Mr O'Neill is continuing his testimony at the royal commission-style inquiry that is examining whether the gaming company is fit to keep its Sydney casino licence.
The inquiry is probing Star after allegations it enabled suspected money laundering, organised crime, fraud and foreign interference at its venues.
Several Star senior managers, including managing director and chief executive Matt Bekier, chief financial officer Harry Theodore, chief casino officer Greg Hawkins, and chief legal and risk officer Paula Martin have left in recent months.
Mr O'Neill, who tendered his resignation as chairman last week, admitted to the inquiry on Tuesday that the company was "underdone on risk and compliance" and should have been alert earlier to problems across the ASX-listed company.
"The buck stops with the board on culture and the leadership team," he said.
He attributed some of the problems to a major cost-cutting program at the company that took place before the COVID-19 pandemic.
He said Crown Resorts - Star's competitor - previously had 30 people in its risk and compliance area but now had to close to 130, with Star on the same path.
"It's a very fast-moving and ever more sophisticated and complex function that businesses like ours have not moved quickly enough (on)," he said.
Quizzed about a 2018 KPMG report critical of Star's anti-money laundering and counterterrorism financing program, Mr O'Neill said he was "exceptionally surprised and alarmed" when he learned of its findings.
He could not recall if he turned his mind at the time to whether the report contained price-sensitive information and should have been disclosed to the ASX, but conceded it should have been disclosed to the NSW gaming regulator.
Asked about a Star ASX-release from October 2021, Mr O'Neil agreed that, at the time, he was not aware Star had withheld the report from AUSTRAC for months.
"Had you known the truth ... you would not have approved the release in this form?" Adam Bell SC, who is helming the inquiry, asked.
"Correct," Mr O'Neill replied.
Earlier, Mr O'Neill called it a "fundamental mistake" to combine the company's legal and risk functions and said Star had asked too much of Ms Martin.
Ms Martin had up to nine people reporting to her and did not have sufficient experience in risk and compliance, the inquiry was told.
He pointed to casino compliance manager, Graeme Stevens, and general manager of financial crime and investigations, Kevin Houlihan, as people in critical positions who should have been upskilled, or said other people should have been brought in.
Mr O'Neill has told the inquiry parts of Star's business went very badly wrong, especially its international rebate and VIP divisions related to junkets, China Union Pay and offshore bank accounts.
The inquiry was previously told that in 2019, China Union - a Chinese financial services company - became concerned that its cards were being used at Star venues to pay for large "suspicious" gambling transactions in breach of its rules.
There has also been evidence that a notorious gang-linked junket operator Suncity ran an illegal cage in an exclusive gaming room at The Star Sydney.
The inquiry continues.
