It took the arrest of Macau-based junket operator Suncity's CEO for the company to be stopped from running private gaming rooms at Sydney's Star casino.

A meeting of Star managers in 2018 heard of a "big fat red flag" that the junket operator was breaching its agreement with the casino and posed a money laundering risk, years before it ceased operating.

Star's general manager of financial crime and investigations Kevin Houlihan on Thursday resumed giving evidence to the NSW gaming regulator's inquiry into the casino's fitness to hold a licence.

He made the decision to stop Suncity's operations at The Star following the arrest of the company's CEO Alvin Chau in November.

Prior to that arrest, Mr Houlihan had decided the junkets could continue operating if Suncity abided with mitigations suggested by the casino following an investigation.

Mr Houlihan agreed he was aware by August 2019 Suncity was handling cash transactions contrary to its agreement with the casino, that its staff did not co-operate with a subsequent internal investigation, that associates of Suncity had been criminally charged for dealing with criminal proceeds, and that continuing with the group could harm Star's reputation.

A note from senior Star investigator Andrew McGregor, quoted at the hearing by counsel assisting Naomi Sharp SC, had earlier warned: "We have an entity within our four walls which is totally non-compliant to reasonable requests for basic information ... operating a business model under our noses which is problematic".

"Let's cut to the chase here, this is a big fat red flag for money laundering going on in Salon 95," Ms Sharp said.

"It's a red flag yes," Mr Houlihan responded.

Mr Houlihan said the matter had been referred to the police and rejected suggestions Star's investigation was too slow.

"We took the opportunity to slow down and do a proper due diligence report to get it right," Mr Houlihan said.

A report compiled for the Hong Kong Jockey Club in 2018 by Star's current due diligence and intelligence manager Angus Buchanan had also found alleged links to triads and money laundering.

He shared the report internally a month after joining Star in May 2019.

"This report was shared confidentially by Mr Buchanan and the appropriate people had a copy," Mr Houlihan said.

He said it was not shared widely within Star or with the regulator for that reason.

Also not shared with the regulator was a second passport held by prolific Star spender, Chinese billionaire Huang Xiangmo.

The inquiry heard the two passports - one from the Republic of China and the other from Hong Kong - in different names with different birthdates, were both known to The Star, however only one was shared with the regulator.

Star was aware of Mr Huang's second passport as early as 2017, as well as more than a billion dollars in buy-ins he had made on table games in the preceding years.

"Would that second passport have raised a question about the propriety of him being able to gamble at the casino?" Junior counsel assisting Casper Conde asked Mr Houlihan.

"It certainly would have raised questions, yes," Mr Houlihan responded.

He told the hearing he did not recall being asked to investigate Mr Huang's multiple passports.

The NSW Independent Commission Against Corruption recently found $100,000 in cash secretly donated to the NSW Labor party via former MP Ernest Wong was withdrawn from Mr Huang's account at The Star.

His permanent residency and citizenship application were both cancelled in 2019.

The inquiry is examining whether the Sydney casino has been infiltrated by criminal activity, and if its casino licence should be withdrawn.

There have been calls for a similar investigation of the company's licence in Queensland.

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