Improving AML Transaction Monitoring in the Online Gambling Industry

Explore effective strategies and advanced solutions for enhancing Anti-Money Laundering (AML) compliance, with a focus on transaction monitoring in the online gambling sector.
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Is AML transaction monitoring the best tool in the fight against money laundering and terrorist financing?

As technology evolves daily, Online Gambling is constantly transforming itself. The popularity of remote gaming saw a huge rise during the pandemic due mainly to the temporary closures of land-based casinos. But, online casinos are often an attractive target for criminal activity too, such as money laundering, terrorist financing, proliferation financing or the transfer of illicit funds.

Undoubtedly globalisation of the gambling industry is real

From a risk standpoint, online casinos are more vulnerable to money laundering and terrorist financing than land-based gambling institutions. Preventing financial crimes is more than an ethical argument, with huge penalties being issued by the UKGC (United Kingdom Gambling Commission) to those found to be failing the local AML regulations.

In Online Gambling, AML compliance is one of the most scrutinised processes, with regulators conducting more investigations and imposing increasingly severe penalties on companies that fail to comply with AML regulations

In 2023 we've already seen multiple high-profile gambling operators in the UK fined when they failed to meet these strict compliance requirements. And both land-based and online gambling operators have been found lacking in their anti money laundering (AML), financial crime prevention and social responsibility strategies, risk loss of revenue, possible regulatory fines, potential loss of license and just as importantly, damage to their reputation.

Why is anti money laundering and terrorist financing compliance important for online gambling operators?

Customers trust that the sites they visit, the money they spend and the companies they choose to interact with are not linked to crime. And whilst the fines may not directly lead to loss of revenue or customers, the knowledge that criminals may be using sites to launder the illegal proceeds of drugs, human trafficking, or other financial crimes definitely impacts the public’s perception of the online gambling industry as a whole.

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What are the AML compliance requirements that affect the online gambling industry?

The AML laws that affect online casinos and other gambling companies are substantially the same as those governing financial institutions. As obliged entities, the Proceeds of Crime Act has a duty of compliance with both the UK and other European Union laws. The gambling industry must comply with national and international regulations such as the Moneyval, FATF (financial action task force) and EU Regulation on Money laundering and/or terrorism.

Mitigating the risk of money laundering for online casino and online gambling platforms

Gambling companies have an obligation to follow the laws to prevent gambling fraud and suspected money laundering, terrorist financing and proliferation financing from taking place in casinos. It is a particularly sensitive business due to its high level of AML risk and online casinos often make painful mistakes leading to massive fines. So, what can online gambling platforms do to protect themselves and comply with AML requirements?

There are a number of ways operators can enhance their anti money laundering processes to meet the gambling regulations and mitigate the risk of huge regulatory fines that are currently being handed down by the regulator for doing so. Before discussing how, it’s important to have a clear understanding of why money laundering is prevalent in the gambling sector and what it actually looks like.

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Why is online gambling a target for criminals?

Online gambling is a target for money laundering because it is an international industry with a lack of cohesive regulation across even the most well-established gambling jurisdictions. The requirements in place in the UK are very different from, for example, the Netherlands or USA. It’s also possible for players in one country to gamble with an operator based in a less reputable gambling jurisdiction lacking robust customer due diligence processes. This adds to difficulties around tracing and ascertaining the source of the funds players use to deposit into online betting and casinos.

How can I spot money laundering?

There are several methods that gambling operators should be aware of, including:

  1. Players deposit funds into an online casinos or sports betting account, usually using pre-paid cards, and then make a few small low-risk bets before withdrawing the funds back into a bank account. This money has now passed through a legitimate source of funds and the small low risk nature of these bets may mean that a trigger-based system (rather than an AML risk-based approach) may not flag these as suspicious activity.

  2. Money Launderers also take advantage of multi person online tables. Either joining with an accomplice or using multiple accounts, one player intentionally loses games so the money ends up with another player.

  3. Illicit goods gambling: the perpetrator joins a virtual table and intentionally loses to a drugs/arms/illicit goods dealer, or in the case of proliferation financing chemical, biological or nuclear weapons, instead of paying cash for the illegal items that have been purchased.

Of course, this activity could easily seem like normal player behaviour, which is why effective enhanced due diligence is so important in preventing financial crime.

Incorporating KYC and AML Regulatory Compliance Into Your Everyday Operations

Even with the different rules for gambling, promoting responsible gambling, preventing underage gambling or anti money laundering all have one thing in common - the need for a detailed knowledge of customers. The gambling industry needs to balance the importance of carrying out KYC checks in an efficient manner whilst minimising the impact on a player’s experience. The latest focus on an evidence-based approach enables casinos and operators to show the rationale for decision-making clearly in an audit trail, including money laundering risks and any suspicious transactions.

But at present, operators tend to focus more on trigger-based monitoring and are often only performing checks at events deemed as high risk of money laundering such as withdrawals and large amounts that are flagged as high risk.

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What are some of the common reasons for AML compliance failings?

As the above examples show, money laundering and terrorist financing can take place via lots of small transactions or even through one player losing to others – activity that would not necessarily be flagged as suspicious.

If anti money laundering checks are only being done on withdrawals, it leaves a wide-open vulnerability for criminals and money launderers to deposit dirty money into the sportsbook or casino account.

The fact that operators continue to receive big fines for AML breaches shows just how difficult of an area this is to get right. But there is an approach that can ensure effective monitoring and action so that operators can be confident they are compliant at all times.

So, How can I improve my AML process?

By implementing continuous ongoing customer monitoring as part of anti-money laundering screening rather that focus on a risk based approach, allows operators to gain insight into potential money laundering and suspicious activity before it’s too late. AML screening using an automated process and advanced filters can radically help reduce the volume of false positives, which in turn can improve operational efficiency by helping to drastically reduce the demand upon compliance officers and remediation teams.

Screening players with our advanced customer due diligence and AML solution at point of onboarding, along with ongoing KYC and transaction monitoring, helps our clients to mitigate operational inefficiencies whilst lowering AML risk.

Given the size of the fines being issued by the UK Gambling Commission and by regulators in other globally-recognised gambling jurisdictions, there is a clear incentive to tighten up the anti-money laundering processes from onboarding to ongoing monitoring to ensure compliance at all times.

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Prevent Fraud, Protect Players and Comply With Regulations

The potential for fraud, compliance and customer safety risk is too great for gaming and gambling operators to ignore. Our solutions keep you in control so you can confidently enter new markets, mitigate risk, keep your customers safe and stay ahead of the competition.
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