The online gambling industry mastering new levels of growth withholding over $65 billion worth of market value. While moving its operations online, this sector is facing severe backlashes including laundering of high sums of money. Due to the advent of digital payments and online casinos, it has become easier for criminals to escape Anti Money Laundering (AML) regulatory checks.
Due to lax AML screening mechanisms and fewer regulatory checks, online gambling is serving as a safe haven for money launderers. Therefore, the industry requires robust identity verification solutions to ensure they are not onboarding risk-possessed players. Furthermore, regulatory bodies are toughening restrictions for online casinos and other platforms due to increased chances of financial crimes. The blog covers AML compliance, restrictions, and guidelines for gaming industry to mitigate financial crimes.
Online Gambling Platforms – Becoming Safe Havens for Money Launderers
Since the Covid pandemic took over, casinos are replaced by online platforms and digital payments are in use as a substitute for paper money. With all these advancements, various other challenges such as high risk of financial crimes are on rise. Moreover, criminals use e-casinos to convert their ill-gotten funds into clean money. Despite stringent AML compliance checks in place, online platforms are becoming vulnerable to fraudulent activities.
Online gambling sites are obliged to adhere with the Proceeds of Crime Act (POCA) which mandates establishing efficient AML compliance programs. Moreover, e-casinos and other such platforms also have to stay in line with the requirements put forth by FATF, Moneyval, and the European Union (EU). While criminals abuse the systems to hide their source of funds and use them for funding organized crimes, the regulatory bodies are striving to place restrictions in their way.
Moving on, the gambling industry needs to integrate efficient AML monitoring mechanisms to mitigate chances of money laundering and other financial crimes. With robust AI-powered solutions, online platforms can identify players before getting them onboarded and restrict fraudulent entries at the bay.
AML Verification Requirments by Global Regulatory Authorities
With rapid adoption of online gambling and digital betting, the risk of criminal activities is also increasing. Fraudulent players are becoming money mules and use third parties to transfer their funds. This helps them steer clear of anti-money laundering checks. Registering an account while depositing a minimum amount is one of the initial red flags. Suspicious transactions, inaccurate identity information, and belonging to riks-possessed or lax regulated regions are other indicators of financial crimes.
In order to mitigate chances of money laundering and other organized criminal activities, regulatory bodies from various justifications are placing strict restrictions in force. As per these, inline gambling platforms must streamline operations with anti money laundering standards. Further details regarding legal obligations for AML screening and preventing financial crimes are in the next section;
Legal Obligation from the European Union (EU)
EU put forth the Fourth and Fifth Anti Money Laundering Directives (AMLD) which are applicable to every member country. Despite having their designated regulatory bodies, states still need to stay in line with the EU’s directive while outlining their operations. The 4AMLD came into force in 2015 with the prime aim to fight financial crimes, especially money laundering and terrorism financing. However, this standard was not perfect to oblige gaming platforms.
Therefore, the EU introduced 5AMLD to take this industry under its supervision. As per the standard, online platforms should establish efficient AML compliance programs to ensure they are not assisting risk-possessed entities. Moreover, the directive imposes strict penalties in case of failure to do so. The guidelines further mandate gaming industry to perform AML monitoring of players along with Customer Due Diligence (CDD) and identity verification.
Legal Obligation from the United States (US)
States like the US have given gambling a legal status but also established regulators for monitoring platforms. FinCen is responsible for supervising all online platforms, enforcing regulations, and making sure they adhere to set standards. The Federal Wire Act and Unlawful Internet Gaming Enforcement Act (UIEGA) count as legal anti money laundering obligations for online gambling industry.
Moving on, the 1961’s Interstate Wire Act is the most significant regulation in the US for prevention of money laundering. As per the requirements, each state with legal betting needs to ensure AML compliance and monitor platforms independently. Similarly, UIGEA is responsible for active AML screening. It further restricts players from accepting online funds from suspicious entities while gambling. However, payment processors can accept them in states with legalized real-money internet betting.
With the advent of online gambling, global payers can open accounts in no time. However, platforms need to ensure AML compliance and that no risk-possessed entity is onboarding the site. For criminals, e-gambling sites are becoming a prime target for money laundering, organized crimes, and terrorism funding. Therefore, the platforms need to integrate efficient AML solutions to prevent fraud and provide a safe environment for remote players.