Playing it right: AML compliance for casino money laundering

As a whole, businesses in the gaming and gambling industry are at a high risk for money laundering. This is because they operate on complex transactions that easily enable players or individuals to hide behind anonymity.
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Anton Vedešin, Founder and CTO of Vespia

January 29, 2024

Casino money laundering is one of the most globally recognized forms of financial crime. In 2022 alone, casino fines increased by 168% globally. Fortunately, the Financial Action Task Force (FATF) has regulations in place specifically for casinos, making it important to set AML (AML) programs in place for businesses. This means stricter processes for Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD).

Why are casinos a high-risk industry?

Casinos are considered a high-risk industry due to their vulnerability to various financial crimes such as money laundering and fraud. The nature of casino operations, which involves a high volume of cash transactions, makes them an attractive target for criminals seeking to legitimize illicit earnings.

The busy environment of casinos makes it an elusive way to conduct suspicious activities that include high volumes of financial transactions. These illegal activities can be detrimental to a business's image. Casino crimes that businesses in the gambling industry should watch out for include:

  • Embezzlement
  • Fraud
  • Money laundering
  • Tax evasion

How does casino money laundering work?

In casinos, large amounts of money are wagered in a relatively short period. This rapid turnover of funds enables money launderers to mask the origins of illegally obtained money or what can be referred to as "dirty money". To exploit casinos, individuals convert illicit funds into chips, gambling minimally, and then cashing out with "clean money". They can also use casino accounts to move funds.

Additionally, casinos are often used to facilitate the structuring of transactions. This process essentially breaks down large sums of money into smaller amounts to avoid detection and reporting. The anonymity of cash transactions and the use of casino chips is what avoids tracking money flows.

Money laundering varies on a global scale and awareness of these differences can help greatly especially when dealing with customers from all over the world. For instance, a report from Reuters shares casino money laundering security across countries like Canada, Australia, and Macau has varying demands for tightening approaches to anti-money laundering (AML) compliance.

In the report Reuters shares that in Canada, a public inquiry into British Columbia's gaming industry revealed significant failures in compliance culture, with a focus on gaming revenue over anti-money laundering laws, leading to calls for stronger enforcement and regulatory reforms. Australia's response to misconduct and money laundering in major casinos, like Star Entertainment Group and Crown Resorts, involves comprehensive regulatory reforms and increased oversight by state regulators and AUSTRAC. Meanwhile, Macau faces financial pressures and has enacted a gambling bill giving authority to revoke gaming concessions for national security concerns or tax issues, indicating an evolving approach to regulatory risks and conduct in the casino industry.

What is the AML program for casinos?

The casino AML program is designed to prevent, detect, and report potential money laundering activities. Casinos must comply with regulatory obligations, such as the Bank Secrecy Act in the United States, which mandates specific AML responsibilities. The effectiveness of an AML program for casino businesses is crucial for compliance with legal standards and to safeguard the integrity of financial transactions. The AML program for casinos captures the following steps.

Customer Due Diligence

When it comes to Customer Due Diligence (CDD) in casinos, identifying and verifying the identity of customers is imperative. This can help understand the nature of customers' gambling activities, and assess the risk of money laundering or terrorist financing.

The CDD process includes checking customer identification, checking their source of funds, and monitoring transactions.

Enhanced due diligence

Casinos must also perform enhanced due diligence for high-risk customers, such as politically exposed persons. Screening should include matching this data to Politically Exposed Person (PEP) databases, sanctioned lists, and adverse media. This level of scrutiny helps casinos to detect and report suspicious activities in order to fulfill their regulatory obligations to prevent money laundering.

Employee training

Employee training is crucial for casino AML compliance as it equips staff with the knowledge and skills to identify, report, and ultimately avoid money laundering schemes. This step of compliance includes understanding AML laws and regulations, recognizing potential money laundering or terrorist financing indicators, and knowing the right procedures for reporting unusual transactions.

