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How Gambling Sector Can Use Data Tools to Comply with AML/CFT Requirements?

Ensuring cost-effective AML/CFT compliance, casinos may need to use data tools based on ML/TF exposure risk

Gambling Fine Insights

The Scale of Anti-Money Laundering Fines in Gambling Sector

In 2023, the gambling industry remained in the news for hefty fines related to violation of compliance with Anti-Money Laundering (AML) regulations. Crown Casino's AUD 450 million settlement with AUSTRAC (Australian Transaction Report and Analysis Center) for violation of the Anti-Money Laundering and Counter-Terrorism Act  2006, was the most prominent one. In March 2023, the UK Gambling Commission reportedly fined £19 million William Hill for social responsibility and anti-money laundering compliance failures.

While these two cases from Australia and England gained attention in the media, countries like the United States, Germany, Netherlands, Lithuania, and Malta also issued millions of dollars for AML and social responsibility regulation violations.

The vulnerability of the gambling industry to money laundering in different jurisdictions has been exposed on multiple occasions. The notable in this regard is Cullen’s Commission report which revealed how Casinos in British Columbia, Canada were being used to launder millions of dollars.

Casinos are likely to have lesser ML/TF exposure risk as compared to financial sector.

For instance, as per UK Gambling Commission guidelines, HM Treasury and the UK Home Office of National Risk Assessment have rated gambling as a low-risk sector.

However, over the years there has been an increase in money laundering and social responsibility fines in the United Kingdom in response to the Gambling Commission’s approach to enforcement as shown in figure in the figure below.

Casinos, don’t face fines due to just AML compliance failure but also due to other reasons such as social responsibility failures as has been witnessed in the case of William Hill.

However, AML fines are likely to be much higher than social responsibility fines. An analysis of gambling fines between 2018 and 2023 fines, shows that gambling industry businesses faced higher penalties for AML compliance failures as compared to social responsibility failures, as indicated in the below graph.

Money Laundering and Terrorist Financing Risk in the Gambling Industry

A proactive approach to AML/CFT compliance measures in the gambling sector first requires analysis of money laundering exposure risk along with a thorough knowledge of how sector is vulnerable to be used by money launderers.

A 2009 Financial Action Task Force Report, Vulnerability of Casinos and Money Laundering noted that there was a significant casino activity that is cash intensive, competitive in its growth, and vulnerable to criminal exploitation.

Level of risk exposure can depend upon, size, scale of operation and nature of service offerings of casinos and potential loopholes which can be exploited by criminals.

While casinos can be used to launder money, Cash-in and Cash-out method remains the most popular. In this technique, criminals convert their money into casino chips, place some bets, and then later cash out the money.

In other techniques, potential criminals could lose on purpose to their opponent and then take their winnings back from them in exchange of some cash.

While casinos and iGaming businesses may not directly offer financial services, they can indirectly facilitate financial transactions in multiple ways, depending upon the mode of operation. For instance, UK Gambling Commission’s 2023 money laundering and terrorist financing guidance published on November 2023, explains ML/TF risks associated with type of commercial gaming businesses like casino (remote), casino (non-remote), casinos offering money service businesses, betting remote, betting (non-remote), Bingo (remote), Bingo (non-remote), Arcades, Society lotteries and external lottery managers (remote and non-remote), National lottery (remote and non-remote) and gambling software machine etc.

The level of ML/TF risk exposure can also depend upon the extent to which casinos facilitate monetary transactions. For instance, UK Gambling Commission 66% of non-remote casinos offer money service businesses including cheque cashing, foreign currency exchange, third-party money transfer to customers’ accounts, and third-party money transfers to customers' accounts.

Histogram of Fines

Top Gambling Industry Fines (2014-2023)

Strategically Using Data-Centric Approaches to Ensure Compliance with AML Regulations

Implementation of of AML compliance measures such as empoloying resources and technological tools could be cost-intensive. Not all businesses in gambling and igaming sector may have equal risk of money laundering and terrorist financing.

Mentioning the case of UK, country’s Gambling Commission assigns different terrorism financing and money laundering risk to each type of gambling business depending upon operations and services provided.

For instance, Casino, Betting and Bingo (remote), Casino (non-remote), Betting (non-remote, off-course), and Bingo (non-remote) are high risk sectors, while Family Entertainment Centres, Society lotteries and external lottery managers, the National Lottery (remote, and non-remote) and Gambling Machine Technical, remote and non remote have a low-risk.

Types of financial services offered and payment methods accepted along with mode of payment acceptance also determine, risk of exposure to mone laundering and terrorism financing activities.

A careful selection of data-powered tools to assess a client’s risk of being engaged in illicit financial activity not only serves the purpose of AML compliance but it can also prevent these businesses from other
fraudulent activity.

Despite the varying scale and size of their business, there is a need to assess money laundering risks associated with clients and then put in place proportionate measures using the appropriate data intensive tools with features including but not limited to following.

  • Screening against data of PEPs (Politically Exposed Persons) and their associates
  • Utilizing tools that allow screening using names, email addresses, identity cards or social security numbers, and pictures to get the exact matches.
  • Screening businesses of casino clients against sanctioned lists, while confirming the sources of funds.
  • Screening against Adverse Media Category to check for any crime such as fraud associated with client
  • Screening for Sanctioned Individuals and Entities (Not necessarily against extensive data but the relevant data)
  • Screening even third parties whose payment credentials are used for transactions and even screening recipients of funds against the above-mentioned lists, in case a casino offers diverse financial services.
  • Using tools that update the data to reflect the latest risk level associated with potential crimes.

The gambling sector may have a low risk of money laundering exposure (as mentioned in the case of UK discussed above) but the magnitude of fines in case of AML/CFT law violation is equatable to the financial sector. Adopting a proactive approach and combating money laundering risks can save casinos millions of dollars in fines.

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