As a predicate offense to money laundering, it’s crucial gambling operators have fraud detection solutions in place to mitigate the risk of “dirty” funds flowing through online gaming platforms and into the legitimate financial system. In this article, gambling operators can learn more about fraudsters’ tactics and discover why implementing proactive fraud prevention strategies is crucial for safeguarding the integrity of online gambling platforms and ensuring a safe and fair gaming environment for all players.

What is online gambling fraud?

Online gambling fraud refers to any illicit or deceptive activity conducted within the realm of online betting and gaming platforms aimed at manipulating outcomes, exploiting loopholes, or defrauding players or the platform itself for financial gain. This type of fraud encompasses various schemes and tactics, including:

• Payment fraud: Using stolen credit cards or fraudulent payment methods to fund gambling accounts or withdraw winnings. 
• Match fixing: Rigging the outcome of sporting events or casino games to ensure a specific result, often in collusion with athletes, referees, or employees of the gambling platform. This undermines the integrity of the game and deceives legitimate players.
• Bonus abuse: Exploiting bonuses and promotional offers provided by online casinos or betting sites through fraudulent means, such as creating multiple accounts or using automated bots to meet wagering requirements unfairly.
• Identity theft: Stealing personal information to create fake accounts or impersonate legitimate users to commit gambling fraud. It can lead to unauthorized access to accounts, fraudulent withdrawals, and other illicit activities.
• Use of cheating software: Developing or using software tools designed to manipulate the outcome of games, exploit vulnerabilities in the platform’s software, or gain an unfair advantage over other players.

How does online gambling fraud work?

Online gambling fraud centers around exploiting vulnerabilities within online betting platforms. One significant factor contributing to the prevalence of fraud in online gambling is the absence of face-to-face interaction, coupled with the anonymity afforded by digital transactions. 

This environment creates opportunities for fraudsters to exploit loopholes, such as using stolen credit cards or engaging in new account fraud, resulting in financial losses for both operators and legitimate customers.

Fraudsters may collaborate with others to manipulate game outcomes, exploit software vulnerabilities to gain unfair advantages or orchestrate sophisticated scams targeting unsuspecting players. Additionally, techniques like phishing emails and social engineering tactics are employed to illicitly access customer data, further exacerbating the risk of fraud.

The impact of fraud on online gambling

Gaming and gambling websites saw a massive increase in interest during the COVID-19 pandemic when many people were forced to change their habits due to stay-at-home orders across the world. In fact, three times as many people visited online gambling websites in 2020-2021 compared to 2018. However, criminals quickly followed suit to tap into this growing market, leading to the average fraud rate for gambling and betting companies skyrocketing by 80 percent.

While the global online gambling and betting industry generated $536 billion in 2023, and projections indicate it will set new revenue records by reaching $1.4 trillion by 2030, this growth is threatened by the rising rates of online gambling fraud. In addition to undermining consumer trust and confidence in the industry, rising fraud rates could hamper the industry’s continued expansion.

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Common types of online gambling fraud

Some of the primary tactics fraudsters employ in online gambling include:

• Bot fraud: The creation of custom code or scripts designed to automatically analyze potential winning odds in various online gambling games such as poker, blackjack, or slot machines. Referred to as value betting, this strategy aims to develop a gambling bot capable of exploiting perceived advantages in the game algorithms. It is often conducted by those with programming experience.
• Affiliate fraud: When deceitful actions are taken by a third party to benefit from marketing techniques such as pay-per-click (PPC) campaigns. This can involve using stolen data or payment details from an iGaming provider to drive leads for their own business.
• Multi-accounting (aka: bonus abuse): The creation of multiple accounts with the same website in an attempt to cheat the system. Often websites offer welcome bonuses for new players, which is a way for individuals to take advantage of these promotions and receive more than they’re entitled to. In matched betting, individuals also deploy multi-accounting to ensure a profit. This tactic entails placing bets on both possible outcomes of an event, thereby guaranteeing a positive return regardless of the outcome.
• Credit card fraud: This can happen in various forms, including the use of stolen credit card information to make transactions on online gambling platforms. This is just one avenue through which criminals can capitalize on stolen financial data.
• Chargeback fraud: A player depositing funds into their gaming account using a credit card, gambling, and then disputing the charges with their credit card issuer, claiming the transactions were unauthorized or that they did not receive the promised goods or services. This may happen unintentionally if, for example, a child uses their parent’s mobile device to make a gambling-related payment unbeknownst to the parent, who subsequently reports it as fraud. 

