In the past year, the UK Gambling Commission undertook a massive investigation of 123 online casino operators to look at compliance standards.
Seven casino operators paid £18m in penalty packages in 2019, while five operators surrendered their licences as part of 14 casino operators who were the subject of enforcement investigations. Some 45 online casino operators were told to submit an action plan to raise standards.
Gambling Commission Executive Director Richard Watson told a conference in Malta that is where a significant proportion of problem companies are located.
“It’s disappointing to note that currently, 24 of the 45 operators who had to submit action plans are based here (in Malta). The same is true for five of the seven operators who had to pay penalties and three of those which surrendered licences.
The first fines were announced in May when four gambling businesses were fined £4.5 million for failing to put in place effective safeguards to prevent money laundering as the UK Gambling Commission works to improve anti-money laundering (AML) compliance for online gambling.
In 2018, three companies paid nearly £14m in penalty packages as result of failing to put in place effective safeguards to prevent the flow of dirty money and keep consumers safe from gambling-related harm.
The investigation into online casinos comes on the heels of the release of a guidance from the gambling commission aimed at helping casinos comply with rules for money laundering and terrorism financing.
Expected to know your customers
“We have been working hard to raise standards in the online industry to ensure that gambling is crime-free and that the one in five people in Britain who gamble online every month can do so safely,” said the Gambling Commission’s Watson.
“We expect operators to know their customers (KYC) and to ask the right questions to make sure they meet their anti-money laundering and social responsibility obligations,” Watson said.
To help gambling operators meet their KYC and other obligations, the UK Gambling Commission issued a 98-page guidance at the end of 2018 that includes the recommendations of the Financial Action Task Force (FATF), the inter-governmental body responsible for setting international standards on anti-money laundering (AML) and countering the financing of terrorism (CFT).
The commission says the guidance is to assist those who set casino operators’ risk management policies and procedures and controls for preventing money laundering and terrorist financing.
Risk scoring and transaction monitoring
In addition to proper KYC procedures, casinos should have properly configured and tuned risk profiling and transaction monitoring processes in place.
When determining a patron’s risk, three aspects should be considered: the patron’s profile, their relationships and their activities. The profile score can be influenced by; country of residence, industry, occupation and type of employment. Activities that influence risk scores may include; prior regulatory filings or convictions for financial crimes or related offences.
Calculating risk scores by patron profile, activities and relationships can be automated using weighted risk factors. Technology can also be used to continuously re-assess a patron’s risk score, depending on their activities and any changes in their personal and business information.
For casinos just getting started with transaction monitoring technology, they can begin with rules-based analytics before moving on to artificial intelligence and machine learning. Rules can automatically flag disbursements above $10,000 or multiple transactions just under reporting thresholds, for example.
To build on this framework, casinos can then add additional layers to reduce alerts and false-positives, such as the patron’s risk profile. If a patron is considered high-risk and suspected of being involved in structuring or layering of transactions, the compliance team should spend more time scrutinizing and possibly blocking those transactions rather than ones being initiated by low-risk patrons.
Senior management could face sanctions
The UK Gambling Commission guidance warns of stiff financial or criminal penalties for those casinos that fail to implement a compliant AML program.
“Senior management must be fully engaged in the processes around your assessment of risks for money laundering and terrorist financing. They must be involved at every level of the decision making to develop your policies and processes to comply with the Regulations,” the commission wrote. “Disregard for the legal requirements, for example, turning a blind eye to customers spending criminal proceeds, may result in criminal or regulatory action.”
The guidance also said casino employees also have a responsibility to fight AML and report to their manager any knowledge or suspicion of money laundering whether by customers, guests or other employees.
“You must conduct your customer due diligence on the basis of risk assessment, including simplified due diligence and enhanced due diligence (which includes politically exposed persons). You are also required to identify the beneficial owner and need to have evidence of identity in place for all customers.”
“The Commission will expect casino operators to be able to explain the reasons for any departures from that standard.”
| Anu Sood (LinkedIn | Twitter) is the Director of Marketing at CaseWare RCM and is responsible for the company’s global marketing strategy. She has more than 20 years of experience in strategic marketing in high-tech industries, product marketing, demand generation, content marketing and product management and development. She has received a number of awards including Canada’s top 40 social influencers in finance, innovation and risk by Thomson Reuters. |
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