AML in Online Gambling Strengthening AML Compliance

“The gambling sector’s fines didn’t just rise, they skyrocketed. From $9.8M in 2018 to $442M in 2023, up by 42.3% on 2022’s figures is a loud reminder: AML compliance in the gambling industry isn’t optional, it’s survival now.”

Still, the appeal of FinCrimes through gambling, either online or land-based remains rapidly growing.

Regulators have adopted an even more strict approach to scrutinize closely. High-profile cases like New Zealand’s SkyCity Entertainment Group docked $8 million in 2024.

Australia’s Crown Resorts assessed an unprecedented $300 million penalty in 2023 showing a worldwide initiative to make the industry accountable.

This raises an important question, however:

Is this recent spike in penalties caused by the casinos’ own ineffective AML systems, or are money launderers beating the system and outsmarting the AML mechanisms by taking advantage of systemic loopholes to make unlawful funds appear as legal gambling winnings?

For years, casinos have been viewed as a rich environment for criminals to mix the gains of illicit activities with legitimate cash.

The land-based or online gambling sector is highly vulnerable because dirty money easily becomes blended with legitimate streams.

Like all high-risk businesses, one of the gambling industry’s biggest weaknesses is its reliance on hard cash.

That reliance opens a simple pathway for criminals to deposit huge amounts of dirty money, make small wagers, and then pull back the rest as clean, legitimate-looking “winnings.”

This makes dirty money slip through the cracks of the financial world, even as there are rising overhaul AML frameworks.

Yet even under the stricter AML regime, gambling is one of the three industries hit hardest by AML fines. The answer remains: as long as money laundering exists, will the gambling industry continue to be one of its prime targets?

This article will examine all the possible confusions linked with gambling, the methods criminals use, the systemic weaknesses that render gambling uniquely susceptible, and the ways the industry can strengthen its defenses against money laundering.

The gambling practices have been around for years, dating back to when Bugsy Siegel opened the Flamingo in Las Vegas in 1946, a casino famous for its ties to organized crime.

I Gambled, I Won: The Money Launderer’s Favorit Lie

Unlike common game, Criminals, especially politically exposed persons (PEPs), don’t just gamble for fun; they gamble to legitimize their illicit wealth. In land-based casinos, the house doesn’t always win, but interestingly, the money launderer does.

Gambling, known for its anonymity and lower AML regulations, presents challenges for the regulatory system to differentiate between winning and illegitimate money.

The ambiguity in the gambling industry attracts launderers to invest in the gambling industry and could publicly claim that “I gambled and I won”.

Around the globe, casinos are frequently exploited as hubs for money laundering.

UN Insights on Rising Trends in Casino Money Laundering

Criminals’ transitions to a lower AML compliance industry like online gambling aren’t shocking since the UN, and other regulatory bodies have made the money laundering process more difficult through Financial institutions.

A recent report by the UN Office on Drugs and Crime (UNODC) projects that the online gambling industry will grow to over $205 billion by 203 and it is expected the Asia-Pacific region will drive much of this expansion.

Regulatory bodies across the world have imposed heavy fines; still, these penalties are proving insufficient to curb the rapid expansion of this booming industry.

Why?

Take a closer look at this article to find the answers.

Why Casinos Are Prime Targets for Financial Crime

The workings of the gambling industry aren’t too different from those of financial institutions, except for one key difference: withdrawing money as winnings allows illicit funds to be mixed with legitimate earnings and appear as lawful income.

By purchasing the chips or funding the online games, they enter into the game, play low-risk games, and cash out the remaining chips as winning through checks or bank transfers.

Casinos as Laundering Labs Exposing Criminal Tactics

If you’ve seen those scenes in movies where people stroll into a casino with bags or carts full of cash, it’s not entirely fiction. In reality, criminals buy chips with cash, play minimally, and then exchange those chips back for cash or a cheque from the casino.

Criminals use this cleaning process to make dirty money look legally earned, allowing them to spend it without drawing attention.

This is why casinos remain attractive hotspots for criminals involved in illegal enterprises, including drug trafficking and human trafficking.

Not too many years have passed since the rise of online betting apps, which have also created new money laundering opportunities, along with e-commerce gambling sites.

If Money Laundering is Illegal, Why Don’t Casinos Stop It?

Are casinos really a haven for money launderers?

The growing popularity of land-based gambling worldwide and the expansion of online casinos have forced governments to intensify their efforts to combat illicit activities in the gambling industry.

In the UK, for instance, some jurisdictions require casinos to implement robust Anti-Money Laundering (AML) measures.

In 2019 alone, UK authorities fined online casinos a total of £8.7 million for failing to meet these standards. Similarly, the U.S. Bank Secrecy Act (BSA) mandates compliance measures for casinos.

However, some casinos choose to turn a blind eye to how patrons fund their gambling activities effectively allowing their venues to serve as conduits for criminal activity.

Often, no one questions cash that arrives at a casino, even if it’s linked to human trafficking or drug trafficking, because casinos benefit financially. Just as a restaurant cannot survive without food, a casino needs gambling to stay in business.

Strict policies may scare away even lawful players who don’t want to disclose exactly how much they plan to wager.

Is the Gambling Industry Overlooking AML Practices by Choice?

Fear of losing the rolling customer is one of the major reasons for not implementing the AML regulations from the top management in the casinos and gambling industry.

Interestingly, many casinos lack the resources to manage effective AML programs, which is what attracts most launderers.

Conversely, Compliance officers must face pressure from regulatory bodies to balance business interests with regulatory obligations.

A Long History of Laundering in the Gambling Sector

Casinos have always been a favorite for money launderers. Back in 2014, British Columbia’s casinos alone processed a staggering $1.2 billion in cash transactions.

