9 Ways To Stop Money Laundering In Casinos

Casinos serve as safe havens for money launderers to conduct their illicit activities without strict monitoring. In February 2024, The New Zealand casino operator SkyCity Entertainment Group saw a sharp drop of 2.4% in share prices in less than two months—after disclosing that a proposed lawsuit against its corporate unit, Skycity Casino Management Ltd., was filed for allegedly breaking anti-money laundering laws and conducting Casino money laundering. After a thorough anti-money laundering audit for the Casino and Entertainment Group, the New Zealand Department of Internal Affairs declared that it would bring a case in the High Court to fine SkyCity an amount equivalent to $8 million.

In another well-known case, in July 2023, “The FCA (Federal Court of Australia) sanctioned Crown Resorts; an Australian player in the gambling industry, must pay  AUD 450 million fine for repeatedly breaching the “AML/CFT Act 2006” between 2015 and 2022”. This fine resulted from the effort made by Crown Australia and Australia’s financial intelligence unit, AUSTRAC. Since this is the biggest fine of any casino, other gambling establishments should take note to implement and maintain robust AML/CFT protocols.

The casinos, in general, being a large popular entertainment setup, provide players with different game opportunities and gambling options. But, on the contrary, this lucrative business is at risk of multiple financially motivated crimes, like money laundering. The following article will have a view of different methods of money laundering through casinos, how they work, and how Casinos can mitigate these risks by adopting efficient AML compliance programs.

What Is Money Laundering In A Casino?

Casino money laundering is done by carefully manipulating the facility’s operations to pass off illicit gains as real money. The most famous strategy is putting it back into the casino to make it look like revenue from winning or any other legal gambling activity. From physical institutions to online systems, criminals use casinos as a disclosure medium to hide the source of their illegitimate funds and make them look like Clean money.

The process of laundering money typically involves three stages: Placement, Layering, and Integration.

With a predicted 124 million active players by 2027, the online casino sector is expected to generate $32.69 billion in revenue globally by the end of 2024. Online casinos are now seen as a separate industry and are welcoming more and more players every day. There are multiple online platform vulnerabilities that criminals can take advantage of. Criminals can easily evade any security by converting this Dirty Money into small chips that either could be physical or digital with no or little check, gambling for a limited period, and then cashing out with newly laundered funds. Online casinos operate in the same way.

Common Techniques Of Money Laundering Through Casinos

Although by its nature gambling industry aims at providing economic and entertainment advantages, it also creates a perfect environment for the criminals who are involved in the process of money laundering as it is an attempt to disguise illicit funds as legitimate income. Let’s explore some common Money laundering method of this system:

• Cash-In, Cash-Out

This simple technique which mainly consists of exchanging Dirty Money for chips (be it physical or digital) and whenever winning, redeeming them instantly, produces a sense of legal gains.

• Structured Deposits And Withdrawals

Criminals divide large sums of illegal money into smaller deposits and deposit them beneath threshold limits, preventing the detection by anti-money-laundering procedures running in both casinos as well as banks.

• Buying Winnings

Criminals may directly contact legitimate gamblers and persuade them to sell their wins at a high profit thus, through such a platform, criminals can directly or indirectly convert their corrupt gains into Clean money.

• Online Anonymity

In the same way as traditional casinos, online sites provide options for money transfer with structured deals and cash-in, and cash-out schemes. Furthermore, some platforms might provide a level of anonymity which in turn gives criminals a much-needed platform to perform their criminal acts.

• High-Roller Programs

Casinos may occasionally give high-rollers credit lines and preferential treatment. Criminals employ those gaming programs to substitute their “significant sums of Dirty Money” for gambling revenue or by allotting markers to withdraw cash without having links to an underlying crime.

Let’s quickly review various international casinos facing serious fines and penalties from regulatory authorities for failure to follow AML regulations.

United Nations Reveals Growing Issues Of Money Laundering In Casinos

According to a recent UNODC report titled “Casinos, Money Laundering, Underground Banking, and Transnational Organized Crime in East and Southeast Asia,” the formal online gambling market is expected to reach a valuation of over $205 billion by 2030, where the Asia Pacific region is supposed to be contributing the 37 percent of the market growth for the period between 2022 and 2026.

The UNODC analysis suggests that by early 2022, Southeast Asia had over 340 licensed and unlicensed casinos operating with the capability to move their businesses online to continue selling live-dealer streaming services. The estimated size of the formal gambling market in this region is projected to grow nearly to $205 billion by the year 2030 with shared market growth from Asia Pacific at a 37% rate from 2022 to 2026. To fight crimes, such as money laundering, governments have come up with multiple policies and enforcement measures that are meant to regulate the operations.

The analysis of the AML compliance fines between 2018 and 2023, shows that gambling industry businesses have received more fine charges for AML failure as one can see that the graph between the likelihood of AML and Social Responsibility failure shows this clearly.

