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How Are Regulators Fighting the use of Cryptocurrencies in Money Laundering at Casinos?

Estimated reading: 6 mins

How Are Regulators Fighting the use of Cryptocurrencies in Money Laundering at Casinos?

Online gambling is fast becoming one of the significant online activities in the twenty fast century, thanks to the advancement in technology that has made gambling products easily accessible. With just a mobile device and internet connection, an average person on the street can access several online casinos to play games for real money. Several reasons can abound why gambling activities thrive: talk about the excitement, fun and the joy of winning real cash. With these benefits comes the significant threat to online gambling activities such as money laundering, among other criminal activities in the gambling industry. This issue has always been there. Still, new trends in gambling like the advent of cryptocurrency, their acceptance and even the springing up of cryptocurrency-based casinos have aggravated money laundering activities in online casinos.

Why Online Casinos Seem Like Perfect Place for Money Laundering

There are a lot of protocols set in place to track the source of bulk infusion of cash and other commodities like digital assets. Banking organisations are the primary systems people use to transfer or conceal huge cash gotten through illegal activities as though they were generated from some legal enterprises. As a result of the strict laws against illicit money activities, many have found online casinos as an excellent destination since it involves real money.

The gambling industry is characterised by billions of dollars and the transfer of money at almost lightning speed with the help of cryptocurrencies. That makes it easy for people to use the system to transform illegal cash and make them untraceable. One advantage that New Zealand and other counties offer is convenience. Games can be played at home, at the office, or even on the bus with the help of smart devices. New Zealand's gambling industry is controlled and well monitored to protect gamblers from illegal game offerings from casinos and the activities of money laundering. A lot of people are subscribing to online gaming activities as they seek to make money through NZ casinos.

cryptocurrencies in money laundering
IMAGE SOURCE: casino.org/blog/how-money-laundering-really-works/

How Cryptocurrencies Have Aggravated Money Laundering

The advent of cryptocurrencies in 2009 has brought about a disruption to the regular banking systems and general online trade. Since their release, cryptocurrencies have witnessed exponential growth due to their unique features and benefits. Today, almost everyone knows about the anonymity/pseudo-anonymity feature and fast transaction speeds. More so, the privacy and security features of cryptocurrency make them a good fit for online casino transactions. Since gamblers want these features, a bitcoin crypto casino is often preferred for quick deposits and withdrawal. Many online casinos in Canada, Europe, and Asia now accept bitcoin and other digital currencies since they make gambling more flexible and fast while prioritising privacy.

However, money laundering now seems easier to achieve using crypto because of these powerful features. Here's an example of how it works below:

  • Huge deposit: Cryptocurrencies are readily acceptable in casinos and most online platforms, and that makes them a boon to a lot of criminal elements and enterprises. And since these currencies are largely unregulated, it becomes easier for individuals and organisations to use them for online gambling. What money launderers do is to deposit a vast sum of money in cryptocurrency into their betting account, after which they wager few bets just for appearance's sake before emptying their account. This way, the money withdrawn appears as a "legitimate" since cash income earned from gambling may not be seen as dirty money.
  • Multiple accounts: Another method is the creation of multiple accounts, which then receive many deposits to conceal money laundering activities. Since deposits with cryptocurrencies are pretty fast and have minimal transaction fees, it becomes easy for launderers to dump vast amounts of cash into several gambling accounts without experiencing any major problem. That action is usually followed by total withdrawal after some time, and such efforts can be more difficult to track if cryptocurrencies are used for the transaction.
  • Chip dumping: Here, gamblers decide who hits the jackpot and take away the money. Since gambling activities these days are not limited by geographical location, three to four bettors can decide on who should win as they conspire by purposely allowing players with strong hands to fold while those with weak hands would win to cash out heavily. Once the choice gambler has all the chips from the gang, all the cash the team is playing with could be cashed out as clean money.