Advanced fraud detection solutions powered by AI

The predictive capabilities of advanced fraud detection software can help gambling operators anticipate and thwart potential fraud schemes. Some solutions have even been shown to offer significant reductions in all payment fraud-related losses. By harnessing predictive analytics, firms can effectively safeguard against fraudsters’ constantly evolving gambling fraud tactics, ensuring enhanced security and peace of mind.

Robust customer screening solutions are just as vital, helping operators know who they’re doing business with and whether certain entities should receive more due diligence surrounding their gambling activity. Solutions that can also screen customers against sanctions and watchlists, politically exposed persons (PEPs), adverse media, and enforcement data are particularly valuable, especially those that use artificial intelligence (AI) matching algorithms to ensure alert accuracy and reduce the likelihood of duplicated profiles. 

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While traditional casinos can provide criminals with an avenue to convert physical “dirty” cash into casino chips, online gambling presents different types of money laundering risks due to increased levels of anonymity. This article details the financial red flags compliance staff should be aware of, alongside best practices for mitigating these risks.

Money laundering risks in online gambling

Recognizing red flag behaviors and activities in online gambling transactions is essential for firms to mitigate financial crime risks effectively. By understanding these indicators, firms can fine-tune their systems to align with their risk appetite and address the challenges online gambling poses within their industry and jurisdiction. Some key money laundering risks in online gambling include:

• Anonymity: One of the primary risks associated with online gambling is the anonymity it affords users. Unlike traditional casinos that require face-to-face interactions, online platforms allow users to gamble with minimal personal information. Criminals exploit this by using stolen credit cards, fake identities, or cryptocurrencies to place bets and withdraw their “winnings,” effectively laundering their illegally obtained money.
• Multiple accounts and cross-border transactions: Online gambling sites often permit the creation of multiple accounts, which criminals can use to transfer money between accounts to obfuscate the origin of the funds. Additionally, the global nature of online gambling allows for cross-border transactions, further complicating efforts to trace illicit funds. These features make it difficult for regulators and financial institutions (FIs) to effectively track and prevent money laundering activities.
• The free flow of funds: Much like traditional casinos, where money flows freely and transactions are numerous, online gambling platforms facilitate the movement of large sums of money. This environment makes it easier for criminals to integrate their dirty money into the legitimate financial system. By placing bets and withdrawing winnings, they can make it appear as though their funds come from legitimate gambling activities.
• Regulatory challenges: The regulation of online gambling varies widely across different jurisdictions, creating challenges for authorities attempting to combat money laundering. Some countries have stringent regulations and robust monitoring systems (e.g., China), while others have more relaxed approaches (e.g., Malta). This inconsistency can create loopholes that criminals exploit to launder money through online gambling platforms.

Money laundering schemes in online gambling 

Bad actors can exploit online gambling platforms at each of the three stages of money laundering:

1. Placement: Illicit funds are introduced into the financial system by depositing money into gambling accounts using methods such as credit/debit cards, cryptocurrencies, prepaid cards, and checks.
2. Layering: The source of the funds (SoF) is disguised through complex transactions involving multiple bets, transfers, and withdrawals within the gambling platform, making it difficult to trace the money’s origin.
3. Integration: The laundered funds are withdrawn or used for legitimate transactions, which can include purchasing assets or transferring money to other accounts, effectively merging illicit funds with legitimate ones.
   

Understanding these stages can help identify some of the common schemes fraudsters use to launder money through online gambling platforms. Key methods to be aware of include:

• Smurfing: Breaking down large sums into smaller, less noticeable transactions to evade detection.
• Coordinated betting: Placing bets with deposited funds, colluding with other players, and making coordinated bets to obscure the money’s origin.
• Chip dumping: Intentionally losing chips to another player at an online poker table to transfer funds covertly.
• Player-to-player transfers: Using gambling accounts to facilitate illegal transactions between parties through direct transfers.
• Gnoming: Utilizing multiple accounts to help one player win and another lose in head-to-head games.
• Concealment: Hiding illicit funds in gambling accounts without immediate withdrawal, using the same anonymous banking method for future retrieval.

