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(AML requirements for the gaming sector (Customer risk ( politically…
AML requirements for the gaming sector
In the UK for example, the Money Laundering Regulations 2017 cover remote and non-remote casinos licensed by the GB Gambling Commission.
In most jurisdictions, regulations require casinos to take the following steps:
a risk-sensitive approach must be taken to Customer Due Diligence (CDD)
the operator should assess risk on the basis of business and customer profile
remote casinos should evaluate their particular risks
‘relevant’ casino employees, including holders of personal management or functional licences, must be trained in AML/CFT. (This would not include catering or bar staff, for example.)
they must appoint a ‘nominated officer’ to review suspicious activity reports (In the UK this person must hold a personal management licence issued by the UK Gambling Commission)
Casinos are required to keep records for customers with whom they have ‘business relationships’ and records in respect of occasional transactions. Business relationships are established if at the point when contact is established the casino expects that relationship to have an element of duration (e.g. opening an account for a customer).
The UK Money Laundering Regulations 2017 require records to be kept for five years. For CDD records these should be kept five years from the end of the business relationship or occasional transaction.
Supporting records of drop/win dates covering each 24-hour period where a business relationship or occasional transaction exists must also be kept for five years, creating a rolling five-year history for each customer.
Under a risk-based approach, risk and corresponding controls should be regularly reviewed because new risks will emerge, while processes, products and customers will all change over time. The risk-based approach to AML covers three main
In implementing the RBA, firms are required to consider the country/geographic risk of their business operations. Internet casinos will generally check customer nationality and place of residence because of the additional risk that arises with remote access.
Customer risk
politically exposed persons (PEPs)
high spenders
disproportionate spenders (i.e. spending inconsistent with personal profile and information held about the customer’s financial resources)
casual customers
improper use of third parties
junket operators
multiple casinos player-rating accounts.
Transaction risk
cash (most Internet-based casinos will accept payment from a financial institution account but they may operate as part of a mixed gaming chain where cash can be credited to Internet-based accounts)
transfers between customers
loan sharking
use of casino deposit accounts
redemption of chips/tokens for currency
redemption using new payments technology, such as prepaid cards or .virtual currencies
Risks that are particularly significant for Internet casinos include: multiple casino accounts or ‘casino wallets’
gaming involving multiple accounts.
Other factors affecting risk
The business profile of the casino will also affect the risk profile. In particular, factors such as whether the casino business model is targeted at attracting a large number of low-spending customers or a small number of high-spending customers. The speed and volume of business along with the types of service and payment method offered to customers will also be relevant.
is wholly based in one country
or owns and operates land-based casinos
operates multiple websites
or offers other types of gaming e.g. sports betting.
Monitoring customers and transactions For Internet casinos checks may be used on the location of the computer when the account is opened or during gaming, including electronic ID checks.
Independent external testing should be undertaken to test the accuracy and completeness of CDD records and other AML processes.
For remote and non-remote casinos the threshold is generally €2000 (during any 24-hour period).
The UK Gambling Commission Guidance for Casinos on the Prevention of Money Laundering and Combating the Financing of Terrorism was updated in September 2017 and when applying the threshold approach: require the casino operator to apply customer due diligence measures. These limits are:
in non-remote casinos the ‘threshold approach for tokens’ – identification and verification is required when a customer purchases from or exchanges with the casino tokens for use in gambling at the casino with a value of €2,000 or more
in non-remote casinos the ‘threshold approach for gaming machines’ – identification and verification is required when a customer pays €2,000 or more for the use of gaming machines, or collects winnings amounting to €2,000 or more
in remote casinos the ‘threshold approach for remote gaming’ – identification and verification is required when a customer deposits funds to take part in remote gambling or withdraws such funds or winnings amounting to €2,000 or more.
The Guidance adds that CDD requirements apply to customers of both remote and non-remote casinos.
red flags
Lack of betting, no ‘closed loop’
After opening his account, Customer A deposited a total of £500,000 and withdrew £495,500.
closed loop’ means payment can only be made back to the account or source from which it originated)
Passing of funds
Funds were often purposefully passed from Customer B to Customer A’s accounts. As soon as the funds were in customer A’s account he attempted to withdraw them.
Reporting may be considered where customers are passing funds to another player by deliberately losing,
Multiple identities
Customer A became a UK customer using the name Fred Smith. Two years later he opened another account using the same name but a different address
A further two years later Customer A opened a third account, registered in Europe, using the same surname but a different first name
Finally, a fourth account was opened a year later again using the same surname but a new first name. The account was registered in the UK but with a different address to that given for the previous two UK accounts
Indicators of potentially suspicious activity in the investment management industry include:
requests for investment management services where the source of the funds is unclear or not consistent with the client profile
a complete disregard for investment risks, such as adverse tax treatment and transaction
a willingness to accept frequent losses unquestioningly
a complete disregard for due diligence/research in connection with investments
no apparent investment strategy, or conduct inconsistent with a stated
investment strategy
fund remittances from unknown third parties
fund transfers to unknown third parties
unusually linked investments
purchase of investments quickly followed by requests to sell, withdraw or
transfer those interests to a third party
matching the buying and selling of particular securities or futures contracts,
creating the illusion of trading (an activity known as ‘wash trading’).
Investment products and services
Retail investments funds can be used to launder money, although the nature of the redemption rules that apply to individual funds can in some cases limit the scope
of opportunity that they offer. Once criminal money finds its way into the system, investment funds offer the opportunity for money to be converted into a different form, in this case shares or units within the fund. This change of ‘format’ can confuse the money trail.
Purchase and sale of shares at off-market prices
The securities are purchased at a lower price than their market value. The seller then receives the balance of the purchase price through alternative means.
Bonus-driven work environments
Investment businesses tend to be ‘bonus driven’ to a much greater extent than many other types of financial services business. The environment is competitive and there is great pressure on employees to trade and to maintain good client relationships through the generation of profits. T