The Response of Casinos in Curbing Money Laundering Activities

The increase in illegal activities carried out through online casinos has been a significant concern and threat to the global economy. The United Nations once estimated a whopping $1.5 to 4 trillion exchanged through money laundering. That figure is approximately 5% of the word’s GDP, and that means a lot of cash, even if only a small fraction of the 5% is exchanged through online gambling. As a result of this growing concern, many online casinos are putting strict measures in place to check the activities of gamblers making large cash deposits and withdrawals. Below are some of the rules adopted:

  • Same method for cash deposit and withdrawal: This method involves the disbursement of funds a gambler wins through the same form or account used as the deposit. Cash deposited via bitcoin can only be withdrawn via bitcoin and through the same account used in depositing the fund. It is a rule meant to prevent launders from turning illegal cash into crypto winnings.
  • Implementation & compliance with anti-money laundering tools: Online casinos are beginning to implement and comply with anti-money laundering (AML) processes to checkmate criminal activities in the online gambling space. Compliance has a positive effect, and the reputation of a casino organisation using that process could make criminal organisations shy away from money laundering through bitcoin or other cryptocurrencies. In this age, using Google to check the activities of a bettor is no longer good enough! The 4th Anti-Money Laundering Directive (AMLD4) of the European Union requires casinos to implement strict and advance verification systems. The law also encourages verification tools that would reduce the risk of having business transactions with criminal individuals and enterprises. Some of the processes casinos employ to reduce illegal activities include:
    • The implementation of systems that decrease money laundering risk.
    • Proper documentation and reporting of transactions.
    • Staff training and customer checks to report suspicious activities.
    • Implementation of an integrated system to detect criminal activities.
    • Periodic evaluation of the system used.
    • The appointment of specialised personnel to investigate suspicious activities.
  • Know your customer (KYC): KYC involves identity verification of customers to prevent doing business with criminal individuals and organisations. Most companies and online casinos make use of this process to reduce potential risks of money laundering activities. The gambling industry KYC involves:
    • The collection and analysis of personal data and documents. Casinos need identity cards and other details to verify the identity of their customers.
    • The matching of data with account and assessment of potential money laundering & terrorist financing activities.
    • Analysis of customer behaviour and transactions involving deposits and withdrawal of funds.

Furthermore, online casinos are making use of suspicious activity report systems (SARs) to monitor customers’ financial transactions. This system can read irregular patterns involving money transfer in an economic system. Also, the currency reporting software has been helping in reporting a massive sum of money above $10,000 exchanged in a casino.

IMAGE SOURCE: online-casino-laws.info

Measures Adopted by Regulators and Commissions in Preventing Money Laundering at Casinos

Gambling regulators and commissions are responsible for the laws guiding the activities of online casinos. These regulatory bodies enforce gambling laws and ensure that online casinos within their jurisdiction comply with the regulations. Some of the measures put in place by gambling commissions involve:

  • Introduction of Anti-Money Laundering Directives: Several legislative gaps has led gambling commissions to enforce AMLD for online casinos. A gambling site may have a website in one jurisdiction, have servers in another while management activities are carried out in a third location. These across-boarder characteristics necessitated the enforcement of EU AMLD in 1991 to control casino money laundering.
  • Penalties for AMLD non-compliance: AMLD laws require that online casinos conduct proper AMLD programs, which include active surveillance, identification, and reporting of suspicious activities and terrorist behaviour. Some casinos have suffered consequences of enormous fines for violating these laws. Non-compliance with AMLD for EU member states casinos could attract a penalty up to $5m for individuals and 10% of total turnover for an organisation.
  • Confiscation of gambling license: Commissions could go as far as confiscating the license of casinos that flout gambling rules. It is one of the necessary measures taken to curb the activities of money laundering in online casinos.

Cryptocurrencies in Money Laundering

Unfortunately, money laundry control by governmental agencies is a hard fight because the online gambling space is not easily regulated. The across-boarder operations of online casinos make things worse as an illegitimate casino site can exit in a different location from its server and the whole management and control of the casino is in a third location. A practical method to curb money laundering activities involves the global cooperation of law enforcement agencies and governmental organisations. More cryptocurrencies are springing up as well as unregulated and unlicensed casinos, and the fact that one is unregistered does not make money earned there illegitimate. These casinos become fertile grounds for criminal activities. The government and gambling commissions sometimes become helpless since they can’t prove some winnings as laundered monies. Until money laundering in online casinos is seen as a global challenge, it is unlikely that there will be a legitimate end to the act considering the upgrades and technologies that enhance its practice. Only time will tell.


What's Next?

Read about recommendations to New Zealand's government regarding cryptocurrency regulations.

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