Panic over fourth anti-money laundering directive only highlights a flawed approach to compliance

The recent passing (26 June 2017) of the European Union’s (EU) fourth Money Laundering Directive (MLD4) has caused much consternation within the gambling industry. Operators now face significant regulatory changes and need to remain on top of the changes to comply with licencing conditions and regulations.

MLD4 was introduced because the EU felt that parts of the gambling sector was being used to launder the proceeds of criminal activity and has resulted in widespread confusion about what exactly the implications and requirements are for those within the gambling industry. This confusion has resulted in 17 EU member countries failing to put the rules in place on time.

Essentially, gambling operators must now:

• have a money laundering / terrorism financing risk assessment in place. This must be reviewed annually and whenever a ‘trigger event’ occurs.
• establish policies, procedures and controls to prevent money laundering and terrorism financing.
• ensure that these policies, procedures and controls are implemented effectively, regularly reviewed and revised appropriately.

An outdated approach to compliance

But this is the fourth incarnation of the Money Laundering Directive – it has been debated and discussed at length, and the requirements are clearly laid out for any interested party to see. So the unnecessary furore and confusion around MLD4 has only really served to highlight the inadequacies of traditional approaches to compliance. While digitisation has improved many business functions, compliance is still managed and monitored in many organisations using Excel.

Given the complexity of compliance in modern business – especially so in heavily regulated industries such as gambling - it’s an approach that is outdated and wholly inadequate. Compliance is a highly involved process, requiring lots of information and knowledge to be input into a certain format. Furthermore, it is a task that requires demands absolute attention to detail. But for many organisations compliance has not been seen as a priority, and there has subsequently been a reluctance to invest in the right tools to manage it effectively.

The rise of digitisation

But for most firms now, irrespective of size or industry, compliance has become increasingly important, with severe penalties for those that are not compliant. So using Excel to manage risk in such an environment is not fit for purpose and leaves organisations vulnerable to compliance requirement failure. The consequences of this are vast and potentially wide-ranging, so a modern and more digital approach to compliance is required.

For effective compliance, you need precision, to be systematic and you need to be up to date. This can be done using a spreadsheet, database or SharePoint, but they all require human input, and humans are fallible. But if you have an automated tool that takes away the hassle of managing compliance, it mitigates the risk of failure much more effectively.

This combination of automation, with input from industry experts and thought leaders, that can help map the compliance requirements faced by an organisation, is a far more effective approach and provides security that compliance will be achieved.

It also allows an organisation to manage compliance on an on-going basis, rather than as a project to be begun and completed within a certain time. Modern compliance is on-going so it stands to reason the management of it must be so too.

Digitisation is assisting organisations all over the world in a myriad of different ways, and compliance is an area of business that is ripe for digitisation. If organisations in the gambling sector has utilised a digital approach to compliance, then much of the confusion over MLD4 could have been avoided, with requirements picked up and addressed in good time ahead of the deadline.

Essential compliance knowledge for iGaming professionals. Conference: Compliance Briefing London, 12 October 2017 Courses: igacademy.com/courses


By Eric Berdeaux, CEO of new generation GRC solutions provider OXIAL