To put that in perspective, there were 1,881 buy-ins of $100,000 or more—an average of five high-roller transactions every single day.

The Federal Reserve Heist and Its Casino Connection

The most prominent real-world examples of money laundering linked to casinos made headlines in 2016 when the infamous New York Federal Reserve Bank heist erupted.

Hackers stole $101 million from Bangladesh’s Central Bank, and out of that, almost $81 million disappeared into foreign casinos and interestingly many of them were operated by Filipinos. This incident exposed how vulnerable global financial systems, casinos, and gambling industries are.

Australian Casinos Under Fire

In the current gambling landscape, the spotlight is on Australia’s Crown Resorts and Star Entertainment Group.  Because these major casino operators have faced allegations of allowing criminals to launder money and facilitate organized crime under the guise of gambling.

However,  The message is clear from the regulatory bodies: regulators are no longer turning a blind eye, and the days of casinos being a playground for dirty money might be numbered.

AML Gambling Regulations Around The World

United States

The Unlawful Internet Gambling Enforcement Act- UIGEA (2006) law ensures that no business process payments are being injected into illegal online gambling platforms.

However, in the US, the Federal Wire Act brings some confusion as it declares that online gambling regulations are a state-by-state affair.

United Kingdom

The UK is the country legalizing the gambling industry and is one of the largest regions running the gambling industry. The UK Gambling Act 2005 sets the gold standard for regulations as well.

Under the UKGC, it is mandatory to follow the AML compliance licensing of gaming tools like deposit limits and self-exclusion.

In particular, every company must adhere to the following:

• “The Proceeds of Crime Act, 2002 (POCA)”
• “The Terrorism Act 2000”
• “The Gambling Act, 2005”

European Union

EU lacks unified gambling regulation that’s why member nations craft their own gambling laws, but overarching directives ensure consistency.

The 6 AML Directive combats financial crimes, GDPR safeguards player data, and the Consumer Rights Directive enforces transparency and withdrawal rights, harmonizing key aspects across borders.

5 Reasons Why AML Regulations Fail in the Gambling Industry?

1. Cash is King

Casinos are cash-intensive businesses, and that’s exactly what makes the Casinos and online gambling platforms so appealing to criminals.

With large amounts of untraceable cash flowing in and out, it’s easy for dirty money to get lost in the mix. Criminals can walk in with piles of cash, gamble a little, and leave with “clean” winnings.

2. Anonymity is Part of the Game

While financial institutions are tightening their AML requirements, some casinos, especially online platforms—don’t always follow through.

Add in the anonymity of cryptocurrencies, and you’ve got the perfect recipe for criminals to hide their tracks.

3. Different Rules, Different Risks

One of the biggest hurdles? Not all countries enforce the same AML rules. Criminals know this and pick jurisdictions with weak regulations.

Online gambling makes this even easier since operators can base themselves in countries where oversight is minimal.

4. Too Many Layers to Trace

Casinos gambling clubs are not the place where games are just played, in fact,  they handle currency exchanges, loans, and complex financial transactions. These layers make it harder for regulators to follow the money trail and spot suspicious activity.

5. Weak Consequences

Even when regulators catch operators failing AML checks, the fines often don’t hit hard enough. For many big gambling companies, these penalties are just part of doing business, rather than a reason to overhaul their practices.

Despite the challenges, the gambling industry needs to take responsibility. Therefore, Combating money laundering in casinos and the gambling industry requires ongoing vigilance, stringent internal protocols, and the willingness to turn away profitable but suspicious businesses.

AML Watcher Redefining AML Compliance for the Gambling Industry

AML Watcher stands as one of the most advanced AML compliance solution providers that deliver top-tier solutions for sanctions screening, watchlist screening, or adverse media screening.

With unparalleled accuracy, our solution empowers businesses to eliminate the risks of non-compliance and penalties.

AML Watcher’s screening competencies are crucial for reducing gambling-related money laundering risks.

How?

Via Comprehensive Global Data Coverage

AML Watcher has access to more than 100,000 sources, including more than 1,300+ watchlists and 5,000+ adverse media sources in more than 235 countries.

This assures that gambling operators can detect high-risk individuals or obliged entities no matter where they are.

Through Real-Time Updates

AML Watcher’s continuous updates ensure gambling facilities check customers against the most recent information, spotting possible money laundering threats before they become serious.

With Enhanced PEP Screening

AML Watcher cross-checks clients against international PEP Data to spot high-risk individuals who might use gambling sites to launder money through intricate financial networks.

Via Adverse Media Screening

AML Watcher detects people or organizations linked to financial crimes by screening through local and international unfavorable media reports. This allows gambling operators to take prompt action and stop illegal behavior beforehand.

With Cross-Jurisdictional Risk Identification

AML Watcher’s cross-jurisdiction coverage allows the gambling sector to monitor suspicious players to spot possible dangers in high-risk areas, lesser-known regions, controversial territories, conflicted lands, or isolated regions, and assure cross-border compliance without missing information.

With Sanction List Integration

AML Watcher helps the gambling sector stay out of trouble by ensuring that they are fully compliant with international laws, by comparing clients to international sanction lists, such as those maintained by the UN and OFAC.

Through Risk-Based Screening Approach

AML Watcher’s customizable screening effectively detects potential risks related to high-value gambling transactions and patterns that may indicate money laundering.

This enables gambling institutions to modify screening parameters by their unique risk appetite.

With Detailed Due Diligence

AML Watcher assures that online gambling operators have a thorough understanding of each customer’s background, reducing the danger of money laundering and protecting their business, through the integration of several screening data sources, including financial crime reports, law enforcement data, and fugitive lists.