High-rollers abandon The Star as it braces for second inquiry

The Star Entertainment Group, an Australian casino operator, is currently facing a significant decline in high-roller business as senior executives prepare for a second public inquiry into the company's operations. The first inquiry was launched in 2019 following allegations of money laundering and other illegal activities at The Star's Sydney casino.

The first inquiry, led by New South Wales (NSW) Independent Liquor & Gaming Authority (ILGA), found that The Star had failed to properly monitor transactions worth hundreds of millions of dollars, which raised concerns about money laundering and other criminal activities. The inquiry also criticized the casino's lack of transparency and inadequate compliance with anti-money laundering regulations.

As a result of these findings, The Star was ordered to pay a record fine of AUD 100 million (approximately USD 72 million) and implement a range of reforms to improve its anti-money laundering procedures. However, the damage had already been done, with many high rollers, who are crucial to the casino's revenue, choosing to take their business elsewhere.

The second inquiry, which is expected to begin soon, will focus on The Star's dealings with Chinese VIP gamblers and its relationship with junket operators, who act as middlemen between casinos and high rollers. Junket operators have been under scrutiny for their role in money laundering and other illegal activities, with some allegedly taking a cut of up to 80% of the gambling losses made by their clients.

The Star's former CEO, Matt Bekink, and its current CEO, Matt Savage, are among those who will be called to give evidence at the inquiry. Both executives have previously denied any wrongdoing, but their testimony will be closely watched by regulators and the public.

The decline in high roller business is expected to have a significant impact on The Star's revenue, with VIP gamblers typically spending tens or even hundreds of thousands of dollars at a time. In the 2020 financial year, The Star reported a 53% decline in VIP revenue compared to the previous year, with total revenue down by 38%.

The company has attempted to diversify its revenue streams by expanding into non-gaming activities such as food and beverage, accommodation, and events. However, these areas are not expected to make up for the losses from VIP gambling.

The second inquiry is likely to be a lengthy and costly process for The Star, with potential fines and regulatory sanctions adding to the financial strain caused by the decline in high roller business. The outcome of the inquiry will be closely watched by other casino operators and regulators around the world, as money laundering and other illegal activities remain a significant concern in the gambling industry.