Gambling Commission warns of ’emerging’ money laundering risks

The UK Gambling Commission has recently underscored a series of emerging threats related to money laundering and terrorist financing that operators in the gaming sector must address. These threats now encompass advanced technologies such as AI deepfakes and the rise of cryptocurrency crash games. Staying informed about these risks is paramount, as failure to do so could lead to significant financial penalties or, in severe cases, license revocation under the UK licensing conditions.

Last month, the regulator imposed penalties on two gaming operators for breaches related to anti-money laundering (AML) regulations and inadequate customer care. Specifically, The Football Pools was fined £375,000 (€449,732/$484,417) for violations in AML protocols, while Corbett Bookmakers faced a heavier penalty of £686,070 due to multiple AML failures.

In its update issued on April 8, the UK Gambling Commission detailed its latest guidance concerning AML and terrorist financing risks. Notably, the Commission highlighted that several remote and non-remote casinos have been observed offering unlicensed money service business (MSB) functionalities. These include foreign currency exchanges, third-party cheque cashing, and facilitating money transfers to and from casinos via external parties.

Further complicating matters, the Commission noted attempts by some customers to deposit significant amounts of foreign currency, including €500 banknotes. “The sale and handling of high-denomination notes in any currency presents a considerable money laundering risk. Requests to purchase or sell €500 notes or similar high-value notes should be classified as high-risk transactions,” the Commission warned.

Additionally, instances have emerged where individuals are allegedly being compensated for providing their personal information, which allows criminals to establish multiple accounts with gaming operators. The Commission expressed growing concern over the prevalence of illegitimate mule accounts created from these paid personal details, potentially operated by unlicensed betting intermediaries.

AI and Cryptocurrency: Emerging Money Laundering Risks

The sophistication of artificial intelligence programs has escalated significantly, according to the Commission, with criminals now utilizing these technologies to circumvent essential due diligence checks. These illicit operations often involve the creation of fraudulent documentation, deepfake videos, and altered images to facilitate money laundering.

The Commission has urged all operators to ensure that their staff are adequately trained to recognize AI-generated documents during customer verification processes. Furthermore, when dealing with cryptocurrencies, licensed gambling companies are expected to treat these transactions as high-risk activities susceptible to money laundering.

Operators should also remain vigilant regarding reported thefts in the cryptocurrency sector, which can lead to laundering activities through gaming platforms. Moreover, the Commission brought attention to the rising popularity of crash games being offered by illegal crypto casinos, raising alarms over their potential for facilitating money laundering activities.

“Such products may allow individuals to obscure the rapid cash-out behavior typically associated with high-risk gambling, complicating the efficacy of transactional monitoring controls in identifying suspicious activities,” the Commission remarked. Operators are encouraged to develop robust systems capable of detecting irregular wagering patterns within crash games.

Gambling Commission’s Warning on Black Market Suppliers

The UK Gambling Commission has cautioned that games designed by licensed software developers are increasingly finding their way onto unlicensed websites operating within the UK market. It has reiterated the necessity for licensed operators to confirm that their software supplier partnerships are not compromised by connections to illegal platforms. In cases where such affiliations are discovered, operators must act quickly to terminate these relationships.

“It is vital that licensees proactively communicate with the Commission if such activities are identified, providing comprehensive details about the measures taken to halt these operations immediately,” the Commission emphasized. This perspective has been echoed in recent public communications, including a webinar in January where Andrew Rhodes, CEO of the Commission, stressed that operators could face repercussions if their supplier partners engage in the black market.

“I cannot fathom why any operator within the licensed industry would wish to collaborate with an entity supporting illegal competition,” Rhodes remarked during the event.

The Commission has made it clear that casino operators are obligated to conduct thorough money laundering and terrorist financing risk assessments, implementing and regularly reviewing effective controls designed to mitigate these risks. Moreover, customers utilizing MSB functions must be regarded as high risk, thereby necessitating enhanced due diligence measures.

Land-based operators are also advised to adopt closed-loop payment processes, given that the regulator identified a reliance on open-loop payment systems among some operators. These open-loop systems are recognized as significant money laundering risks as they facilitate the movement of funds across various payment methods.