AUSTRAC Launches Landmark Action Against Mounties for Systemic AML Failures

Mounties, a major New South Wales club group and one of Australia’s largest poker machine operators, is under intense regulatory scrutiny as AUSTRAC initiates civil proceedings in the Federal Court for what it describes as “serious and systemic” breaches of anti-money laundering (AML) and counter-terrorism financing (CTF) laws.

The enforcement action highlights longstanding vulnerabilities in Australia’s cash-heavy gambling venues and signals a new era of accountability for the club and gaming sector.

AUSTRAC’s proceedings target Mount Pritchard & District Community Club Ltd—widely known as Mounties—which operates ten venues across NSW, including eight sites hosting approximately 1,400 poker machines. These machines generate hundreds of millions of dollars in annual revenue. AUSTRAC argues that such scale demands a rigorous and compliant AML/CTF program, which Mounties allegedly failed to maintain across multiple critical areas.

At the core of AUSTRAC’s case is the allegation that Mounties was offering gaming services without a fully compliant AML/CTF program, as mandated by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and its associated Rules. The regulator claims that these failures left Mounties exposed to potential criminal exploitation and allowed illicit financial activity to go undetected.

Among the key failures alleged:

• Risk assessments were not adequately tailored to Mounties’ size, operations, and substantial cash flow.

• Staff training was insufficient and failed to equip employees with the tools to detect and escalate suspicious activity.

• Transaction monitoring systems were not robust or aligned with known financial crime risks facing the sector.

• Enhanced due diligence (EDD) was lacking for high-risk customers or activities.

• Independent reviews, which are required under the AML/CTF Rules, were not conducted in a compliant manner.

• Outsourcing oversight was weak, particularly in Mounties’ reliance on third-party provider Betsafe, with insufficient internal supervision of the program’s execution.

AUSTRAC’s allegations extend to failures in customer monitoring, particularly in identifying and responding to high-risk gaming behavior. These shortcomings are considered especially serious in light of the known risks associated with poker machine venues and the extensive history of criminal abuse of such platforms.

Mounties’ case arises within the broader context of Australia’s risk-based AML/CTF regime, which demands tailored responses from reporting entities based on their specific exposure to money laundering and terrorism financing risks. The 2024 National Risk Assessment classified the club and pub sector as medium risk, but emphasized that operators with high cash flow and inadequate controls are vulnerable to abuse by criminals.

The significance of AUSTRAC’s action is magnified by earlier investigations, including the 2022 NSW Crime Commission’s Project Islington report, which concluded that billions of dollars in suspected criminal funds had likely flowed through NSW poker machines in a single year.

Under the AML/CTF framework, while certain components of compliance can be outsourced, such as transaction monitoring or training delivery, legal responsibility cannot be delegated. Each reporting entity must remain accountable for the effectiveness and adequacy of its program, regardless of any third-party arrangements.

AUSTRAC’s statement points to a culture of compliance failure at Mounties. According to the regulator, Mounties failed to appropriately review the risks inherent in operating a large number of poker machines and did not revise its AML/CTF controls in response to evolving criminal threats. Staff training was found to be inadequate, leaving frontline personnel ill-equipped to identify red flags or submit suspicious matter reports.

Transaction monitoring at Mounties was also found to be lacking in sophistication and not calibrated to the specific risks of the gambling sector. “Gaming venues need to deploy tailored analytics to detect frequent buy-ins, repeated cash-outs, and patterns that deviate from normal customer profiles,” AUSTRAC argues. The agency claims that Mounties did not implement such controls, creating vulnerabilities exploitable by money launderers.

Enhanced due diligence procedures, a legal requirement for dealing with higher-risk customers or cash-heavy transactions, were reportedly not consistently applied. AUSTRAC contends that this failure led to missed opportunities to identify, prevent, or disrupt criminal financial flows.

Another cornerstone of a robust AML/CTF framework—the independent review—was neglected, according to AUSTRAC. The absence of regular, independent audits means that program weaknesses likely remained unaddressed, increasing the risk of non-compliance over time.

Outsourcing is also central to AUSTRAC’s case. While Mounties contracted Betsafe for certain AML/CTF functions, AUSTRAC argues that the club did not adequately oversee or assess the quality of the outsourced work. “While third-party support can help with delivery, responsibility for design, implementation, and performance of the AML/CTF program lies with the club itself,” the regulator asserts.

This enforcement action reflects AUSTRAC’s broader concern about how poker machines are exploited for criminal gain. Techniques such as “smurfing”—where large sums of cash are broken into smaller transactions to avoid detection—or “cycling”—where funds are briefly played and cashed out as “winnings”—are common among criminal actors. These methods often go undetected in venues with poor transaction monitoring and weak front-line training.

AUSTRAC emphasizes that preventing these abuses requires more than just installing monitoring tools. “It demands a culture of vigilance, real-time data analysis, and well-trained staff who understand their role in identifying suspicious behavior,” the regulator explains.

In line with regulatory guidance, clubs and gaming venues are urged to:

• Routinely update AML/CTF programs in response to new threats

• Deliver targeted, ongoing staff training

• Commission and act upon regular independent reviews

• Maintain strict oversight over any outsourced compliance services

• Engage executive leadership and boards in AML governance efforts

“AUSTRAC’s action against Mounties is a clear signal that the regulator expects no less, regardless of an operator’s size or the perceived convenience of outsourcing compliance functions,” the agency said.

As the Federal Court now prepares to examine the evidence, the implications for Australia’s gambling sector are far-reaching. This case may well redefine AML/CTF expectations—particularly regarding outsourcing, independent oversight, and leadership accountability.

For operators across the country, AUSTRAC’s message is unequivocal: “Only those organizations that invest in robust, well-governed AML/CTF programs will be fit to operate in Australia’s modern gambling landscape.” 

By fLEXI tEAM