Gambling and gaming companies are subject to the Proceeds of Crime Act (POCA) and are regulated, (along with financial services), and as such, must comply with the directives and regulations of the FATF and European Union. This requires gaming and gambling companies to have a comprehensive compliance program to protect against potential criminal activities. These activities and a lack of compliance will not damage the reputation of the organisation but may result in large penalties and fines. 

In which ways are casinos vulnerable to financial crime? 

The FATF has identified nine ways in which gaming and gambling companies are particularly vulnerable to money laundering, including: 

  • accepting cash payments
  • unwittingly receiving the proceeds of a crime 
  • transfers between customers
  • improper use of third parties 
  • casino deposit accounts
  • the use of prepaid cards
  • identity fraud 
  • the use of multiple accounts
  • the presence of multiple operators

Any business accepting payments from customers faces the risk that cash has come from illegal activities, but gaming and gambling companies deal with significant volumes of customers, which increases their vulnerability. Casinos perform many financial transactions, including opening credit, leasing safes, fund transfers, check endorsements and more. Money launderers place huge volumes of cash in the casino and can withdraw or transfer the money with casino checks without generating reports or even raising suspicion. 

In addition, there are several gambling crimes that casinos are subjected to, including theft, illegal corruption of slot machines, cheating at gambling tables or loading chips (i.e. adding additional chips to an original hand after announcing the winning hand) that require extra security and due diligence. 

The consequences of failing to spot risk

Casinos and gaming companies who do not take action to avoid money laundering being precipitated through their companies are dire. Some of the recent fines levied against casinos for money laundering responsibility failures include a £2m fine levied against BetVictor, a £9.4m fine against UK Limited, and a £3.8m fine against Genesis Global (along with a 3-month suspension of their licence to operate). 

Regulatory bodies continue to crack down on the sector and are imposing harsh penalties against businesses that fail to correct deficiencies in their AML and CFT processes. 

The Money Laundering Regulations 2017 included a rule for companies to conduct annual written assessments regarding their own vulnerabilities to money laundering and whether they are at particular risk. Other regional regulators have warned operators to carry out ongoing screening of their employees to determine risk and to conduct enhanced due diligence on customers who place bets that total more than €2000 within a period of 24 hours. Companies should also appoint a nominated compliance officer and implement an independent audit process to measure the effectiveness of their compliance program. 

The Gambling Commission, the UK’s supervisory authority, has issued guidance on emerging risks that remote/non-remote gaming and gambling operators may face and gives companies some freedom to devise controls to address their unique AML challenges, following in the footsteps of the Financial Action Task Force that takes their own flexible approach to recommendations. 

Preventing money laundering

Casinos have a responsibility to combat money laundering and terrorist financing by carrying out controls in line with AML and CTF regulations. Any suspected money laundering activities must be reported to authorised institutions, like the Gambling Commission. Like financial institutions, operators and employees in both remote/non-remote casinos must submit a Suspicious Activity Report (SAR) if they come to know or suspect that a person is engaged in or attempting to launder money through their business. 

Per POCA and the 2017 Regulations, casinos need to implement preventative AML measures, including: 

  • Carrying out regular inspections and controls through appropriate AML systems
  • Adopting a risk-based approach to potential financial crimes 
  • Performing regular KYC and Customer Due Diligence checks 
  • Establishing guidelines, procedures and reports for Risk Assessment

Conclusion

The gambling industry has been hit hard by stringent regulatory requirements as well as the fall-out of financial crimes perpetuated through their websites and businesses. The first step towards safeguarding a gambling or gaming business is to implement a know your customer process and screening. Implementing a robust and automated AML & KYC Screening solution can screen and monitor customer profiles and transactions quickly and accurately, reducing the risk of compliance failures. 

If you are a gambling or gaming operator and feeling the pressure of regulatory scrutiny or having trouble navigating the ever-changing compliance landscape, get in touch with our team at sanctions.io. Our automated Sanctions & PEP screening solutions are perfectly suited to the challenges that online and offline gambling operators face every day, providing complete peace of mind that your business is taking the necessary compliance measures.