A INTRODUCTION AND SIX PRELIMINARY COMMENTS
1 The Chief Executive Officer of the Australian Transaction Reports and Analysis Centre (AUSTRAC) brings this proceeding against Crown Melbourne Limited (Crown Melbourne) and Burswood Nominees Ltd as trustee for the Burswood Property Trust trading as Crown Perth (Crown Perth) (together, Crown).
2 AUSTRAC has sought declarations that Crown contravened provisions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (Act) and an order that Crown pay a pecuniary penalty to the Commonwealth.
3 Crown has admitted that it has contravened ss 81(1) and 36(1) of the Act. The parties submit that "a penalty of $450 million is appropriate" in the light of the nature and seriousness of Crown's contraventions, and to deter future contraventions of the Act.
4 At the outset, however, it is worth saying a number of things about aspects of the conduct of this litigation and how agreed orders were proposed to the Court.
5 This proceeding was commenced as long ago as March 2022 by the filing of an originating application and statement of claim. A concise statement was also filed in that month, and the matter was listed before another judge of the Court for a first case management hearing in April 2022. The first case management hearing was stood over to June 2022, and adjourned again in that month, following which time the matter largely remained in stasis.
6 When the proceeding was allocated to my docket in December 2022, I listed the matter for a first case management hearing. In February 2023, shortly prior to the case management hearing, the solicitors for AUSTRAC contacted my Associate, indicating that the parties had consented to yet another adjournment to a date in June 2023, following service of Crown's defence in May 2023 (that is, some 14 months after the filing of the statement of claim).
7 I determined to proceed with the first case management hearing, at which time I asked counsel why the matter had been the subject of such extraordinary delay. As I remarked then, the Congress of Vienna had taken less time to agree upon the future of Europe following the defeat of the First French Empire than the time the parties had already spent in attempting to agree upon the facts.
8 Be that as it may, counsel informed me that a draft statement of agreed facts and admissions had been progressed, such that any remaining areas of dispute were likely to be narrow and limited to matters of statutory construction. Accordingly, to expedite the matter to hearing, I made orders providing for the filing of a concise response and further conferrals between the parties before a Registrar.
9 As it happened, following further conferrals, an in-principle agreement was struck to resolve all issues of liability and relief. Accordingly, I listed the matter for a further case management hearing in May 2023, at which time orders were made for the filing of joint submissions and the final version of the statement of agreed facts and admissions document.
10 On 30 May 2023, upon the filing of the joint submissions, AUSTRAC put out a press release with the following heading in bold 24 point type: "AUSTRAC and Crown agree to proposed $450 million penalty", which was in the following terms:
Crown Melbourne and Crown Perth (together Crown) and AUSTRAC have filed joint submissions with the Federal Court of Australia, proposing a $450 million penalty over Crown's breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). A court hearing has been set down for 10-11 July 2023, at which Justice Lee will consider the parties' proposed settlement.
While AUSTRAC and Crown agree that a $450 million penalty is appropriate in all the circumstances, it is a matter for the court to determine the appropriate penalty.
In reaching this agreement, Crown has admitted that it operated in contravention of the AML/CTF Act, including that Crown Melbourne and Crown Perth:
• Failed to appropriately assess the money laundering and terrorism financing risks they faced, and to identify and respond to changes in risk over time.
• Did not have appropriate risk-based systems and controls in their AML/CTF programs to mitigate and manage the money laundering and terrorism financing risks they faced.
• Failed to establish an appropriate framework for Board and senior management oversight of their AML/CTF programs.
• Did not have a transaction monitoring program[me] that was appropriate to the nature, size and complexity of their business.
• Had an enhanced customer due diligence program[me] that lacked appropriate procedures to ensure higher risk customers were subjected to extra scrutiny.
• Did not conduct appropriate ongoing customer due diligence on a range of specific customers who presented higher money laundering risks.
AUSTRAC Chief Executive Officer, Nicole Rose said the casino sector is at risk of exploitation by organised criminals seeking to clean their dirty money, money which criminals make through the sale of illicit drugs, scams and even human trafficking.
"Crown's contraventions of the AML/CTF Act meant that a range of obviously high-risk practices, behaviours and customer relationships were allowed to continue unchecked for many years." Ms Rose said
"Crown has sought to respond to the failures identified in these proceedings by enhancing its approach to ML/TF risk management and investing in its financial crime compliance. We continue to work closely with Crown to ensure that their AML/CTF program[me] and systems are compliant and fit for purpose into the future."
As the matter is before the court for determination, AUSTRAC is unable to comment further on the proceedings or in principle agreement.
11 In the light of all of the above, it is appropriate to make a few important preliminary observations.
12 First, without in any way criticising the solicitors in the present case, who are all competent and highly experienced, there is a real public interest in regulatory proceedings being conducted with far more alacrity, consistently with the dictates of Pt VB of the Federal Court of Australia Act 1976 (Cth) (FCA Act). A frequent difficulty in proceedings of this type is that proposed orders or agreements are negotiated and workshopped in a way which occasions very considerable delay. This highlights why it is often inappropriate for the Court to acquiesce in delay by making consent orders which punt case management hearings down the road. Case management hearings are not directions hearings. The Court's role is not to affix wearily a rubber stamp to agreed directions which reflect the stately progress of the litigation. Rather, they are a means by which the Court seeks to understand the nature of the issues, and manage the proceedings consistently with the overarching purpose: see Australian Securities and Investments Commission v AMP Financial Planning Pty Ltd [2018] FCA 1708 (at [4]-[7] per Lee J); Mayfield Development Corporation Pty Ltd v NSW Ports Operations Hold Co Pty Ltd (No 3) [2023] FCA 713 (at [14] per Lee J).
