Crown Resorts Limited (“Crown”) has been the subject of three completed commissions of inquiry, in NSW, Victoria and Western Australia, in which damning evidence of misconduct was uncovered.
Following these inquiries, ASIC investigated whether Crown directors had breached their obligations under the Corporations Act. ASIC has decided not to commence proceedings against the Crown directors, and has issued “no action” letters to them. ASIC has not made any formal announcement about the decision, but Chair Joe Longo has confirmed it in public statements. It must be a great relief to the relevant members of the Crown board.
This was the first controversial decision by ASIC in a high-profile governance case since Joe Longo became Chair in June 2021. ASIC has not disclosed the basis for its decision, but indications are that the decision was made after considering a number of factors including the expiry of limitation periods within which ASIC may take action, and independent assessments of the strength of the evidence against the directors.
ASIC’s decision surprised many governance experts. Taking civil penalty proceedings against directors for a breach of the duty of care and diligence under s180(1), involves a pretty low bar. ASIC has had great success in taking “stepping stones” actions against directors for failing to take care to prevent foreseeable harm to the company arising from breaches of the company’s legal obligations. These actions require a “red flag” – actual involvement by directors in a breach, knowledge of the circumstances that constitute a breach or a risk of breach, or circumstances in which directors ought to have been aware of the breach or risk of breach by the company. Foreseeable harm is not limited to financial detriment, and can include damage to the company’s reputation. Reading the findings in the public reports of the NSW and Victorian inquiries, including those relating to Crown’s marketing activities in China and money laundering compliance issues in Australia, one could be perplexed by ASIC’s decision. One would certainly expect the defendants in recent ASIC proceedings against directors of other companies to be perplexed.
Around the same time as ASIC’s decision not to proceed, AUSTRAC commenced civil penalty proceedings against Crown (but not the directors) for breaches of anti-money laundering laws, following its own investigation. AUSTRAC is seeking its fourth big scalp, after successful actions against TabCorp, the Commonwealth Bank, and Westpac. AUSTRAC alleges that Crown breached its AML compliance obligations in the following ways (quoting from the AUSTRAC media release):
- Failed to appropriately assess the money laundering and terrorism financing risks they faced, including the likelihood and impact of those risks, and to identify and respond to changes in risk over time.
- Did not include in their AML/CTF programs appropriate risk-based systems and controls to mitigate and manage the risks to which Crown were reasonably exposed.
- Failed to establish an appropriate framework for Board and senior management oversight of the AML/CTF programs.
- Did not have a transaction monitoring program to monitor transactions and identify suspicious activity that was appropriately risk-based or appropriate to the nature, size and complexity of Crown.
- Did not have an appropriate enhanced customer due diligence program to carry out additional checks on higher risk customers.
- Did not conduct appropriate ongoing customer due diligence on a range of customers who presented higher money laundering risks.
AUSTRAC’s allegations involve recent conduct by Crown. If proved, ASIC’s decision not to proceed against Crown directors will seem even more perplexing.
