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Australian casino operator The Star Entertainment Group has been fined A$15m ($10m) and ordered to implement fiscal and operational reform over compliance failures at its Sydney casino, but has dodged the bullet of licence termination.

The New South Wales state government’s Independent Casino Commission (NICC) issued the fine on Thursday (October 17) after considering the report of the second Bell Inquiry, which found Star Entertainment remained unsuitable to hold a casino licence.

NICC chair Philip Crawford told a morning media conference that Adam Bell SC’s inquiry into Star Entertainment revealed enduring compliance failures and entrenched operational problems amid attempts at remediation in the wake of Bell’s first inquiry report in 2022.

Consequently, Star Entertainment’s licence will remain suspended and operations will continue under NICC-appointed external manager, Nick Weeks, whose tenure has already been extended to March 31 next year.

“Despite more prescriptive supervision that prevented the type of misconduct seen in the first inquiry, numerous shortcomings in governance, regulatory compliance, technology and risk management remain, including in areas that The Star claimed it had remediated,” Crawford said in a later statement.

“Reform in the systems, policies, processes and culture that support these areas cannot be understated in a business as complex as The Star’s.

“In a casino setting, compliance breaches can have serious consequences for the community, and the Bell Report illustrated how quickly weak controls can lead to criminal infiltration and gambling harm.”

In addition to the fine, which was levied over “serious breaches” of four internal control manuals, the NICC ordered the company to adhere to certain recommendations in Bell’s second report.

These include “additional financial and operational reporting” requirements until March to keep the regulator better informed of the company’s difficult financial situation and remediation efforts, as well as enhancing customer due diligence.

The NICC said it will look to amend the casino licence to force structural change to board committee operations, board membership and independence, top management practices and the links between the board and management.

The NICC will also push for amendments to the NSW Casino Control Act 1992 in keeping with the Bell Inquiry’s recommendations on suitability assessments for companies and individuals.

The amendments are also likely to toughen penalties for breaches such as Star’s inability to prevent more than A$3.2m in slot machine transaction fraud.

The new fine has been described by Australian media outlets as “hefty”, but the outcome for the company was much less damaging than could have been, hinting at government sensitivity over employment and the economic impacts of Star Entertainment exiting the industry.

The NICC had threatened to strip The Star casino of its licence in a worst-case scenario, and/or could have imposed another A$100m on a company that recently reported an annual net loss of A$1.7bn, likely imperilling casino operations in Queensland state, including the newly opened Queen's Wharf integrated resort.

At the same time, Star Entertainment is set to retrench 300 employees and faces a potential fine in the hundreds of millions of dollars from federal transactions regulator AUSTRAC.

As things stand with the lighter punishment and new leadership after a second management purge, the company has a chance to convince investors that it will endure, especially after securing a maximum A$200m debt facility in late September.

The NICC will now review the company’s progress in remediation at the end of March with a view to the possible restoration of the casino licence.

“We’re very heavily still motivated by what our perception of the public interest is,” the Sydney Morning Herald quoted Crawford as saying.

“And if Sydney Star fails, the Star Group will fail, and that’s a group that employs 9,000-plus people, and if you add on to that, the huge number of suppliers to the business.”

Crawford added that the period covered by the second Bell Inquiry did not exhibit criminality, unlike that covered by the first report. The current focus is on problems with confidence, capability and culture, he said.

Crawford on Thursday praised incoming Star Entertainment CEO Steve McCann for establishing “open lines of communication and cooperation with the NICC which has resulted in a much healthier relationship between the company and the regulator.

“The NICC is encouraged by the steps initiated since Mr McCann’s appointment, and the company is now taking the opportunity to reset its remediation priorities, strengthen its financial position and bolster the leadership team to refocus the business,” Crawford said.