13 Secondly, senior counsel for AUSTRAC was not able to point to any case where AUSTRAC has litigated a contested hearing or advocated for orders different to those proposed by the contravener on a final hearing. Hence, in all cases, it has presented the Court with an agreement struck with the contravener. As I explain in detail below, there are compelling public policy reasons for encouraging agreement in such matters, particularly in promoting predictability and consistency in cases involving regulatory litigants where there is some form of established "tariff" for penal orders; such a course provides an informed basis for assessing comparability and parity of outcome. But like many considerations of public policy, the considerations do not all point in one direction. The fact that agreed orders were accepted by the Court in earlier cases suggests the relevant judge was satisfied that AUSTRAC was not being overly pragmatic in not proceeding to a contested hearing on liability or penalty. On balance, and not without some hesitation, for reasons detailed below, I am similarly satisfied in this case. But it is appropriate to sound a note of caution. If a regulatory body approaches litigation on the basis that it will not run to a contested hearing and always reaches an agreement, it risks being perceived as a soft touch. As I will explain, if the proposed penalty falls within the lower end of a permissible range, the Court will generally accept the proposed penalty even if the Court may have been disposed to select a higher figure. Speaking generally, and without finding that such a criticism can presently be made of AUSTRAC (or Crown for that matter), if a regulator never runs contested hearings and always eventually agrees, a danger arises that a sophisticated contravener will approach negotiations on the basis that it can present obstacles to making admissions, and delay and hold out to secure what they perceive to be the lowest possible permissible figure confident that the regulator will not take them on.
14 Thirdly, agreements of the present type are often justified, correctly, on the basis that they serve to save costs, including for the regulator. But in the present case, the orders provide that Crown is to pay AUSTRAC's costs of $3.4 million. For all I know the costs may be greater than this sum. What I can say is that it is far from self-evident that if the case had been contested in some respects, including as to penalty, it could not have gotten on before me more quickly and at a comparable cost to AUSTRAC.
15 Fourthly, it is naïve to consider that agreements as to penalty do not sometimes present real challenges at the hearing. The Court is presented with a joint resolution and submissions are made along the lines made here that: "the parties have agreed to a figure of 450 million without interest … that's the deal that the parties have struck, so we would urge for your Honour - for the [C]ourt not to interfere with that deal" (T73.19-21). Here, an affidavit was filed as to the financial position of Crown in support of oral submissions that a penalty on deferred payment terms was agreed "because [Crown] can't afford to pay more than what we've agreed" (T71.14-15). This was buttressed by the submission that evidence as to the cash and borrowing position of Crown should be accepted because it was not the subject of cross-examination by the regulator (see T69.45). This was in circumstances where aspects of the evidence going to the financial positon of Crown were scant, unsupported by business records, or not addressed. Most notably, there was no evidence as to the past payment of dividends and diminution of retained earnings or the group's current enterprise value; and only the most superficial evidence of its ability to obtain future, alternative sources of debt capital or additional equity capital.
16 One can easily imagine how this evidence in chief could have led to cross-examination of a chief financial officer as to whether it was correct to say, for example, we can pay no more or, perhaps more accurately given the terms of the evidence adduced, cannot pay now "without significant financial hardship". Although AUSTRAC in submissions rejected the idea that the paction was struck based on it accessing what Crown could pay (T78.10), as noted above, there was no cross-examination. The reality is that AUSTRAC had become, not unnaturally, a friend of the deal. In other types of cases where this phenomenon presents itself, for example, settlement approvals in class actions, the Court commonly appoints a contradictor which assists in avoiding the Court entering into the fray. With the benefit of hindsight, it may have been prudent to adopt this course, which I raised at the last case management hearing on 12 May 2023 (T3.25; T12.33).
17 Fifthly, and although not presently relevant, I have previously remarked that when these types of agreements dictate future steps to be taken by a contravener as part of the remedial response, or agreement is reached as to how compensation is to be paid, the agreements can often have the practical effect of presenting the Court with a fait accompli: so many costs have been expended, and so much work has been done, that it is difficult for the Court to put in place a different approach: see Australian Securities and Investments Commission v AMP Financial Planning Pty Ltd (No 2) [2020] FCA 69; (2020) 142 ACSR 277 (at 335 [252] per Lee J).
18 Sixthly, the issuing of a press release was foreshadowed to the Court and was appropriate and accurate as far as it went. But what it did not indicate is that an agreement had been struck whereby the proposed penalty is subject to a payment plan over two years. The significance of this, among other things, is that the net present value (NPV) of the proposed penalty today is not $450 million. It is common ground that at the usual and default post-judgment interest rate, assuming no discount, the NPV of the proposed penalty is approximately $405 million. As I noted to the parties at the hearing, one must compare "apples with apples". In other regulatory proceedings involving AUSTRAC, penal orders were made without a deferred payment plan. Publicity engendered as to the comparability between this proposed penalty and other penal orders was unfortunately confused by such an approach, although I hasten to add I accept this was unintentional.
19 Having made these preliminary points, what follows in these reasons is largely drawn from the joint submissions and the statement of agreed facts and admissions (SAFA). The thoroughness of the joint submissions, the exchange today and yesterday at the oral hearing, and the high degree of co-operation in agreeing upon relevant facts, has allowed me to proceed immediately to the delivery of judgment at the conclusion of the hearing today.
20 I have organised the balance of my reasons as follows:
B THE RELEVANT FACTS
C THE ACT AND RULES
D OVERVIEW OF ADMISSIONS
E ORDERS SOUGHT BY AGREEMENT
F THE RELEVANT LAW
G CONSIDERATION OF THE PROPOSED PENALTY
H PAYMENT OF THE PENALTY
I CONCLUSION AND ORDERS