4 Top Casino AML Compliance Practices for Risk Teams

Key Points

The modern gambling industry is experiencing unprecedented growth, mirrored by a significant rise in money laundering activities.

As regulatory bodies tighten oversight and escalate penalties, it is imperative for casinos to elevate their Anti-Money Laundering (AML) compliance measures.

Collaborating with leading AML service providers equipped with advanced artificial intelligence technologies and human expertise can streamline regulatory complexities and ensure full compliance with confidence.

What Makes Casinos a Money Laundering Haven?

With vast sums of money moving in and out and significant opportunities for anonymity, casinos and online gambling platforms can become black holes, making them prime targets for illicit activities. The ability to mask income through gambling winnings makes these venues even more attractive to fraudsters and money launderers. Some top money laundering strategies include straightforward cash-in, cash-out operations, using multiple sources or destinations for funds to confuse tracking, and the notorious Vancouver model, which combines cash transactions with underground banking systems like Hawala.

Here's a breakdown of the three main stages of money laundering in the gambling industry:

Placement of funds

Fraudsters inject their dirty money into the gambling system via casinos, online gambling or sports betting. They buy chips with cash, effectively blending illegal funds with legitimate ones.

Layering of transactions

To obscure the source of their money, launderers make multiple bets, transfer money between various accounts or engage in complex transactions using intermediaries. This step is all about creating a tangled web that's hard to trace

Integration

Finally, the “cleaned” money is re-introduced into the legitimate economy. This can happen through cashing out chips as legitimate winnings, withdrawing funds from gambling accounts or buying assets.

Betting Big on Compliance

AML compliance requirements in the gambling industry mirror those for banking and financial institutions. Since 1985, US state-licensed casinos have been stamped as "financial institutions" under the Bank Secrecy Act (BSA), placing them firmly within the scope of AML compliance for casinos and subjecting them to rigorous reporting, recordkeeping and program obligations

Entities must navigate both international gambling standards and local AML regulations with exacting precision. Globally, several regulatory bodies like the Financial Action Task Force (FATF), the American Gaming Association (AGA), the US Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and the UK's Proceeds of Crime Act (POCA) are shaping expectations around casino compliance, reinforcing the need for strong governance across AML for casinos and broader AML in gambling environments. Some crucial compliance and reporting demands include:

Transaction Reporting and Customer Due Diligence (CDD):

Casinos worldwide must file Currency Transaction Reports (CTRs) and conduct Patron Identification Procedures (PIPs or CIP in AML parlance) for bets exceeding a specified threshold — typically over USD 10,000 within a casino-defined gaming day.

Suspicious Activity Reporting:

Casinos are mandated to file Suspicious Activity Reports (SARs) if they are aware of or suspect that a transaction or attempted transaction aggregating to USD 5,000 or more:

Involves efforts to conceal illicit funds
Seeks to evade BSA obligations
Utilizes the casino for criminal ends
Lacks legitimate economic or business purpose
Deviates from expected patron behavior

Playing Your Cards Right: 4 AML Best Practices

Here are four key moves to strengthen AML for casinos and reinforce a culture of proactive risk management.

Enhancing internal controls through rigorous risk assessment

Conducting detailed risk assessments annually, tailored to the business model, location, volume of activity and customer demographics, is a foundational step in effective casino compliance. SkyCity Adelaide, a prominent Australian casino operator, faced scrutiny from financial watchdog AUSTRAC for allegedly lacking adequate risk-based systems in its AML framework – a completely preventable scenario had the right AML solutions been in place.⁵ In essence, leading-edge technologies involving Artificial Intelligence (AI) and Machine Learning (ML) can significantly boost the efficacy and efficiency of internal controls and AML for casinos.

Implementing a tailored Know Your Patron (KYP) approach

Casinos must rigorously conduct KYP and due diligence to verify customer identities against databases of Politically Exposed Persons (PEPs), sanctioned entities and adverse media reports. Prioritizing Enhanced Due Diligence (EDD) to validate the legitimacy of funding sources, particularly for high-risk clientele, is a must-do. when strengthening AML for casinos. The repercussions for failing to adhere to these KYP protocols are severe. Crown Resorts faced a substantial AUD 450 Million penalty in July 2023 due to inadequate CDD measures concerning high-risk patrons and the lack of a risk-based transaction monitoring program to detect and report suspicious activities.⁶ This highlights the high stakes of AML in gambling environments.

Building a culture of compliance through targeted training

Leveraging employees as the first line of defense can significantly bolster AML efforts. AML training, when meticulously designed with a clear purpose, serves a pivotal role in enhancing the organization’s capability to effectively detect and report suspicious activities, while reinforcing a culture of accountability across casino compliance programs. Globally relevant training sessions, aligned with evolving AML regulations and standards, are crucial to defining the best course of action and enabling employees to effectively counter emerging threats from non-compliance, money laundering and terrorism financing.

Partnering with experts to ensure rigorous compliance

In June 2022, the Cullen Commission, a money laundering inquiry established by the Canadian province of British Columbia, uncovered sophisticated money laundering schemes, including the use of Hawala systems, and significant compliance failures.⁷ The report revealed that drug traffickers and organized crime gangs frequently exploited casinos to conceal illicit financial transactions, often with the intent of evading taxes. It also underscores the growing complexity of AML in gambling environments. For casino operators, this means casino compliance is not just a regulatory obligation anymore, it is a strategic imperative to protect revenue integrity, reputation and long-term viability.

Teaming up with AML compliance specialists enables casinos to implement comprehensive AML programs to proactively address such systemic shortcomings. Collaboration enables casinos to leverage their partners' skilled personnel and advanced anti-financial crime solutions, integrated with AI and ML capabilities, to manage end-to-end compliance processes effectively. Areas such as identity verification, KYP, CDD, EDD, sanctions screening and transaction monitoring — including support for SARs — are excellent starting points for collaboration.

In today's dynamic gambling landscape, static AML solutions are impractical. To stay effective, solutions must evolve continuously, anticipating emerging trends and threats in financial fraud, and adapting proactively. In addition to partnering with experts, fostering proactive collaboration with local and global financial networks is crucial for balancing exceptional customer experiences with regulatory compliance.

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References

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Hitting the Jackpot: 4 Best Practices for Casino AML Compliance