The process had not been approved but it was not clear at the time that it needed to be, chief risk officer Scott Saunders told the inquiry on Monday.
"From my perspective, we were not deviating from the standard operating procedure - so in terms of what we were doing or how we were doing it - other than having included automation," he said.
Mr Saunders was interrupted by a lawyer as he began detailing legal advice received later.
Star adopted an automated process as it worked through a backlog, but the inquiry chaired by Adam Bell SC heard on Monday the regulator may not have been adequately informed.
Mr Bell is chairing his second inquiry into Star's suitability for its lucrative Sydney casino licence following concerns about long-term reform at the company.
The casino's licence was suspended in 2022 after the first probe revealed illegal gang-linked junkets in gaming rooms and Chinese debit-card transactions disguised as hotel expenses.
"Are you familiar with what I said … about the desirability of communications to the regulator being clear and in writing?" Mr Bell said on Monday, referencing his first inquiry.
Adam Bell SC is chairing his second inquiry into The Star. (HANDOUT/NSW INDEPENDENT CASINO COMMISSION)
Mr Saunders said it was made clear to the regulator in September automated processes may be used to undertake bulk reviews of customer sources of wealth, after standard operating procedures had been approved months earlier.
"The method of achieving it was approved and fully transparent," he said.
Red flags prompted a manual review, while a cautiously adopted and broader definition of customers meant some were flagged high-risk despite only visiting hotels or restaurants, not the casino, Mr Saunders said.
Thousands of duplicates, identified and discarded, had inflated the numbers to about 32,000 customers requiring enhanced customer due diligence.
It was impossible to get them all assessed in the time allowed but Mr Saunders denied the automated process was a "workaround".
"We adopted a process that included automation to achieve the outcomes," he said.
Mr Saunders told the inquiry he was buoyed by the company culture in responding to feedback when he joined Star in February 2023, giving him hope change was achievable.
"It seemed to be that everybody wanted to do the right thing, but they genuinely didn't know what the right thing was," he said.
Monday's hearing was delayed about half an hour when Star produced more documents, weeks past deadline, as counsel assisting Caspar Conde was questioning Mr Saunders.
The late production of additional documents was "very unfortunate", Mr Bell said.
He earlier sought an explanation from Star as he considered charges for breaching a summons when a large number of documents forced an adjournment on Wednesday, as Star's former chief financial officer Christina Katsibouba described a culture of secrecy and isolation among the casino operator's leadership.
Mr Saunders told the inquiry he was not familiar with Ms Katsibouba's claims, including being asked to book losses in the wrong month, besides what he had read in media reports.
Star Entertainment Group's share price has plunged more than 18 per cent since the second inquiry's public hearings began and closed at $0.415 on Monday.