AML regulations for online gambling

In the US, online gambling falls under federal and state jurisdiction, with laws like the Wire Act governing interstate betting and payment processing. However, the Financial Crimes Enforcement Network (FinCEN) does expect online casinos to have the same robust Bank Secrecy Act (BSA) and AML programs as traditional brick-and-mortar casinos. In fact, in June 2021, FinCEN issued its first government-wide priorities for AML and countering the financing of terrorism (CFT) policy pursuant to Section 5318(h)(4)(A) of the BSA. The regulator’s new policy identified eight national priorities for all bank and non-bank FIs covered by the BSA, including online gambling establishments, that must be incorporated into existing BSA/AML programs. The eight priorities include:

1. Corruption
2. Cybercrime
3. Foreign and domestic terrorist financing
4. Fraud
5. Transnational criminal organization activity
6. Drug trafficking organization activity
7. Human trafficking and human smuggling
8. Proliferation financing

Meanwhile, the EU lacks unified gambling legislation, with member states like France, Italy, and Spain each governing their regulations at the national level. These entities enforce licensing, consumer protection, and anti-fraud measures.

In the UK, the Gambling Commission oversees online gambling regulation, ensuring compliance with laws like the Gambling Act 2005. Specifically, all operators must comply with the following:

• The Proceeds of Crime Act 2002 (POCA).
• The Terrorism Act 2000. 
• The Gambling Act 2005. 

Penalties for non-compliance

The UK’s Gambling Commission has the authority to issue fines for breaches of the Gambling Act 2005. These fines can range from a percentage of annual revenue to substantial fixed penalties, depending on the severity of the violation – non-compliant operators may face license suspension or cancellation.

Similarly, in the EU, member states enforce penalties for non-compliance with gambling regulations. For example, under France’s Autorité de Régulation des Jeux En Ligne (ARJEL), operators can face fines of up to €30,000 for violating licensing conditions or regulatory requirements. Repeated offenses may lead to higher fines or even license suspension or cancellation.

In the USA, penalties for failing to comply with online gambling regulations vary at both the federal and state levels. Under the Unlawful Internet Gambling Enforcement Act (UIGEA), FIs can face civil penalties for processing illegal gambling transactions, with fines reaching up to $1 million per violation. Operators may also face prosecution under state-specific laws, such as New Jersey’s Casino Control Act, which imposes fines of up to $200,000 for each regulatory violation. Regarding BSA violations, the US government imposes statutory penalties – which can range from $10,000 dollars for record-keeping violations to over $200,000 for more serious infractions. 

Money laundering red flags in online gambling

By recognizing financial red flag indicators about online gambling money laundering, firms can develop and implement specific rule sets and monitoring systems to identify and mitigate risks, ensuring they do not inadvertently facilitate illegal activities. Some of the most common indicators of potential money laundering in online gambling include:

• Unusual betting patterns: Players who consistently place large bets on low-risk games or matches may be attempting to launder funds by minimizing the risk of loss.
• Frequent and large transactions: Individuals making numerous substantial deposits or withdrawals within a short time frame could be moving illicit money through the platform.
• Funds originating from crypto: Gaming deposits originating from cryptocurrency, due to their pseudo-anonymous nature, can raise a red flag for potential money laundering. In February 2024, the UK Gambling Commission reminded operators that crypto-assets are considered high-risk, and licensees must appropriately scrutinize crypto transactions throughout customer and business relationships.
• Quick turnover: Depositing significant amounts and withdrawing them shortly afterward, without much gameplay, indicates an attempt to obscure the money’s origin.
• Multiple accounts and identities: Operating multiple accounts under different names or using various IP addresses can signify efforts to evade detection or circumvent transaction monitoring.
• Inconsistent behavior: Erratic gaming patterns that do not match deposit and withdrawal behaviors suggest the platform is being used as a conduit for illicit activity rather than for entertainment.

How can online gaming platforms mitigate money laundering risks?

