Anti-Money Laundering Guidance for Gambling and Gaming

Jan
Jan
Content Writer
Karol
Karol
CTO & Co-founder

The gambling and betting industry has undergone significant changes and has seen growth in the global market. How much growth, you ask? Well, according to Custom Market Insights, the online gambling and betting market was worth about USD 58.2 billion in 2021. By 2030, it could reach a staggering USD 145.6 billion, growing 12% annually from 2022 to 2030.

That’s impressive, right? However, despite the rapid expansion, a formidable hurdle emerges in the task of thwarting and halting money laundering and related financial offences that possess the potential to inflict harm. Hence, regulatory bodies and authorities worldwide have formulated stringent anti-money laundering (AML) regulations for gambling and betting.

Within this comprehensive Anti-Money Laundering guideline, we shall explain the essence of AML, underscore its significance, and provide guidance adhering to AML regulations across different regions. Furthermore, we will provide you with invaluable tips and information to aid you in constructing a robust AML compliance program tailored to your business.

global online gambling and betting market chart

Understanding the Difference between Betting, Gambling and Gaming

Betting, gambling and gaming are frequently mistaken for one another, yet, they are not the same. They both involve putting money at stake on the outcome of an uncertain event, but they have different characteristics and purposes. Let’s see what makes them different.

Gambling encompasses a wide spectrum of activities that rely on chance or a combination of chance and skill. For example, playing slots, roulette, or bingo is gambling because the outcome is completely random. Betting on a horse race or a poker game is also gambling but involves some skill and judgment. Gambling can be done for fun or profit, and it always involves risk and a degree of uncertainty.

Betting is a more specific term for placing a wager on an event with predefined odds and outcomes. For example, betting on a sports match or an esports tournament is betting because the bookmaker or the platform sets the odds and outcomes. In other words, it is more organised and regulated than gambling, and it can be done for various reasons, such as supporting a team, showcasing one’s knowledge, or making money.

Gaming is when you play online or computer games that don’t involve money or betting. Like playing Fortnite, Minecraft, or Candy Crush. You don’t risk anything. You just have fun, entertain yourself, or socialize with others. But sometimes gaming can look like gambling. Some online games have features that make you spend real money to get them, like loot boxes, skins, or virtual currencies. They can make you feel like you’re gambling, even though you’re not.

Exploring the Essence of Anti-Money Laundering: Preventing Financial Crimes

Anti-Money Laundering (AML) is a collection of rules designed to prevent and detect incidents of money laundering or terrorist funding. We refer to money laundering as hiding or disguising the source of funds by moving them through different accounts. Terrorist financing is when money or assets support terrorist operations or groups. These activities can potentially harm the financial system and expose firms to the risk of getting involved in illicit activities.

The gambling and betting industry is especially exposed to money laundering risks due to the high amount of cash transactions and the possibility of hiding one’s identity. That’s why regulators set strict Anti-Money Laundering compliance requirements for operators in these sectors worldwide. AML compliance means following the rules and regulations for your industry and region.

It also implies having a system to monitor your customers’ activities, report suspicious transactions, conduct due diligence checks, train your staff, and keep records. AML compliance helps protect your business from legal penalties, reputational damage, financial losses, and operational disruptions.

We encourage you to check out our blog post about Anti-Money Laundering, covering 10 anti-money laundering (AML) checks in detail.

Anti-Money Laundering Compliance Regulations in the European Union

The EU has developed anti-money laundering (AML) standards that all member countries must adhere to. The fourth and fifth Anti-Money Laundering Directives (AMLD4 and AMLD5) provide gaming and betting operators with instructions on preventing and identifying money laundering and terrorist funding.

For instance, operators must verify customers’ identities, evaluate risks, track transactions, and report unusual activity. A new guideline for online gambling operators in the EU has been published by the European Gaming and Betting Association (EGBA). This guideline provides practical advice on conducting customer and business risk assessments, CDD processes, suspicious transaction reporting, record keeping, and other vital areas for AML compliance.

The rules follow a risk-based approach and help online gambling operators comply with the EU AML rules, including the upcoming EU AML Regulation. EGBA members must report their progress in implementing the guideline every year, and other operators can join the initiative too.

Anti-Money Laundering Compliance Regulations in the United States

In the United States, gambling operations are overseen by federal legislation such as the Bank Secrecy Act (BSA) and the Anti-Money Laundering Act (AML).

The businesses mentioned above must put in place rigorous programs to handle risks and effectively identify and prevent incidents of money laundering and terrorism funding.

Entrepreneurs must disclose transactions (for example, those worth over $10,000) to the FinCEN (Financial Crimes Enforcement Network). Furthermore, state-level rules apply, which include obtaining gambling licenses, completing background checks, subjecting to audits, or meeting specified reporting criteria.

Anti-Money Laundering Compliance Regulations in the United Kingdom

As the largest gambling market, various laws exist in the United Kingdom. Gambling operators are covered by the Proceeds of Crime Act 2002 (POCA), the Terrorism Act 2000, and the Gambling Act 2005. These laws make businesses responsible for preventing and reporting money laundering and terrorist financing.

