(Adds background on watchdog report, fallout) Feb 16 (Reuters)...

(Adds background on watchdog report, fallout)

Feb 16 (Reuters) - The New South Wales (NSW) state gambling watchdog considers Crown Resorts (CWN) unfit to hold a gaming licence for its flagship Sydney casino, Crown said on Tuesday, a week after an inquiry found widespread money laundering and governance issues.

The casino operator said the state gambling watchdog gave it a notice in a letter after its Sydney casino breached a clause of the VIP Gaming Management Agreement.

The watchdog has now begun a consultation process and invited Crown to address the authority, it said.

A report issued last week calling for sweeping changes to Crown's board and culture was the culmination of a year-long inquiry commissioned by the NSW gambling watchdog that found criminal conduct took place at Crown's Melbourne casino.

Since then, Crown's chief executive and three other directors have resigned, while another broke links with major shareholder James Packer, whose influence on the company was also criticised.