While there are many risks associated with online gambling, FIs can bolster their defenses with the right application of diligence, software, and training. Outlined below are some best practices businesses should consider:

• Risk assessments: Ensure risk assessments align with the latest red flag indicators. This should include evaluating the risks associated with specific products and services, taking into account the user and the product’s functionality.
• Blockchain technology: Blockchain technology offers online gambling companies a transparent way to record transactions, providing an immutable ledger that can be audited for suspicious activities. 
• Staff training: Comprehensive staff training on AML procedures and regulations is critical for ensuring compliance and fostering a culture of vigilance within any organization. Regulations in 21 US jurisdictions mandate that online gaming operators must prepare and submit a plan for addressing responsible gaming issues, which must include employee training and public awareness efforts.

Detect money laundering with advanced AML solutions

Advanced AML solutions employ a mix of sophisticated techniques to help compliance teams effectively monitor and prevent illicit financial activities. At the core of these strategies is transaction monitoring, which scrutinizes financial transactions to spot suspicious activities. Utilizing cutting-edge machine learning algorithms, these systems can identify irregular patterns like significant transfers to offshore accounts, recurring high-value transactions, or movements inconsistent with a customer’s usual profile, triggering alerts for further investigation.

Customer screening is also vital as it aims to verify the identities of both new and existing customers against databases of known criminals, politically exposed persons (PEPs), and sanctioned individuals. This step is crucial for preventing high-risk individuals from using online gaming platforms for money laundering, helping firms mitigate the risk of non-compliance and protect their reputations in the market. 

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MAS Deputy Managing Director (Financial Supervision), Ms Ho Hern Shin, acknowledged financial institutions’ (FIs) indispensable role in reporting the suspicious activity leading to the raids. She continued, “Singapore remains vulnerable to transnational ML/TF risks and …MAS and FIs need to continue to work together to strengthen our defences against these risks.”

How STRs Helped Catch a Crime Ring

MAS and CAD facilitated the investigation due to suspicious transaction reports (STRs) filed by firms that had noticed suspicious activity. Thanks to the information, authorities identified a criminal group suspected of laundering the proceeds of foreign illicit activity, including fraud and gambling. 

Multiple red flags led the FIs to report possibly tainted funds, including:

• Suspicious flows of funds.
• Questionable source of wealth documentation.
• Other inconsistent customer information.

The regulator is actively communicating with the reporting FIs regarding the illicit activity. In addition to emphasizing the importance of FI cooperation and reporting of suspicious transactions, MAS has announced that it will crack down on firms discovered to have lax or noncompliant anti-money laundering and counter-terrorist financing (AML/CFT) controls. It reminds firms that it actively works with FIs to curb illicit activity.

Specifically, the authority announced it is conducting AML/CFT inspections of wealth management firms.

Laundering Millions through Luxury Goods

None of the individuals arrested were Singapore nationals or permanent residents. They are suspected of being part of an organized criminal network and came from Cyprus, China, Vanuatu, Turkey, and Cambodia. They face various charges, including:

• Using a forged document under Section 471 of the Penal Code.
• Forgery for the purpose of cheating under Section 468 of the Penal Code.
• Money laundering under Section 54(1)(c) of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA).

The police are still looking for eight additional individuals who have evaded arrest. Four more are assisting police with their investigation.

During the raids, Singapore authorities seized goods and cash worth close to S$1 billion. Items seized included:

• Cash worth over S$23 million, and two gold bars.
• Over 270 pieces of jewelry.
• Fifty luxury vehicles and 94 properties estimated at over S$815 million.
• Collectible toys.
• Over 250 luxury watches and bags.

During this ongoing investigation, more assets may be seized or frozen. 

Key Takeaways

MAS has reemphasized its high expectations for firms’ AML/CFT processes. All firms, especially wealth management firms, should ensure their current frameworks align with regulator requirements and their individual risk profiles.

Singapore authorities provide valuable resources to help FIs comply with these standards. The Singapore Police Force has released an in-depth list of key ML red flags firms can consider in their due diligence processes. 

In addition, firms are encouraged to consult the MAS AML resource page, which includes links to the latest guidance, notices, and guidelines, as well as STR forms, the AML/CFT Industry Partnership best practice papers, and details on Collaborative Sharing of ML/TF Information & Cases (COSMIC). 

Still in development, COSMIC will be an information-sharing digital platform allowing FIs to collaborate in tackling financial crime. 

