Australia: Crown incurs $635 million loss in FY 2022 due to rising costs for fines and compliance procedures

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Due to a multitude of financial fines, compliance expenses, and COVID-19 restrictions, the largest casino chain in Australia, Crown Resorts, reported a loss of almost AUD one Billion.

The company reported a net loss of AUD 945.4 million for fiscal year (FY) 2022 with ASIC on Tuesday.

Crown’s EBITDA fell to a loss of AUD 699.6 million, with AUD 710.1 million in significant items. Statutory revenue for the period landed at AUD 1.9 billion, up 20% on the prior comparable period.

While revenues at Crown Perth decreased from AUD 740.9 million to AUD 731.1 million, they rose at Crown Melbourne, where they went from AUD 567.5 million to AUD 923.8 million, and at Crown Sydney, where they went from AUD 68.4 million to AUD 113 million. In 2022, the gaming floor at Crown Sydney was not open.

A Crown representative reportedly told a Sydney Morning Herald reports that, “the results shouldn’t be interpreted as an indication of operating success going forward because a number of one-time expenses had significantly impacted them.”

“These matters are ongoing, and we continue cooperating with the relevant parties on resolutions. Crown has a strong desire to continue to invest in its business, jobs, industry, and community, “ the spokesperson added.

The casino’s cost increased from AUD 1.98 billion in 2021 to over AUD 3.09 billion in 2022. The largest burden on Crown’s books, totaling AUD 617.2 million, was incurred due to regulatory expenditures, which also include provisions for the AUSTRAC enforcement inquiry and fines from other regulators.

After discovering evidence of money laundering, the neglect and exploitation of problem gamblers, and organized crime infiltration of its junkets program, the loss further increased by AUD 145 million to hire more staff, upgrade compliance systems, and pay for lawyers and consultants.

The Victorian Gambling and Casino Control Commission (VGCCC) fined the Crown an unprecedented AUD 120 million penalty previously, raising its Victorian penalties to AUD 200 million. This fine was for failing to promote responsible gambling at its Melbourne casino.

Due to the states’ raising the maximum casino penalty limits to AUD 100 million, fines related to the NSW and WA inquiries it undertook in 2022 are also anticipated to be substantial. AUSTRAC, an organization that monitors financial crimes, has filed a complaint against Crown for allegedly letting “high-risk” VIP customers spend billions of dollars at its casinos.

During an inquiry in 2019, it was discovered that “Money-laundering organizations and international criminal syndicates had compromised the Crown.” Since then, official investigations in the three states where its casinos are located have determined it is unfit to hold a casino license, preventing it from establishing the high-rise casino at its newest tower at Sydney’s Barangaroo in late 2020.

In order to win over the authorities, Crown was required to make significant changes to its board, management, and operating processes. In June, the regulators granted Crown a conditional license to run its Barangaroo casino, which is valid through December 31, 2023.

After shareholders approved Blackstone’s offer in May, the casino operator was taken over by the investment firm in July, putting an end to the three years of turmoil caused by James Packer, a former major shareholder.

The organization claimed that since then, it has significantly increased its counterterrorism and anti-money laundering staff as well as more than doubled its team dedicated to responsible gaming.

In September, Ciaran Carruthers, Crown’s newly appointed chief executive, pledged to alter the casino’s expansion plan and expressed his desire for Crown to become the “gold standard” for responsible gambling in Australia.