Khurram Akhtar – Cofounder of ProgrammersForce.
The gambling industry is a high-stakes arena—not just for players but for money launderers exploiting its vulnerabilities. This became evident in a news report on the Entain Group in 2022, where the company faced a record fine of £17 million for failing to meet anti-money laundering (AML) compliance standards.
The public statement made by the U.K. Gambling Commission read:
“The investigation and our subsequent regulatory review found: failings in LBG’s implementation of Anti-Money Laundering (AML) policies, procedures and controls … deficiencies in its responsible gambling policies, procedures, controls and practices, including weaknesses in implementation …”
It is not just the magnitude of the fines imposed on the gambling industry that stands out. It’s the operational shortcomings they expose. Despite robust regulatory frameworks, the gambling industry continues to struggle with following compliance guidelines.
However, this is just the tip of the iceberg. AML fines within the gambling industry are likely to exceed social responsibility fines. For instance, U.K. regulators have imposed millions in fines on operators failing to protect vulnerable players, including cases of inadequate checks for problem gamblers and insufficient measures to prevent gambling addiction.
Despite such headlines, AML violations remain a more pressing concern. This raises an important question: What’s driving this imbalance, and why isn’t it gaining the attention it deserves?
Having spent over a decade in the RegTech field helping organizations across diverse industries meet their compliance obligations, I’ve observed that many businesses, particularly those in the gambling sector, struggle to reach their full potential due to complex AML regulations and inadequate compliance systems. This often results in substantial fines and reputational damage. To address these challenges, let’s delve into the root causes behind these compliance gaps and discover actionable strategies for effective compliance.
Compliance In Chaos
The UNODC report on gambling highlights how the gambling industry has seen exponential growth in recent years, with the online market expected to grow to more than $205 billion by 2030.
A French AML document highlights how the gambling industry, while generating massive revenue and growth opportunities, also exposes itself to significant vulnerabilities like money laundering. Casinos, contributing billions annually, exemplify this duality, offering economic benefits but posing serious risks to regulatory compliance and financial stability, demanding stricter oversight.
Between 2018 and 2023, the gambling industry faced higher AML compliance fines than social responsibility fines. This is because the industry has repeatedly failed to adequately assess the risks associated with remote and non-remote businesses. The staggering disparity between AML fines and social responsibility penalties within it also highlights the sheer scale of the money laundering problem.
Contrary to what was initially assumed, this imbalance is not a sign of misplaced priorities. It reflects how pervasive and damaging money laundering has become in recent years. So, how can the industry protect itself and its assets?
How Money Laundering Works In Gambling
Money laundering follows three stages. To understand how it works within the gambling industry, let’s use the Crown Resorts case of 2023, where the company had to pay $450 million in fines for breaching AML laws.
In the first stage (Placement), criminals deposit illicit funds disguised as gambling credits/chips. In the second stage (Layering), they move money through high-stakes bets to disguise its origin. In the last stage (Integration), they withdraw the funds they deposited as casino winnings, thus legitimizing their use elsewhere.
Why Compliance Matters Now More Than Ever
The nature of gambling operations, which includes handling high-value cash transactions, international clientele and complex supply chains, creates inherent vulnerabilities.
The gambling sector, as part of the DNFBP category, is facing tighter AML compliance requirements globally. Australia’s proposed Tranche 2 regulations aim to expand the AML/CTF framework to include more high-risk services offered by DNFBPs, modernize digital currency and virtual asset oversight, and simplify compliance to better prevent financial crime.
In the UAE, continuous risk assessments for DNFBPs, including casinos, are being issued in Dubai and other emirates. These assessments highlight vulnerabilities and emphasize the need for robust compliance programs, particularly in sectors involving large cash flows and anonymous transactions.
As regulations evolve and tighten, the gambling industry must adopt enhanced due diligence, modern monitoring systems and clear reporting protocols.
How To Beat The Odds: Using Data Tools For AML Checks
Effective AML compliance in the gambling sector hinges on comprehensive screening processes to detect and mitigate potential risks. A critical focus lies in identifying politically exposed persons (PEPs) and their associates, given their higher vulnerability to illicit activities. Advanced tools capable of screening PEPs through names, email addresses, identity cards or photographs can ensure precise identification.
Additionally, make sure screening extends to the businesses associated with casino clients. Cross-check these entities against sanctioned lists and verify the legitimacy of their sources of funds to uncover any connections to financial crime.
Moreover, casino leaders should employ adverse media screening to highlight any red flags, such as a client’s involvement in fraud, corruption or other criminal activities, ensuring casinos remain vigilant against reputational risks.
Further precautions include screening third parties involved in payment transactions and the recipients of funds, especially when casinos provide diverse financial services. Reviewing these parties against sanction and risk-based lists helps identify and block suspicious financial flows.
These measures are foundational to an effective AML program, but they are not exhaustive.
It’s Time For Smarter Compliance Strategies
In the gambling industry, AML compliance often takes a back seat to social responsibility concerns, yet its impact is equally, if not more, critical. While the sector generates significant revenue and is recognized as valuable, regulators view AML risks as a priority. These risks may not always be visible at a macro level, but individual cases at the firm level highlight their severity.
Casinos must address their social obligations while prioritizing AML compliance to prevent financial crimes. Leveraging advanced AML tools, such as PEP screening, sanctions screening and adverse media monitoring, enables organizations to adopt a thorough risk-based approach.
These solutions streamline compliance processes and enhance the timely detection of potential risks, ensuring that gambling firms not only meet regulatory standards but also uphold their responsibility to maintain business integrity.
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