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While the market size of the casino and online gambling industry was forecast to reach $261.8 billion in 2022 – representing a $54.5 billion increase from 2021 – more and more casinos are being held responsible for their insufficient anti-money laundering (AML) controls. In 2022 alone, reports show casino regulators in the US, the UK, Austria, Sweden, and the Netherlands issued over $264 million in fines to casinos – representing a 444 percent increase over 2021.

How does casino money laundering work?

In many cases, criminals exploit the anonymity provided by the casino environment. Gamblers can give the casino incorrect, incomplete, and/or vague identifying information, meaning red flags may not be raised around their identity. When playing in an online casino, they can also create and use multiple accounts, which means suspicious transactions are not noticed quickly.

A common technique in casino money laundering involves converting “dirty” money into physical casino chips, which are then played with in various games before being cashed out as “clean” money in the form of a check. Fixed-odds betting terminals are often used in this laundering method, as they allow the gambler to only lose a small amount before cashing out. 

Legal and illegal casinos

Casino money laundering can take place in both legal and illegal gambling establishments:

• Legal casinos – these casinos need to be licensed and are required to pay taxes. 
• Illegal casinos – these undercover casinos are not licensed and do not pay taxes.

According to the US Department of Justice (DOJ), illegal casinos are one of the five major types of illegal gambling – the other types being sports betting with bookmakers, horse betting with bookmakers, sports parlay cards, and numbers (also known as “the Mafia lottery” or “the numbers racket”). 

In a joint operation carried out in September 2021, INTERPOL commented on the common convergence of illegal gambling with organized crime networks and money laundering efforts. The city of Los Angeles, California, has experienced this on an unprecedented scale since the COVID-19 pandemic, with illegal casinos (known as “casitas”) emerging “everywhere” under the control of the Mexican Mafia. According to authorities, the illegal casinos can generate tens of thousands of dollars per week, with the proceeds primarily benefiting incarcerated members of the gang. In addition to contributing to elevated levels of crime – such as drug use, shootings, and kidnappings – illegal casinos present a higher risk of money laundering as gamblers and organized crime members look for ways to make their winnings appear legitimate in the financial system. 

Casino money laundering examples

Incidents of money laundering through casinos have repeatedly made headlines over the past few years, with some jurisdictions facing a great deal of scrutiny for insufficient anti-money laundering (AML) measures and slow enforcement proceedings. 

Macao, China

While gambling is strictly prohibited in China, it is permitted in the special administrative region of Macao. However, Thomson Reuters found that Macao “has not scrutinized money laundering risks in the gaming industry with as much rigor as casino regulators in other jurisdictions.” Following this report, an amendment to gambling laws now means that Macao’s Chief Executive can revoke a casino’s license if it fails to pay its taxes on time, or on national security grounds. 

Australia

Additional examples of money laundering in casinos can be found throughout Australia. In March 2022, the Australian Transaction Reports and Analysis Centre (AUSTRAC) started federal proceedings against’s the country’s largest casino operator, Crown Resorts. Crown’s alleged failings include not undertaking appropriate ongoing customer due diligence (CDD) on high-risk customers and not having a risk-based transaction monitoring program to identify suspicious activity. As of March 2023, Crown’s proceedings are still underway.

Following the investigation into Crown Resorts, AUSTRAC fined casino operator Star Entertainment a record $100 million in November 2022, after discovering the company allowed gamblers to move money through non-transparent channels. Among the failings that led to the operator’s penalty included making misleading representations about its processes and systems for compliance with AML and counter-terrorism financing (CTF) obligations. 

In the following month, AUSTRAC also commenced civil penalty proceedings against major Australian casino operator SkyCity Adelaide for alleged “serious and systemic non-compliance”. Similar to Star Entertainment, it is alleged that SkyCity failed to include appropriate risk-based systems and controls in its AML/CTF program.

To combat the rising threat of money laundering in the gambling sector, AUSTRAC launched a second specialist AML unit in March 2023. 

Canada

Additionally, in June 2022, a report by the Cullen Commission found “staggering” amounts of “lavish” money laundering schemes and serious compliance failings throughout Canada’s province of British Columbia, particularly in the gambling/gaming industry. The report found that drug traffickers and organized crime gangs often used casinos to “snow wash” money gained via illegal activities. 

