AML/CTF Rules (Federal Register of Legislation)
• NSW Crime Commission: Project Islington
• AUSTRAC: AML/CTF Program Guidance for Clubs

Other FinCrime Central Articles About AUSTRAC’s Actions Against AML Failures in Gambling

• AUSTRAC Orders External Audits for Two Australian Casinos Over AML Gaps
• AUSTRAC CEO Focuses on Gambling Industry Compliance: Action Promised
• AUSTRAC Targets Entain Over Money Laundering Breaches

Source: AUSTRAC

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