Effective training also helps strengthen the compliance culture within the casino, which is essential for maintaining regulatory standards and protecting the integrity of the gambling industry. It is also mandatory for teams to undergo an annual refresher training to secure the business.

Ongoing customer monitoring

Ongoing customer monitoring is vital for casino AML compliance as it helps in the consistent assessment of customer risk profiles while also validating that sources of funds are legitimate. This process involves tracking transactions to identify any patterns or activities that deviate from a customer's usual behavior, which could indicate money laundering.

Regular monitoring allows for the early detection of suspicious activities, enabling timely intervention and reporting. This proactive approach is crucial for maintaining regulatory compliance and safeguarding the integrity of financial transactions in the casino industry.

Independent AML audits

Independent AML audits provide an objective review of a business's compliance to AML laws and regulations. These audits assess the effectiveness of the casino's AML program, identify areas of risk or non-compliance, and suggest improvements.

With independent AML audits in place, it can help ensure casinos are not only following the law but also effectively combating money laundering, thus maintaining the integrity and reputation of the gaming industry.

Precautions to prevent casino money laundering

Operating casinos comes with various risks, including financial crimes like money laundering and fraud, regulatory compliance risks, and reputational risks. Implementing precautionary measures helps protect clients from fraud and identity theft while safeguarding the casino's business from legal repercussions and financial losses.

Playing your cards right with precautionary measures also maintains the integrity of the gambling industry and enhances customer trust and loyalty. Here are some to implement in your business.

Starting with a risk-based approach

A risk-based approach involves assessing the level of risk associated with each customer or transaction and applying appropriate levels of due diligence accordingly. This can help, specifically with higher-risk areas for money launderers such as VIP lounges where there is a tendency for people to do larger transactions.

This targeted strategy allows for more effective monitoring and management to detect money laundering activities, ensuring that resources are focused where they are most needed to protect the casino and its clients from financial crimes.

Integrating stronger precautionary protocols

Going beyond customer due diligence can be beneficial. This can come in the form of employee background checks and monitoring security systems can also minimize any suspicious activity that happens internally.

Integrating stronger precautionary protocols in casinos is crucial in combatting money laundering. These protocols enhance the identification and scrutiny of suspicious activities, especially in high-risk transactions. By implementing rigorous checks and balances, casinos can better detect and prevent illicit financial activities, ensuring compliance with AML regulations.

Monitoring significantly large transactions

Monitoring transactions can foretell suspicious activity, especially with larger transactions where cash is used. Checking on significantly large transactions is a key strategy against casino money laundering as these are more likely to be associated with money laundering activities. They can represent an attempt to inject "dirty money" into the financial system. By closely monitoring these transactions, casinos can identify unusual patterns or suspicious behaviors, enabling them to take appropriate action.

Partnering with law enforcement agencies

Working with law enforcement can add another layer of security and support in the event that a deeper investigation into a case is necessary. It can prove to be beneficial in combating casino money laundering as it facilitates the sharing of information and resources to weed out suspicious transactions.

Law enforcement agencies have specialized expertise and access to broader intelligence networks, which can significantly enhance a casino's ability to identify and respond to suspicious activities. This collaboration fosters a more comprehensive approach to tackling financial crimes and ensures regulatory compliance, ultimately protecting both the casino's business and its clients.

Ensuring AML compliance for casinos

Businesses in the gaming and gambling industry like casinos have a globally recognized high risk for money laundering. Rising global fines for casinos emphasize the need for strict AML programs that employ CDD and EDD processes.

There are many ways to seamlessly integrate this. Solutions include employee training for better quality checks starting internally, ongoing customer monitoring, and independent AML audits. Setting precautionary procedures in place can go a long way as well.

While there are many steps to take for a high-risk business like a casino, AML compliance can be done efficiently on autopilot with Vespia's AML compliance. It includes everything casino businesses need for a thorough and smooth process, including ID verification for KYC, age verification, sanctions screening, PEP screening, and adverse media screening to help safeguard your business. 

Sign up and get a demo from the team to discover how you can automate AML compliance processes for your business.

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