As a result, the commission encouraged British Columbia to instate an AML commissioner, begin a dedicated money laundering investigation, and implement an intelligence police unit to address the “corrosive form of criminality”.

Measures to prevent money laundering in casinos

Global regulators and the Financial Action Task Force (FATF) are keen to enforce AML and counter-terrorist financing (CTF) regulations around the gambling industry. The FATF flagged the vulnerability of casinos for money laundering and terrorist financing when it revised its 40 recommendations.

Casinos can proactively mitigate the risk of money laundering by implementing the following measures:

• Train staff on AML: Employees should be coached and well-trained so they can confidently recognize red flag indicators of money laundering and fully understand the process of reporting suspicious activity to the relevant authorities.  
• Participate in industry forums: Forums, like those run by the UK Gambling Commission, often share best practices and support AML/CTF policy development.
• Comply with AML regulations: In some countries, gambling is completely illegal. In others, such as Japan, it is heavily controlled and regulated. Many jurisdictions have strict AML rules that apply to casinos as well. In the US, for example, casinos must comply with the Bank Secrecy Act. AML regulations will often require casinos to undertake customer due diligence (CDD), maintain comprehensive records, and commit to reporting obligations.
• Employ a risk-based approach: Not all risk is created equal. Casinos should adopt a risk-based approach to AML to assign the appropriate level of resources to high-risk areas — such as “VIP customers” —  who are more likely to spend larger amounts of money.

Risk indicators for money laundering in casinos

What are some of the red flags for money laundering in casinos?

Of the suspicious activity reports (SARs) that US enforcement body the Financial Crimes Enforcement Network (FinCEN) received from casinos, common issues reported included: :

• Suspicious behavior and/or more than one gambler seeming to be working together
• Large amounts of cash or chips spread over only a few bets
• Betting amounts just below the reporting threshold
• Customers abandoning their jackpot winnings
• Customers having a large quantity of chips
• Customers making changes to bets to avoid reaching the threshold

Other things that casino AML and KYC teams may notice include:

• A discrepancy between the amount cashed in and the amount cashed out – in one case examined by the FATF an individual was named as winning $1m but not recorded as bringing any cash in
• Customers closing their casino account after the initial deposit
• Clients transacting across different locations
• Clients having access to multiple bank accounts registered abroad
• Clients asking questions about thresholds or having in-depth knowledge of thresholds
• Rapid or large transactions
• Customers trying to make friends with casino employees 

Casinos also need to keep a close eye on individuals from sanctioned countries and avoid breaking sanctions laws.

AML solutions for casinos

Casino AML compliance teams are seeing a perfect storm as the cost-of-living crisis fuels financial crime while firms’ profits – and therefore capital available to invest – is under pressure. To balance these pressures and mitigate the risk of money laundering, casinos should ensure their customer screening solution is set up in accordance with geographic regulatory differences and is able to update in real-time. 

Each facility’s transaction monitoring solution must also be able to handle large transactions, especially those that are cash-based. Therefore, a solution with easily adjustable thresholds and a high level of configurability should be prioritized. Casinos must also be prepared to report any suspicious activity to the relevant authorities. 

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To begin implementing the reforms, a “transition taskforce” will be established in April 2023 to protect the economic viability of venues across the state and monitor delivery against the roadmap.

The five-year plan

According to the Australia Institute, one-fifth of the world’s one million legal poker machines can be found in Australia, half of which are in NSW. To combat money laundering in the electronic gaming sector, Perrottet says the switch to cashless poker machines “solves problem gambling, solves money laundering, protects jobs and industries”. Additionally, the government says the reforms will enable law enforcement to better identify and respond to financial crime and will improve data analytics around gambling and money laundering. 

The NSW government’s five-year plan includes the following actions:

• Introducing mandatory cashless gaming in NSW across all venues
• Legislating for December 31, 2028, to be the date by which the full transition to cashless gaming must be complete
• Requiring any new cash machine purchased after July 2023 to have a load-up limit of $500, compared to the current $10,000 limit
• Enabling player identity verification to be linked to a single bank account
• Ensuring funds for gaming come from a bank account rather than allowing credit to be used 
• Ensuring personal player data can only be used for law enforcement
• Legislating the best possible player privacy protections for all system-generated data

Money laundering via EGMs

In October 2022, the NSW Crime Commission published the results of its Inquiry into Money Laundering via Electronic Gaming Machines (EGMs) in Hotels and Clubs. According to the report, approximately $95 billion was gambled through EGMs in hotels and licensed clubs in NSW from 2020 to 2021 with a “significant amount” of the funds estimated to be the proceeds of crime.

