MONEY LAUNDERING
Our November article 1 on the extraordinary level of financial settlements being imposed by the Gambling Commission (GC) had almost as a throwaway remark a comment that the overwhelming reason given was social responsibility and AML failures. We asked at the time whether or not this indicated a money laundering problem in online gambling without drawing any firm conclusions. Since then, the European Commission has published its Supranational Risk Assessment (SNRA) 2 which singled out gambling (alongside crypto-assets) as a sector which required a “re-calculation of risk levels involved” as “significant changes have been detected” in the time elapsed since the previous report in 2019. This is in contrast to the findings of the MONEYVAL Panel of Experts report 3 (albeit dating from 2013) which said: There is currently very limited information or evidence suggesting that licensed online gambling operators in Europe are being misused for ML/FT purposes. Furthermore, various sources of literature on the topic, which were consulted by the project team, seem to indicate that the ML/FT risks linked to regulated online gambling are low and that the sector is not likely to be the preferred option for money launderers or terrorist financiers due to the following factors: • Gamblers are subject to customer identification controls and therefore their identity is known; • Financial transactions related to online gambling are conducted electronically and are therefore easily traceable; • All wagering carried out by online gambling operators is recorded. So where does the truth lie? Has so much changed since 2013 that online gambling deserves to be considered at high risk of money laundering? A growing problem? In 2018, the EU introduced the Fifth Anti-Money Laundering Directive (5AMLD), which expanded the scope of AML regulations to include provisions for the gaming and gambling industry, making it mandatory for operators to implement
effective AML measures. Under 5AMLD, gaming and gambling companies are required to conduct Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD) measures for high- risk customers, including politically exposed persons (PEPs). Operators must also monitor and report any suspicious transactions to the relevant authorities, such as the Financial Intelligence Units (FIUs). Despite this, reports of AML failures in gambling across European jurisdictions have been limited to date. In the UK, the key AML regulations are the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), which apply to all sectors, including the gaming and gambling industry. MLR 2017 requires all gaming and gambling companies to conduct a risk assessment of their business to identify and mitigate the risks of money laundering and terrorist financing. In addition, the UKGC has been given specific responsibility for money laundering in the gambling sector and issued specific guidance for the gaming and gambling industry on AML requirements. This key difference from most other jurisdictions explains why anti-money laundering failures have appeared so frequently in its judgements. But does it indicate a money laundering problem? In its SNRA the Commission did not provide any data or evidence to support the risk upgrade but quoted unnamed “competent authorities reporting that risks arising from online gambling have increased”. This, together with an industry “characterised by fast economic growth and technological development, with a strong growth of the online sector”, seems to have been enough to give rise to the concerns. At the same time, the SNRA seemed to relax its stance towards brick-and-mortar casinos. Although these still “present an inherently high-risk exposure, their inclusion in the AML/CFT framework since 2005 has had a mitigating effect”. Taken at face value, online gambling with its high growth, technology base and chequered past associations would appear to be the perfect conduit for the transfer of illegal funds to the legitimate economy. There are huge volumes of financial transactions providing cover, there is no physical product and winnings are often tax free. 4 The European Gaming and Betting Association (EGBA) in its advice on AML
1 It’s a Fine Thing IMGL Magazine Volum 2, No 4 https://online.flippingbook.com/view/571235438/28 2 EUR Lex https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52022DC0554
3 Moneyval Research Report https://rm.coe.int/research-report-the-use-of-online-gambling-for-money-laundering-and-th/168071509c 4 Dr Ingo Fiedler, University of Hamburg, Institute of Law and Economics, Online Gambling as a Game Changer to Money Laundering? 2013
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IMGL MAGAZINE | APRIL 2023
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