AUSTRALIAN gambling giant Tabcorp has found itself in hot water with the Australian Transaction Reports and Analysis Centre, the financial watch dog launching proceedings over allegations it failed to comply with anti money laundering and counter terrorism financing laws.

AUSTRAC yesterday filed papers in the Federal Court against three Tabcorp group companies for “extensive, significant and systemic non-compliance” with the legislation.

The civil penalty proceedings have been launched against Tab Limited, Tabcorp Holdings Limited and Tabcorp Wagering (Vic) Pty Limited.

The company, if found guilty, faces a maximum penalty of $17 million.

“This action follows a long and comprehensive process of assessment by AUSTRAC of the Tabcorp companies' anti money laundering and counter terrorism financing compliance,” a statement on the AUSTRAC website read.

“AUSTRAC has provided a number of opportunities for these companies to improve their standards and compliance, however they have failed to take the necessary steps.

“Non compliance of this nature provides opportunities for organised crime to exploit vulnerabilities and puts at risk the integrity of the Australian financial system.

“AUSTRAC works to keep dirty money out of our financial system, which helps protect the Australian community from serious and organised crime.

“As we have demonstrated in this case, we are prepared to work with businesses to improve their systems and controls, but will take strong action when they fail to make the necessary improvements to address serious and systemic non compliance.

“We will continue to work with law enforcement and other agencies to address risks associated with money laundering – for the benefit of the community as a whole.

Tabcorp Holdings Limited acknowledged on its website that it was aware of the legal action, stating “it has been advised today that civil proceedings have been brought by the CEO of Australian Transaction Reports and Analysis Centre (AUSTRAC) against Tabcorp Holdings Limited and Tabcorp's NSW and Victorian wagering businesses.”

“Tabcorp takes its compliance obligations extremely seriously,” the statement read.

“Tabcorp is reviewing the nature of the proceedings and will inform the market of its intended response.”

AUSTRAC chief executive officer Paul Jevtovic told ABC News that the body could not ignore Tabcorp.

“The risks are that legitimate industries which Tabcorp is responsible for can be utilised by criminal elements to launder their money, to move money and value to other criminal elements, and we can't allow that, and won't allow that, to happen,” Mr Jevtovic said.

In a tough day for the wagering giant, shares in Tabcorp dropped 21 cents, or 4.2 per cent, to $4.77, on the news of the court action.

A hearing will be held on August 11.

Tabcorp still fighting Victorian Government

The AUSTRAC action pits Tabcorp against a second government body, as it continues to battle to secure nearly $700 million in compensation over a 2008 Victorian Government decision.

That year, the Brumby Labor Government decided to end the Tatts and Tabcorp duopoloy over poker machines in the state, opening the door for other companies to purchase licenses.

The Supreme Court had decided it would not allow Tabcorp to launch a claim for the money, but that decision was overturned on appeal and it will now continue the fight later this year.

Tabcorp launches action over blow up spas

There's more than this action on the Tabcorp lawyers' plates, with the giant launching its own proceedings against advertising agency Rhubarb Rhubarb.

The Australian reported on July 10 that Tabcorp had launched a $1.5 million claim against the company in the Victorian Supreme Court after it said it stumped up for 1000 imported spas from China, worth $475,000, to run a promotion for its Keno game.

Problem was, the spas appeared to have some faults, with Energy Safe Victoria receiving 15 complaints that they “presented a serious risk of electric shock to users”.

The faulty spas were recalled by Tabcorp, and those winners were given the choice of a voucher to purchase another spa or $500 cash, and it blames Rhubarb for the trouble.

Rhubarb boss Bob Bagaric did not comment on the action because the matter was before the court.