To minimize money laundering associated with EGMs, the NSW Crime Commission recommended the implementation of mandatory cashless gaming as it would remove anonymity and increase the traceability of EGM-related transactions. Additionally, the report outlined the following recommendations for the NSW government:

• Identify ways of creating real-time alerts for money laundering flags
• Create a legislative or regulatory framework that requires certain standardized data be maintained for EGMs to better flag suspected money laundering
• Work with industry to build the sector’s investment in AML/CTF training and education and secure support for training from external sources
• Explore technical and policy/process solutions to better utilize data collected by EGMs

The NSW government’s five-year plan aims to support all of the recommendations laid out by the commission.

Key takeaways

Firms with clients related to gambling businesses should be careful to ensure their customer due diligence (CDD) investigations go beyond basic know-your-customer (KYC) policies to better manage risks that may occur.

Compliance staff should also familiarize themselves the gambling sector guidance published by the Financial Action Task Force (FATF), paying close attention to the money laundering indicators explored in chapter two. In the report, countries and their national authorities are reminded to establish a partnership with casinos and other designated non-financial businesses and professions (DNFBP) sectors to combat money laundering and terrorist financing. The FATF also calls out casinos in its updated AML/CFT standards, stating that “casinos should be subject to a comprehensive regulatory and supervisory regime that ensures that they have effectively implemented the necessary AML/CFT measures.” 

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Speaking alongside senior executives from the Reserve Bank of Australia, the Australian Prudential Regulatory Authority, and the Australian Securities and Investment Commission, Rose contextualized AUSTRAC’s priorities in light of the impact of COVID-19 on financial behaviors around the world. She cited reports from the Financial Action Task Force (FATF) that detailed a spike in online banking, customer onboarding, and identity verification during the pandemic, resulting in a global reduction in the use of cash, but also an increase in the possession of digital currencies, trading of precious metals, and activity in the insurance sector and parts of the gambling sector. 

Education and information sharing

To meet these objectives, Rose stated a “general uplift” in AML/CFT program investment is necessary. AUSTRAC is committed to education and sharing financial intelligence through collaboration. . AUSTRAC’s team has visited over 450 pubs and clubs to ensure a good understanding exists of the need for compliant AML/CTF programs.  

Further consideration will also be given to the value of information sharing between casinos and law enforcement, as this could “add great value to law enforcement operations and would result in tangible disruption outcomes”. FATF guidance on private sector information sharing can be found here. 

Rose also noted that targeted supervision of the pubs and clubs sector will take place during the latter half of 2022. As a result, firms operating in this industry have an opportunity not to ensure their AML/CFT programs are comprehensive and risk-based, going beyond basic know your customer (KYC) policies.

Investing in technology 

To combat the increasingly large volumes of data received by AUSTRAC year on year, the regulator has prioritized the delivery of its Reporting Entities System Transformation (REST) program. The program aims to streamline the suspicious matter reporting process and enable AUSTRAC to sustainably collect the vast volumes of information required under the AML/CTF Act.

According to AUSTRAC, this improvement will:

• Make it easier to comply with reporting obligations
• Deliver a modern, secure and intuitive experience
• Support firms to proactively address compliance issues before they become a serious threat; and
• Improve data quality by alerting AUSTRAC to incorrect or non-compliant data.

Beginning in June 2021, the program is due to be finished in 2025. 

Simplified legislative frameworks

Rose also noted the need for AUSTRAC to simplify its AML/CTF legislative framework as its current complexity acts as a barrier to firms trying to comply. 

First acknowledged in the 2016 Statutory Review of the AML/CFT Act, AUSTRAC will be focusing on creating a streamlined regulatory framework that addresses contemporary challenges in the financial, criminal, and national security environments, without compromising on innovation or creativity. 

Blockchain analytic tools

An additional impact of COVID-19 was the increased uptake of distributed ledger technologies such as blockchain. To be in the best position to deal with this rise in crypto and the associated risks, Rose acknowledged the critical importance of blockchain analytic tools to detect illicit activity.

