What do you think of when you hear the words anti-money laundering or “AML”? Do you picture banks and investment companies? If you’re a solicitor or financial advisor, you might even think about the regulations that you have to follow with each new client. But for many, AML is synonymous with the online gambling sector, and the role that this industry plays could have a knock-on effect that impacts all of us.

Online Gambling is Used to Launder Huge Sums

Put yourself in the shoes of a criminal for a moment.

You have millions of dollars in ill-gotten gains acquired digitally. As far as the government is concerned, you’re a legit businessperson turning over tens of thousands a year. You can’t spend the money, as it will draw unwanted attention. For the same reason, you can’t deposit it into a bank or even convert it into cash.

What do you do?

Well, you could deposit a sizeable chunk into an online casino or sportsbook. Place a few high-return bets, wait for a few weeks, and then withdraw. Do the same on multiple sites and you’ll have all of your cash and can also claim that you won it all.

After all, it came from an online casino, and there’s nothing illegal about winning large sums of money.

That’s not even the biggest issue.

If criminals have access to a victim’s financial details, there are limits to how much they can withdraw without raising suspicion. What’s more, they can’t withdraw those funds to their own account, as it would create a paper trail. But they can deposit into an online casino using the victim’s details and then withdraw with their own, thus placing that paper trail behind the relative security of an online casino.

In essence, that’s what money laundering is, and this ease of use is why it has become so popular in the online gambling sector.

If the online gambling industry wasn’t secure and tightly regulated, it could be used for everything from processing stolen money to avoiding sanctions and cleaning digital funds. But thankfully, the industry is secure, and it has been leading the way in the fight against money laundering.

How the Gambling Industry is Fighting Back

In 2022, the Wall Street Journal published an article highlighting the recent explosion of money laundering in the United States. It noted that the issue was caused by increasingly relaxed gambling laws and the fact that the US doesn’t have the regulation to deal with it. Yet.

It also noted that this regulation exists in the UK and other jurisdictions, and that’s because gambling has been legal in the UK for many years, so it has kept pace with the criminals.

The UK Gambling Commission is the organisation tasked with protecting UK gamblers and operators, and it has been doing a pretty good job of it over the years.

Firstly, it requires all operators to undergo strict due diligence checks before they are allowed to offer their services. It means that criminal enterprises can’t slip through the net, but it also means those businesses can’t become a willing front for fraud or money laundering.

Secondly, it requires all operators to conduct Know Your Customer (KYC) checks on their players. It needs to know exactly who they are, where they live, and how old they are. It must also confirm that they are the same person on the name of the card or e-wallet account they are using.

Finally, it requires the operator to report high-value transactions and to conduct source of funds requests, whereby the player must prove they can afford to deposit the money they are depositing.

All of this makes it very hard for money launderers to get away with their crimes. More importantly, as AI continues to improve, the systems that detect unlawful behaviours are getting better, and this means that the machines can do most of the work in detecting money launderers.

Why It Matters

If you’re not an online gambler and have no vested interest in these operations, why would you care about AML? Well, for one thing, the technologies that detect AML often rely on machine learning, and by definition, machine learning requires large datasets.

Online gambling sites welcome millions of players every week. These players are logging in, depositing, playing, and withdrawing, and the AI is recording everything that they do. The result is that it can build a picture of what a money launderer looks like in this space, and that could influence future technologies.

Online gambling is also a global business that is constantly changing due to the introduction of new systems, security methods, and payment options. While the world ponders the AML complications caused by cryptocurrencies, the online gambling sector is already working on solutions.

Cryptocurrencies are accepted on many gambling sites around the world, and the regulators that have thus far forbidden them (including the aforementioned UK Gambling Commission) no doubt have plans to introduce them once it is safe to do so.

Furthermore, online gambling is traditionally seen as an easy option for money launderers. These sites use similar systems as financial institutions, but due to the nature of their operations, they typically accord their players more anonymity, and anonymity is a money launderer’s best friend.

By stopping them at the source, the gambling industry could do more to stop money laundering than any other. Essentially, it is the frontline of this crime, and as any military strategist will tell you, the frontline is where you take the biggest beating and lose the most ground, but it’s also where you learn the most.

Summary: AML and Online Gambling

As you can see, having an  AML program and proper controls in place is not just about banks and investment companies. It has been an ever-present issue in the online gambling industry since the very first casinos and sportsbooks, and it continues to grow. As things stand, it’s a cat-and-mouse game between the regulators/casinos and the criminals, and it’s one that could shape the future of AML regulations.

To learn more about how your company can combat money laundering and capture suspicious entities in the gambling industry (or any other industry), check out our automated risk intelligence services 

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