MONEY LAUNDERING
gambling to recycle funds from drug dealing, fraud etc. and those using illicit money to fund their gambling habit. It is immediately obvious that the two groups have very different motivations. As the SNRA itself says, “the criminal economy remains overwhelmingly cash-based” giving organized crime groups the challenge of turning large amounts of banknotes into funds which can be used legitimately. By contrast, the problem gambler has no interest in money laundering per se, but may have committed a money laundering offence by using stolen money to gamble. What is the risk of money laundering actually taking place? Having identified the two groups at risk of being involved in money laundering through online gambling, we will now try to assess the levels of risk in both cases. This is relevant as most advice is to take a risk-based approach to resourcing AML. Suspicious Activity Reports (SARs) are the only proxy data available to try to understand the size of the potential criminal activity channeled through gambling. In 2021/2 over 901,000 SARs were received by the UK National Crime Agency (NCA) resulting in the denial of £305.7m. 10 However, only 6,352 SARs were made by the gaming/leisure sector (which includes both physical and online casinos), accounting for 0.7 percent of the total. The data is not broken down further, but if this translated perfectly into the proportion of funds denied, the total in 2021/2 would have been £2.14m. The kind of criminality uncovered by SARs is also interesting. John Lewell-Clarke, Financial Intelligence Officer at the Gambling Commission told SARs in Action magazine that: “SARs provide us with typologies and are sources of information to increase our understanding of how criminals may be exploiting the gambling sector. This usually entails people acting as unlicensed bookmakers, taking bets or acting as a betting intermediary . 11 He goes on to say that “The Commission identified an increasing offering of illegal lotteries where no gambling license was held.” As we have already seen, these internally
derived funds may be criminal but they do not require money laundering in the traditional sense of the term. Looking at consecutive SAR Annual Reports there is a clear increase in the number of SARs submitted from the gaming and leisure sectors growing from 2,154 in 2018 to 5,150 in 2020; and from bookmakers growing from just 872 in 2018 to 1,984 in 2020. 12 Again the data is tantalizingly broad brush, but the reasons behind the increase have at least as much to do with engagement by the NCA as they do with an increase in suspicious activity. As Keith Bristow, independent chair of the Gambling Anti-Money Laundering Group says “It was noted by the NCA that the number of SARs submitted by the gambling industry [in 2016] was low and the quality submitted variable. The industry has since worked to improve the quality and number of SARs submitted.” If the quantity of reported suspicious activity is low and mainly related to illegal gambling, what is the likelihood that a large amount of dirty money is washing through the industry undetected? Without the data this is impossible to answer with any certainty but a look at the modus operandi of organized criminal gangs may be instructive. Criminal activity that generates large volumes of cash creates a challenge for the criminal, one which a brick-and-mortar casino may help to solve. The Cullen Commission Report into money laundering in British Columbia published in June 2022 highlighted the role of the province’s casinos and the BC Lottery in turning hundreds of millions of dollars from cash into a bankable form. 13 In over 460 pages of often brutal assessment of the failures of land-based gambling there was not a single reference to the digital space as a conduit for illegal cash. This could be because there is only one legal online gaming operator, but the thoroughness with which investigations were conducted into other sectors strongly suggests that the Commission did not consider online gambling was at high risk of money laundering. In order for cash to be deposited with an online gambling operator it first has to be converted to digital form. There could be a risk of cash being deposited at those establishments with both retail and online operations, but they are likely to be the
10 https://nationalcrimeagency.gov.uk/who-we-are/publications/632-2022-sars-annual-report-1/file 11 John Lewell-Clarke, Accredited Financial Intelligence Officer at the Gambling Commission quoted in SARs in Action magazine of February 2021. Emphasis added. 12 Keith Bristow, independent chair of the Gambling Anti-Money Laundering Group quoted in SARs in Action magazine of February 2021. 13 https://cullencommission.ca/com-rep/
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IMGL MAGAZINE | APRIL 2023
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