Rose also noted that while crypto-related risk typologies have risen over the course of the pandemic, criminals largely still need to convert digital currency into fiat currency to maximize their gains. 

Firms need to ensure they’re prepared for higher volumes of crypto-related transactions. Central to this is ensuring transaction monitoring tools include blockchain analysis, enabling firms to consolidate their risk management processes, and detect truly high-risk transactions and customers. 

Key takeaways

Compliance teams operating in any of AUSTRAC’s priority focus sectors should ensure they are familiar with the regulator’s extensive guidance that has been published on a host of major risks/typologies and how to handle them. All official resources can be found on the AUSTRAC website, including guidance on forced sexual servitude, the misuse of payment text fields, and suspicious crypto behaviors. 

A Guide to Anti-Money Laundering for Crypto Firms

Uncover the essentials of building and scaling a crypto AML program and how to navigate regulatory change.

Download the full guide

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Ismail Shalash sold vehicles to dealerships across the US, defrauding five victims in four states out of a total of $1.7m and attempting to defraud eight victims in five states out of a total of $3.4m.

According to the FBI, victims would try to contact Shalash (sometimes using the alias Armand Brigante of MDDI Inc) after waiting for the purchased vehicles to be delivered. But the vehicles never came, and the victims received no refund.

Authorities reviewing his bank account found that after receiving money from victims through wire transfers, Shalash would withdraw large amounts and cash them in at a casino. He would then launder the money by cashing out in credits.

The Hard Rock Casino Cincinnati’s Currency Transaction Reports (CTRs) reveal that between May 24th and August 24th, Shalash cashed in $464,796 and cashed out $789,541 – significantly more than he had deposited.

Documents also show patterns of suspicious activity in which Shalash’s casino account was used as a “conduit to transfer significant amounts of funds he received from victims through financial transaction channels”.

In September, a federal arrest warrant was issued for Shalash, who has dual Jordanian and Palestinian citizenship, after he was charged with wire fraud and money laundering. However, he had already moved to Morocco with his new wife Abir Mulawwah.

Shalash withdrew $500,000 in cashier’s checks before fleeing Cincinnati, while Mulawwah opened a safety deposit box at a bank in Houston, believed to be used to store Shalash’s illegally obtained funds.    

In November, FBI agents learned that Mulawwah was planning to return to the US and retrieve her safety deposit box. Arriving in Houston she went on a shopping spree, paying for items in cash.

“Mulawwah was planning to travel back to the United States frequently and slowly take cashback with her to Morocco,” documents read, adding that she planned to “purchase high dollar items in the United States and take them to Morocco to sell.”

A search of the safety deposit box found $300,000 in cash and Mulawwah was stopped from boarding a Turkish Airlines flight. FBI officials say that when interviewed, Mulawwah claimed she was no longer married to Shalash and had not been in contact with him since September. She was arrested and now faces charges of conspiracy to defraud the US, false statements, and money laundering. Shalash is still at large. 

Money laundering tactics

Despite the growing prevalence of illicit activity online, this case shows that cash continues to be a popular vehicle for money launderers. Compliance teams should look at the tactics employed by the money launderer here, including the use of casinos – which are a popular vehicle for criminal activity – spending on luxury goods that might not be easily detected, and the use of safety deposit boxes. 

The scope of the activity across multiple US states and countries is also notable, highlighting the importance of adverse media checks to help detect patterns that siloed transaction data may not, and the need to monitor high-risk individuals regularly. Screening online forums can be overlooked by compliance teams, but in a case such as this forums may have been used by victims to complain about Shalash’s activities. 

Financial institutions that are providing services to casinos and other high-risk venues should ensure that a comprehensive review of the business’ AML program is part of the onboarding process. Casinos themselves must also ensure they have conducted appropriate due diligence on customers accessing their services, whether in-person or online. 

In November, Bicycle Hotel & Casino in California found itself in trouble due to shortcomings in its AML program and failures to file SARs and CTRs for a foreign national who conducted millions of dollars in cash transactions at the casino in 2016. The casino was fined $500,000 and will submit to increased reviews of its AML program.

Find out more about the state of compliance in 2021 with our latest on-demand webinar. 

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