Proposed merger of Crown and Star to renew scrutiny of Australian casino industry

The potential merger of Crown Resorts and Star Entertainment will put renewed pressure on state governments, casino regulators and casino operators to permanently end the use of junket companies that bring international gamblers to Australia.

The Covid-19 pandemic had already ended the use of junket companies in practice, but the Bergin inquiry in NSW prompted Crown to publicly declare it would no longer partner with junket operators after the report found they raised serious risks of money laundering and involvement by organised crime.

Now the proposed merger of Crown with Star will renew the focus on broader reforms for the casino industry in Australia, recommended by commissioner Patricia Bergin SC. These included a new a new independent casino authority in NSW, banning junkets and enhanced requirements for suitability.

Related: 'A harm-production factory': Crown casino faces scrutiny over problem gambling

The chairman of the NSW Independent Liquor and Gaming Authority, Phil Crawford is expected to make a public statement later this week on how he will deal with probity checks for the companies bidding for Crown.

ILGA is also midway through negotiations with Crown over how the company can be made suitable to hold a casino licence in NSW, after the damning findings by the Bergin inquiry found that the company was no longer suitable.

These include the future of junkets in Crown’s operations and governance changes to address the threat of money laundering.

But how these undertakings would apply to a merged entity is uncertain. A merger of casino groups would also renew the question about how casinos can be more effectively regulated across the board and how states can better coordinate their efforts amid embarrassing failures by some states to identify possible breaches for years.

The current bidding contest could stretch out over 12 months.

The rival bidder to Star, the US investment group Blackstone, which made its first bid in March, is still a long way off getting approval. Other bidders may also emerge, with talk that Apollo Investment group, which specialises in alternative investments, is circling.

Related: Crown Resorts employees 'instructed to use codewords' when discussing China operations

Star has so far escaped close scrutiny of its operations including use of junkets in the wake of the Bergin report, but it too used the SunCity junket, named in the Bergin inquiry as having likely ties to the Chinese Triads.

In February Star’s chief executive, Matt Bekier said Star would focus on premium gamblers both at home and from overseas and would not rely on junkets to lure them to its casinos.

“The junket business is dead,” he told the Australian. “It’s not going to come back.”

The report issued earlier this month by Patricia Bergin, after a year of inquiry into Crown’s suitability to hold a casino licence in NSW, recommended strongly that the use of junket operators be banned in New South Wales.

The Star bid also faces several regulatory hurdles including probity checks by the Victorian and Western Australia authorities and a public inquiry by the Australian Competition and Consumer Commission.