The New Zealand-based operator of SkyCity Adelaide today released its annual report for the 2021-22 financial year, reporting a total net loss of $A31.4m (NZD $33.6m) – down more than 120 per cent on its $A149.5m profit in FY21.

The company attributed the result to long-running COVID-19 shutdowns of its three New Zealand casinos, but also highlighted the increasing regulatory scrutiny of the Australian casino sector over anti-money laundering and counter-terrorism financing laws.

“The 2022 financial year has been one of the most challenging periods for the SkyCity Board and management to date given the ongoing significant impacts on SkyCity’s operations from the COVID-19 pandemic as well as ongoing regulatory and media focus on the casino industry in Australasia,” SkyCity chair Julian Cook and CEO Michael Ahearne wrote in a joint-foreword to the annual report.

SkyCity Adelaide is currently subject to two separate investigations, from the federal government’s financial crimes watchdog AUSTRAC and retired South Australian Supreme Court judge Brian Martin QC.

Martin’s independent review, set up by the state government’s Liquor and Gambling Commissioner after interstate inquiries into other casino operators revealed serious regulatory issues, is investigating whether Adelaide casino is still fit to hold a license.

AUSTRAC’s investigation, which commenced in June 2021, is probing SkyCity Adelaide for “potential serious non-compliance” with Australian anti-money laundering and counter terrorism financing laws.

Today’s joint statement from SkyCity leadership said the timeline for AUSTRAC’s investigation remains unclear and the watchdog is yet to file proceedings “or indicated whether it intends to take any enforcement action against SkyCity Adelaide”.

But the company also said Adelaide casino has recently identified “enhancements” to its anti-money laundering and counter-terrorism financing (AML/CTF) protocols “in response to concerns raised by AUSTRAC” and findings from both an independent and internal review.

“Given that AUSTRAC’s enforcement investigations remains ongoing, and we have identified certain areas where enhancement to the Adelaide AML/CTF Programme are required or appropriate, there is a possibility that AUSTRAC could bring an enforcement action against SkyCity Adelaide,” Cook and Ahearne wrote.

“Any such action and any associated penalties could have a significant financial and reputational impact on SkyCity.”

Earlier in the foreword, SkyCity states: “Critically, the Board and management continued to recognise the importance of protecting our casino licenses and enhancing our social licence to operate, with a particular focus on uplifting our anti-money laundering and host responsibility programmes.”

The company said it had set up a dedicated office and made “significant investment” in ICT systems and “ongoing improvement in oversight/controls” to improve its AML/CTF programs.

It also announced in the report that it would be introducing financial penalties for executives who don’t meet compliance objectives related to anti-money laundering.

“We have made changes to the senior executive remuneration framework to introduce specific requirements relating to compliance and introduced ‘malus’ and clawback provisions into incentive plans,” the report states.

“These changes ensure that executive remuneration is aligned with SkyCity’s performance in relation to AML (anti-money laundering), host responsibility, and health and safety targets.”

Chair Julian Cook said the new payment framework “ensures SkyCity’s incentives are responsive to any compliance breaches and that any underperformance in compliance has consequences for participants”.

The announcement of a second probe in SkyCity Adelaide prompted wider calls for a Royal Commission into Adelaide casino.

Martin’s independent review into SkyCity Adelaide’s suitability to hold a casino license is due to be handed to the state government on February 1, 2023.

SkyCity’s annual report lists regulatory risk and loss of casino license among the company’s material exposure.

“The suspension, cancellation or expiry of any of SkyCity’s other casino licenses [outside of Auckland] would also have negative impact on SkyCity,” the report states.

The risk management section of the annual report highlights “continued media and regulator focus” on the operations of Crown Resorts and the Star Entertainment Group in Australia for non-compliance with financial crime laws.

“This has resulted in increased focus and scrutiny on SkyCity and other casino operators and could lead to more stringent regulations for casino operators in Australia and New Zealand in relation to money laundering and other financial crimes,” the report states.

“Consequently, there are heightened expectation on SkyCity around its obligations under AML/CFT legislation and regulation, monitoring cash and third-party transactions, and undertaking enhanced due diligence checks on higher risk customers.”

SkyCity’s Adelaide casino license runs until 2085. The company reported $171.8m in revenue from SkyCity Adelaide last financial year.