By Renju Jose and Lewis Jackson
SYDNEY (Reuters) -Star Entertainment Group, Australia's second biggest casino operator, has been found unfit to hold a casino licence in Sydney after an inquiry into alleged breaches of anti-money laundering laws and criminal infiltration released its report.
Australia's New South Wales (NSW) state gambling regulator on Tuesday said the report has identified "systemic governance, risk and cultural failures" at the Sydney casino of Star.
"The report is, quite frankly, shocking. It provides evidence of an extensive compliance breakdown in key areas of (Star's) business," said New South Wales Independent Casino Commission (NICC) Chief Commissioner Philip Crawford.
Huge amounts of money were disguised by the casino as hotel expenses and vast sums of cash evaded anti-money laundering protocols several times, mostly through a secret room with a second cash cage, Crawford said.
Star is currently reviewing the report and intends to respond to NICC within 14 days, the company said in a statement.
The report comes as Australia's casino sector was put under intense scrutiny over the last three years after media articles accused Star's larger rival Crown Resorts Ltd of money laundering, prompting some states to launch inquiries.
The NICC's report also flagged real risks of criminal infiltration and accused senior staff at Star of trying to conceal how they operated the business.
Crawford said regulators were still not getting the "vibe" from Star that it was serious about fixing its problems.
"The institutional arrogance of this company has been breathtaking and their willingness to take risk in pursuit of finiancial goals has been appalling," he said during a media briefing, but added the majority of Star's 8,000 employees were following the correct procedures.
Under new laws that came into force last week, the NICC can fine casino operators up to A$100 million ($69 million) and individuals A$1 million for any serious breaches.
NICC said it will hold off on taking any disciplinary actions until it gets the company's response, due within 14 days.
A separate probe on Star is happening in neighbouring Queensland state with its gambling regulator investigating whether to let Star keep its gambling licence, putting a cloud over its plan to open a A$3.6 billion ($2.48 billion) casino resort in Brisbane as planned in 2023.
Crown Resorts, owned by private equity giant Blackstone (NYSE:BX) Inc , has been investigated on wide-ranging misconduct including failure to stop money laundering by foreign criminals. That resulted in findings that Crown was unfit for a licence in the three states it operates.
In June, NSW authorities cleared it to take bets at a A$2.2 billion Sydney casino after suspending its licence just before opening 17 months ago.
($1 = 1.4533 Australian dollars)