The gambling sector has become an appealing target for money launderers as a result of the high volumes of transactions, the internationalisation of gaming (particularly online gaming), and the absence of a physical product.

The explosion of online gaming, though, has raised the stakes. The market is expected to be worth more than $92 billion in 2023, and the instances of criminals using the sector to launder illicit funds is likely to increase in parallel. The gaming sector offers a number of money laundering opportunities, including:

  • Transferring money into a gambling account from a wide range of sources including prepaid cards and cryptocurrency, using the gaming account to legitimate the funds
  • Collaboration between player-criminals result in one deliberately losing money, transferring and laundering funds in the process
  • Online player-to-player transfers between gaming accounts

The Financial Action Task Force, the organisation that coordinates the international fight against money laundering and terrorist financing, considers casinos and other gaming businesses to be ‘designated non-financial businesses and professions’ (DNFBPs). These are businesses that routinely handle large amount of client funds, and which have been increasingly targeted in recent years by money launderers and other financial criminals. These businesses typically have lower defenses against money laundering, and carry out fewer checks on customers, making them an attractive target as banks and other financial institutions implement increasingly stringent checks.

It’s hardly surprising, then, that regulators around the world are tightening anti money laundering and counter terrorist financing (AML/CFT) guidance around the gaming and gambling sector.

At the end of 2021, the Swedish gaming regulator Spelinspektionen published new AML guidelines for the online gaming sector. The regulators had received requests for clarification of the existing guidance; it says that the aim of the new guidance is to raise awareness of the risks of money laundering and terrorist financing in the sector, and to encourage businesses in the sector to adopt a risk-based approach.

The move comes following high-profile cases where the Swedish regulator has fined gaming operators for failures to meet national AML regulations. In August 2021, the casino group Mr Green was fined SEK31.5 million for failing to apply the necessary know-your-customer and other AML checks. The regulator said in a statement that Mr Green failed to carry out sufficient risk management practices as required by legislation, resulting in a risk that illegitimate funds could be channelled through its casinos. The licence of another operator, SafeEnt, was revoked by the regulator due to ‘serious deficiencies’ in its operations, including AML measures.

The guidance states that:

  • License holders should have risk-based internal procedures in place for AML and CFT measures, designed to counteract the risks that have been identified in the business.
  • Customers must be asked for their name and any other information that may be relevant to the purpose and nature of the business relationship.
  • An e-ID can be used for initial identification of customers online. For low-risk customers, e-ID plus a check for Politically Exposed Persons may be enough to achieve simplified customer due diligence measures at online registration.
  • Closed loop transactions – where one account is used for all transactions by a customer – are recommended as an effective way to reduce the risk of money laundering and terrorist financing.
  • Regular follow-up checks and monitoring of all customers and their transactions is important to ensure that due diligence is up to date and to detect unusual behaviour. For customers who pose a high AML/CFT risk, their risk rating should be continuously monitored and revised if necessary
  • Suspicious transactions must be reported under the Money Laundering Act

It’s likely that the Swedish gambling sector, along with others around the world, will see an increase in regulator activity in the coming months and years. As a result, operators of physical casinos and online operations are turning to technology in their bid to combat money laundering and meet new regulatory obligations.

Sophisticated automated checks, powered by machine learning and massive amounts of verified, relevant and up-to-date data, allow gaming operators to rapidly and efficiently check and verify the identity of customers, and monitor transactions and customers for unusual activity. In conjunction with a risk-based approach, this technology allows operators to greatly improve their compliance and defences against money laundering, without any disruption to the customer experience.

How can we help?

With a large volume of customers in casinos, gambling establishments and online sites each day, it is difficult to screen all of these customers quickly and competently. Through LexisNexis Firco Compliance Link, you can screen a high volume of customers and create a seamless customer experience by configuring the system to assign high- and low-level matches, reducing delays in the screening process for your customers.