Anti-Money Laundering: Casino Compliance

The Regulations
Serious and organised crime costs the UK at least £24billion each year. To conceal the proceeds of crime, money launderers exploit financial systems that enable anonymity when carrying out transactions. The EU’s Fourth Money Laundering Directive (4MLD) was enforced in the UK under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 on the 26th June. The government must ensure that regulated businesses comply, not just because it’s the right thing to do, but because it will want to strengthen the stability, integrity and reputation of the UK financial sector following Brexit.

The new regulations introduced a stricter, risk-based approach to anti-money laundering, in which regulated businesses must perform more exhaustive checks on their customers. Regulated gaming operators must carry out a risk assessment of their clients to ascertain whether they present a high or low money laundering risk, including searches for adverse information.

Although the requirements are stricter, the regulations underline a customer-centric risk-based approach, thereby minimising the risk of businesses inadvertently laundering the proceeds of crime.

Obliged Operators
In the gambling industry, the UK Treasury was able to exempt lower risk sectors from the Regulations, applying exemptions to all but non-remote and remote casinos. Whilst only holders of casino operating licences are subject to the new requirements, other gambling operators would be well advised to take a similar approach.

The money laundering risks across the gambling industry are not uniform; some parts of the sector are more vulnerable than others. This is recognised by the government, which relies on the UK Gambling Commission to monitor and report the sector’s evolving risks.

Of particular concern to the government is betting shops, which are cash-intensive and often take sums in excess of the new €2,000 stake limit in anonymous bets or through fixed odds betting terminals. As a result, these sections of the industry may come under the new Regulations if they fail to prevent money laundering and terrorist financing under existing obligations outlined by the Gambling Act, the Proceeds of Crime Act and industry standards.

Industry Impact
On the 21st June, the Gambling Commission issued guidance to operators regarding the new Regulations. It urged operators to review their risk assessments and processes to ensure they were meeting anti-money laundering and social responsibility obligations. The guidelines specified that this means assessing ongoing risks as the customer relationship progresses, not just at the withdrawal stage. The guidance can be read in full here.

This guidance was updated on the 31st July, with the Gambling Commission urging:
“All casino operators both non-remote and remote must comply with the new regulations and will need to ensure they have effective measures in place.
“As the regulations are already in force, we expect casino operators to familiarise themselves with the new regulations as soon as possible, and take action to comply.”

Under the more prescriptive Regulations, carrying out appropriate customer checks manually will be challenging, especially if the customer is based abroad. Without the right processes and expertise, searching for adverse information on customers and evidencing results appropriately may prove too challenging to undertake.

Given the explosion of information on the web in recent years, searching for adverse information has become far more difficult. It is almost impossible to hold all relevant data in structured databases. This means that manual searching of the web is usually required, but this method can be hit-and-miss, since relevant information may not be indexed on the web at the time of searching.

Implementing Technology
Today, it is nearly impossible to undertake the necessary due diligence without the right technological tools. Developments in Artificial Intelligence have enabled new ways of extracting information without spending undue time and money.

Those attempting to carry out customer due diligence and researching adverse information will find the process expensive and inconsistent, and important information can be missed. When a customer is based abroad, this is particularly problematic. Researchers must be able to identify pertinent information published in the customer’s native language.

Technology companies are developing products to make regulatory compliance easier and address common compliance issues. These tools can produce more accurate results far quicker than a manual search, and perform regulatory functions such as ongoing monitoring and accurate translation.
Regulatory Technology (RegTech) tools can be used to ease the workload when performing adverse information searches and monitor the ongoing risks presented by customers.

Technology and human expertise can be combined, creating a powerful defence against money laundering. Gambling operators will be well advised to harness the power of both to fulfil their moral and regulatory obligations.   

By ​Jane Jee, Barrister and CEO of Kompli-Global