Australia’s anti-money-laundering watchdog has launched an investigation into two of the nation’s biggest online sports betting companies over money laundering concerns and warns that it wants the multi-billion-dollar gambling industry to “lift its game”.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) has appointed external auditors to assess Sportsbet’s and Bet365’s compliance with the anti-money laundering and counter-terrorism financing laws.

It comes after an extensive supervisory campaign by AUSTRAC that assessed entities within the corporate bookmaking sector and the recent investigation into Ladbrokes owner Entain about its compliance.

Sportsbet and Bet365 are among the largest operators in the sports betting sector.

“AUSTRAC is putting the whole industry on notice to lift their game,” Nicole Rose, AUSTRAC chief executive, said in a statement.

“Ultimately, enforcing non-compliance is about protecting the community.

“Money laundering feeds organised crime and all the harm that comes with it.”

Ms Rose said the regulator wants businesses at the front line to fully comply with the laws and to understand and mitigate their risks and report suspected crimes.

“AUSTRAC will not hesitate to take action where suspected non-compliance is identified,” she added.

In 2017, gaming company Tabcorp was fined $45 million — then one of the largest penalties in Australian corporate history — for breaches of anti-money laundering and counter-terrorism financing laws.

The Federal Court found Tabcorp failed to alert regulators to reports of suspicious behaviour on 108 occasions over more than five years.

Two of Australia’s big four banks — the Commonwealth and Westpac — have paid even bigger fines for non-compliance with anti-money laundering and terrorism financing rules, with Westpac’s $1.3 billion penalty the largest in the nation’s corporate history.

AUSTRAC has issued audit notices to both Sportsbet and Bet365 and said it will give the external auditors 180 days after their appointment to determine whether both companies have risk-based systems and controls in place to effectively identify, mitigate and manage money laundering and terrorism financing risks.

The extent of the auditor’s examination of each company is determined by AUSTRAC and will be at Sportsbet’s and Bet365’s expense.

The regulator also said the outcomes of the audit will assist Sportsbet and Bet365 to comply with anti-money laundering and counter-terrorism financing obligations, and inform AUSTRAC whether any further regulatory action is required.