MONEY LAUNDERING
also recognizes a higher risk inherent in the digital world. It says: “business relationships that do not take place face to face, such as online gaming, pose a higher ML/TF risk (e.g., risks of identity theft and other fraudulent acts relating to impersonation).” 5 Although it does go on to say that “due to the technological mitigating measures and controls put in place, this risk can be mitigated to an acceptable level.” With concerns raised at such a high level, we wanted to investigate further to understand whether worries over money laundering through online gambling were justified and whether the steps being taken in the UK and further afield are likely to achieve their objective of reducing the risks. Without such analysis there is a danger that there is a greater focus on what AML compliance should look like than is known about how money laundering is organized via online gambling platforms or the reductive impact of AML compliance mechanisms. 6 Some definitions Money laundering is described in the UN Vienna 1988 Convention Article 3.1 as: “the conversion or transfer of property, knowing that such property is derived from any offense(s), for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such offense(s) to evade the legal consequences of his actions.” 7 For the purposes of this article we will consider this the “traditional” definition. This narrow description is quite different from the UK position where money laundering is defined in the Proceeds of Crimes Act 2002 (POCA) and includes all forms of handling or possessing criminal property, 8 including possessing the proceeds of one’s own crime, and facilitating any handling or possession of criminal property. The catch all UK approach explains in part why there are so many more apparent AML failures identified by the Gambling Commission. As highlighted above, the UKGC’s specific remit to address money laundering in the industry is another reason. In March 2023 in just the latest enforcement action, brands within the William Hill Group were asked to pay a record £19.2 million penalty
for social responsibility and anti-money laundering failures.
The SNRA essentially encourages European gambling regulators to move much closer to the UK position. The EGBA guidelines also mirror this position in advising gambling operators to take a proactive approach to consider the risks of money laundering when conducting customer due diligence and monitoring. Given the broad agreement that the UK’s approach is helpful, we will use UK data to try and understand whether and how much money laundering is going on and how current AML regulations would likely impact it. Under the UK definition of money laundering, the proceeds of crime flowing through online gambling platforms fall broadly into two categories. Internally and externally derived funds. Internally derived funds are those where there is an irregularity within the game itself. Players of online poker could, for example, collude using messaging services to cheat other players. The EGBA confirms this in its 2023 AML Guidelines saying that “where the outcome can be influenced by the customer, such as in the case of poker, operators need to monitor for signs of individual misuse or collusion.” 9 In general it confirms: “Transfer of funds between the accounts of different players within the same operator presents a risk factor, which must be considered due to the peer-to-peer nature.” The organization of illegal lotteries is another example of irregularities, this time in the entire game. However, illegal lotteries have as their main objective the generation of profits through the provision of gambling services without having obtained a license. In both cases the funds generated are the proceeds of crime and those involved may have committed a money laundering offence. That said, these types of funds do not need to be laundered in the traditional sense as they are already part of the financial system (a core objective of money launderers). Having been staked and been part of a gambling game they can be withdrawn unhindered. The second category is externally derived funds, that is funds which are the product of crimes carried out elsewhere. These subdivide broadly into two: organized criminal gangs using
5 EGBA Guidelines https://www.egba.eu/uploads/2023/03/230306-EGBA-Guidelines-on-AML-for-Online-Gambling-FINAL.pdf 6 Duncan, P. & Lord, N. (2022) ‘Organized crime money laundering through online gambling businesses in Great Britain’ Emphasis added 7 www.imolin.org/pdf/imolin/UNres03e.pdf 8 https://www.legislation.gov.uk/ukpga/2002/29/part/7 9 https://www.egba.eu/uploads/2023/03/230306-EGBA-Guidelines-on-AML-for-Online-Gambling-FINAL.pdf
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IMGL MAGAZINE | APRIL 2023
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