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