FATF flags casino, offshore gambling risks as digital shift widens AML exposure

The rapid expansion of online gambling, digital payments and cross-border platforms is changing the illicit-finance risks facing the global gaming industry, with casinos and sports betting remaining particularly exposed to money laundering, says the Paris-based international watchdog the Financial Action Task Force (FATF). The intergovernmental body said in a recently-published report – titled “Risks of Gaming and Gambling” – that gaming and gambling had become part of a broader, interconnected value-transfer ecosystem involving numerous participants, some of which sit outside national anti-money laundering (AML) and counter-terrorist financing (CFT) frameworks. The study drew on questionnaire responses from 80 jurisdictions “from across the FATF Global Network”, and “targeted consultation with industry bodies, researchers and private sector stakeholders”, as well as case studies provided by national authorities. FATF concluded that money laundering through gambling “is an established risk across many jurisdictions,” with land-based and online casinos, as well as sports betting, considered particularly exposed. By comparison, money laundering through online video and mobile gaming appeared to take place on a smaller scale, or with less sophistication and frequency, based on currently available evidence, according to the report. The organisation highlighted the growing variety of payment channels available to customers. “Findings indicate that certain payment methods associated with gaming and gambling activity, such as cash, e-wallets, mobile money and virtual assets are vulnerable to a range of money-laundering risks,” the FATF stated in the report published this month. It added: “The variety of payment methods accepted by online gaming and gambling operators increasingly allows rapid, anonymous, cross-border transactions, and the conversion of value into different forms.” Online gaming and gambling platforms are also increasingly interconnected with social media and other digital platforms, which “can increase” risks, the report noted. Such channels “can be used to communicate and coordinate illicit activity such as competition manipulation, advertise illegal or unlicensed gambling [and] recruitment of money mules,” among other activities, the document added. Offshore gambling, junkets The financial watchdog singled out illegal and unlicensed offshore gambling as a “significant risk”, noting that the “illegal gambling market rivals or even exceeds the legal market in some countries and continues to proliferate, attracting players through promotions and greater levels of confidentiality”. Junkets also remain on FATF’s radar. Although the segment is “on the decline and subject to increasingly strict regulations,” the organisation said junkets continued to pose risks related to player anonymity and “obscured beneficial ownership of the junket operator”. The report’s scope also points to a widening of the AML risk perimeter beyond casino customers and transactions. Among its red-flag indicators, FATF identified complex – and often cross-border – platform ownership structures that obscure beneficial ownership, as well as the use of nominees, trusts and foundations, and shareholding arrangements structured to “bypass/avoid thresholds for regulatory checks”. It also highlighted reliance on third-party providers or white-label arrangements “without robust oversight,” as well as contracts with software, marketing, consultancy or technology providers that “appear to lack economic or commercial sense”. Other red flags identified by FATF include rapid expansion by operators into digital-led services such as virtual-asset or payment services, unexplained spikes in revenue or customer activity, and significant cross-border business-to-business financial flows “unrelated to regulated gambling activity”. At customer level, the report identifies multiple accounts, repeated use of virtual private networks, discrepancies between customer and payment information, unexplained sources of wealth and transactions involving higher-risk jurisdictions among potential warning signs. Payment-related red flags include the use of multiple payment methods in different names, deposits followed by withdrawals with little or no play, third-party deposits, rapid withdrawals to different beneficiaries and transactions involving virtual assets. FATF said differences between national regulatory frameworks could enable “regulatory arbitrage” by gambling operators. Other challenges include limitations on information sharing between the public and private sectors, difficulties in international cooperation, tackling illegal gambling and keeping pace with technological developments. The organisation recommended that jurisdictions improve their understanding of evolving risks and strengthen licensing and registration requirements “to prevent criminals controlling gambling operators”. It also called for stronger international cooperation, particularly regarding online, illegal and cross-border gambling, and suggested strengthening public-private partnerships to facilitate information sharing and quicker responses to emerging risks.