Online gambling faces heightened scrutiny over money laundering risks

The UK Government have recently published their National Risk Assessment of Money Laundering and Terrorist Financing.

These assessments are usually conducted every 2 - 3 years, but the last one was in 2020. They evaluate all the financial risks that the UK faces.

In the latest report, the risk for money laundering inside casinos has increased from low risk to medium.

However, the risk of terrorist funding remains low.

This rise in threat level stems from “changes in customer, geographical and transaction risks”.

Key points in the report

The escalation of remote gambling has led to an increase in the amount of funds going through these online platforms.

The UK has now become a target for these illegal, and often offshore, online casinos.

This issue has prompted crackdowns globally. For example, earlier this year, Michigan banned five of these illicit online sites.

Casinos are required to have specific licenses to operate online and follow strict regulations regarding who they allow to play.

What are the major threats?

Over the past four years, the Gambling Commission have provided licenses to 37 new companies. Out of these licenses, 39% have been identified as posing as high risk.

There are two major threats concerning money laundering:

• ‘White label partnerships’ - These usually involve a third party in charge of promotion for the remote casino business. These third-party sites normally have sponsorships or marketing agreements which limit them from following typical due diligence requirements.

• Masked identities - These people are using fake identities and VPN’s to mask their location. This allows them to gamble without anyone knowing where the money is coming from.

Current regulations against money laundering

Customer due diligence means that casinos are required to apply certain measures if they see suspicious behaviour.

According to the Gambling Commission, these measures should be implemented with the following events:

• Suspecting money laundering or terrorist financing

• Doubting the adequacy of documents provided for identification

• Having transactions that are over 1000 euros

The report by the Treasury claims that 12.5% of casinos were failing to comply with these regulations. This is an increase of 5.5% between 2023 - 2024.

However, there has even been a mention of casinos using CDD certificates, which were “generated using Artificial Intelligence”.

This latest assessment reveals that 25% of online casinos are not compliant with Anti-Money Laundering regulations.

Examples of regulatory failures

Several casinos have already faced consequences for failing to comply with these regulations.

Football Pools was fined £375,000 and placed under review for failings which were directly linked to the online betting option.

Corbett Bookmakers were fined £686,070 for not having sufficient measures against money laundering.

How these sites are exploited

Criminals may be laundering funds through multiple ways.

This includes using masked identities and VPN’s allow people to hide their true identity and location.

The most frequent method for money laundering is “in the form of recreational spending of criminal property”.

In other cases, criminals use online casinos to ‘clean’ illicit funds.

Criminals will sometimes use prepaid cards to deposit their funds, then gamble, and withdraw using a different payment method, which hides where the money originated.

Will this affect players?

Whilst there are no mentions in the Treasury report of the impact on customers, it is likely that there will be some implications.

If this threat level is sustained or even increased, we can assume that online casinos and their customers will be checked more thoroughly.

Stronger compliance checks would likely mean more security for players’ funds. It would also increase the likelihood that you’re playing a game which follows the CDD compliance rules.

A blessing in disguise?

Whilst the rise in threat may be concerning, it appears that online casinos have become a victim of circumstance.

However, this heightened threat level could be a blessing in disguise for player safety. More stringent checks mean greater protection and confidence when playing at popular online casinos.