Operators must also comply with the Licence Conditions and Codes of Practice (LCCP). The LCCP provides specific guidelines for gambling operators, such as conducting risk assessments, verifying customer identity, using enhanced identity verification procedures, continuously monitoring customers, keeping records, training staff, and setting up internal controls.

Compliance with the Money Laundering Regulations 2017, which implements the EU Fifth Money Laundering Directive (5AMLD), is also mandatory. Furthermore, the Gambling Commission requires businesses in the UK’s gambling sector to register with them. They must also choose a nominated officer, implement specific processes, and report any odd behaviour to the National Crime Agency (NCA).

Anti-Money Laundering Compliance Regulations in Other Countries

Canada, Australia, Singapore, and many other countries also have Anti-Money Laundering regulations. These laws usually include due diligence, record-keeping, reporting obligations, and effective AML controls.

Fines and Consequences for Non-Compliance

Some gambling operators have been fined for not complying with AML regulations in different jurisdictions. For example, the Gambling Commission in the UK fined Entain Group £17 million in August 2022 for breaking the rules, which included having poor anti-money laundering controls and customer protection measures.

In turn, Wynn Resorts, a US-based company, agreed to pay FinCEN a $5.5 million civil penalty in January 2022. This settlement was due to Wynn Resorts’ failure to maintain an effective anti-money laundering program at its Las Vegas casinos, which violated the Bank Secrecy Act.

Furthermore, the Ministry of Finance in Poland fined STS, the biggest bookmaker in the country, PLN 13.9 million in June 2022 for breaking the anti-money laundering and counter-terrorism financing regulations.

Anti-Money Laundering Guidance: Key Elements of Compliance Programs

Risk Assessment

A vital part of Anti-Money Laundering compliance is conducting a risk assessment. This means identifying and understanding the potential money laundering and terrorist financing risks associated with gambling and betting activities. By knowing the risks, operators can customise compliance programs to mitigate them effectively.

Customer Due Diligence (CDD)

Customer due diligence requires operators to verify the identity of customers, evaluate risk profiles, and collect relevant information to prevent and detect potential money laundering activities. They must conduct additional checks for high-risk customers or transactions.

Transaction Monitoring and Reporting

Operators are responsible for monitoring customer transactions to identify suspicious activities or patterns that may indicate money laundering. As local regulations require, they must have robust systems and processes to report suspicious transactions to the authorities.

Training and Awareness

A well-trained and aware staff is essential for effective Anti-Money Laundering compliance. Operators should provide regular training sessions to employees, educating them about AML regulations, red flags, and the importance of reporting suspicious activities. By fostering a culture of compliance and awareness, operators can enhance their AML defences.

Record-Keeping and Retention

AML regulations require operators to maintain detailed records of customer transactions, identification documents, and filed reports. These records serve as valuable evidence in investigations and audits, aiding the fight against money laundering and other financial crimes.

Independent Audits and Assessments

Regular independent audits and assessments play a critical role in evaluating the effectiveness of an operator’s AML compliance program. These audits provide an objective review of controls, policies, and procedures, identifying any weaknesses or areas for improvement.

Collaboration and Information Sharing

Collaboration and information sharing among industry stakeholders, regulatory authorities, and law enforcement agencies are critical in the ongoing fight against money laundering. Operators should actively participate in industry forums, discuss best practices, and remain updated on emerging trends and typologies of financial crimes.

Implementing Effective Anti-Money Laundering Compliance

Building a Strong Anti-Money Laundering Team

To ensure effective AML compliance, operators should establish a dedicated AML team comprising professionals with expertise in compliance, risk management, and legal aspects. This team will develop and implement robust AML policies, conduct risk assessments, train employees, and monitor compliance.

Utilising Technology Solutions

Technology is crucial in bolstering AML compliance efforts in today’s digital era. Operators can leverage advanced software solutions, data analytics, and artificial intelligence to enhance transaction monitoring, automate customer due diligence processes, and identify potential red flags more efficiently.

Engaging External AML Experts

Engaging the services of external AML experts provides operators with valuable insights and guidance. These experts bring industry-specific knowledge and experience, assisting operators in developing robust AML compliance programs tailored to their needs and regulatory requirements.

Conclusion: Prioritising Anti-Money Laundering Compliance for a Safer Industry

The gambling and betting industry operates in a dynamic and challenging environment. Prioritising Anti-Money Laundering compliance is crucial as it maintains integrity, protects businesses, and reduces the risks associated with money laundering and other financial crimes.

Operators establish a robust compliance framework by understanding and adhering to the AML regulations of various jurisdictions worldwide. Implementing effective AML compliance programs, including risk assessments, customer due diligence, transaction monitoring, and staff training, is essential to safeguarding the industry against illicit activities.

Remember, to have a robust AML system, You need a trusted software developer who has experience in providing solutions for gambling companies. Blurify is such a company and has vast experience in this field. For example, we helped Hurricane to develop its system by adding advanced features such as managing transactions and users, assessing risks, verifying customers’ identities (KYC), preventing money laundering (AML), and connecting with key payment providers. For more details about this project, please visit our portfolio.

If you have any questions about Anti-Money Laundering compliance, please contact us. Our experts are always happy to answer any query you have.

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