Preventing Money Laundering In Casinos: A Prime Step To Focus On

The AML programs are an integral part of the risk reduction processes in casinos that act as countermeasures against money laundering through casinos. Such programs are created to identify and block risky transactions and report to the institution that has responsibility for that matter. Casinos have multiple options for implementing streamlined AML compliance programs, including;

• Know Your Customer Procedures

Casino operators should engage in the KYC process to verify the customer identity and to establish that the activities are not associated with illegal operations. The procedures must include accurate customer identification, inherent risk assessment, continuous monitoring, and regular customer-based transaction control.

• Internal Control And Policies

Casinos should implement an AML Compliance program that includes protocols and policies to identify, cease, and notify money laundering through casinos. Tailoring these programs in a way that they are specific to risk and compliance regulations, and specific threats to the casino must be reviewed and updated regularly.

• Suspicious Activity Reporting

Casinos should set up a mechanism that can identify and report doubtful activities to the authorities. These may be any activities occurring outside predetermined channels, patterns, or limits and which in any manner appear to be money laundering in nature or indicating other financial loss.

• Enhanced Due Diligence

While casinos are at higher risk of money laundering they must follow the due diligence procedures, especially for high-risk customers such as politically exposed persons or RCA. Scanning should involve comparative analysis with PEP data, global sanction list, and adverse media.  This check helps casinos monitor various suspicious activities and report them to authorities who supervise the operations of any sort of money laundering.

• Adopt Risk-Based Approach

The risk-based approach implies evaluating the risk level of each client and transaction unit and, subsequently, the level of specific countermeasures reducing that risk shall be applied. This risk-based system in place, specifically in higher-risk laundering areas like VIP lounges, where there might be a chance of bigger transactions, would be helpful to deter this.

• Transaction Monitoring

Casinos should consider deploying systems of transaction monitoring to identify suspicious activity, ranging from abnormal cash transactions to volatile gaming patterns and other deviations. The systems should entirely be automated and may contain information to identify any unusual activities that require an in-depth analysis.

• Compliance Audits

Casinos should conduct compliance audits regularly especially to verify whether their AML Compliance program and other financial crimes countermeasures are supported at high levels. Internal or external audits can be conducted and would involve a performance audit to review processes, procedures, and controls.

• Technology And Data Analytics

Casinos need to take advantage of the latest technologies and data analytics because it helps them to identify, reduce, and investigate financial crimes. For this purpose, the use of AI and machine learning algorithms must be required to detect anomalies in typical activity and trends.

• Employee Training

Casinos should train their employees about how to detect and report money laundering and other dubious transactions regularly.  Besides the training on AML laws and regulations, there will be training on continuous customer due diligence and transaction monitoring processes.

Apart from the independent AML audits, the efficient AML Compliance measure and sanction screening can offer an additional layer of protection for casinos to guard against noncompliance with the law or become a tool for money launderers, maintaining the credibility and image of the gaming industry.

Let’s quickly review major international AML regulations for casinos and their mandates for casinos imposed by required authorities.

The FinCEN former Director, Jamal El-Hindi emphasized that: “A strong culture of compliance is where ethical conduct is applauded whereby an individual who goes the other way is punished”.

To conclude all money launderers will continue to view the gambling sector as a good place to hide their illicit activities until the gambling industry as a whole and the financial institutions operating in this unstable jurisdiction see increased AML-regulated activity and monitoring to curb Casino money laundering. This is because compliance regulations do exist, but do not go far beyond casinos.

The global business in gambling is very vulnerable to criminal activities like money laundering; the casinos stand in the front line. Increased fines for casino businesses worldwide indicate the necessity of a rigorous AML program that comprises CDD and EDD methods.

AML Watcher is one the most advanced AML compliance solution providers offering AML sanction screening, profile matching, and gambling regulatory solutions for various gambling entities. With a maximum accuracy rate, our solution allows such platforms to prevent penalties arising from non-compliance and dangerous profiles completely.

With our AML sanction software casinos can enhance their compliance processes, make their gaming business safe from money laundering through casinos, and strengthen the integrity of the financial framework.

Our AML screening solutions can automate complete compliance procedures including customized risk scoring, customer due diligence, and continuous monitoring required by law.

We utilize the most advanced algorithms and machine learning for detecting suspicious profiles, activities, patterns, or other instances of money laundering, funding of terrorism, and other illicit deeds. That will permit the casinos to carry out the recognition of money laundering quickly and respond to the risks accurately.

At AML Watcher, we share efficient AML compliance even though the procedure of checking against money laundering for a business with high risk is very complicated. It has everything that a casino business may need at all stages, including ongoing monitoring, effective risk configuration, PEP screening, sanctions screening, and adverse media screening to ensure the security of your business.

Contact us now and get the opportunity to test our solution that can help you automate AML compliance and ease your casino business.