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Money Laundering in the Casino Industry

Casinos and gambling have long had a link to money laundering and organised crime, and these associations with vice are largely responsible for a lingering bad reputation in many circles.

With gambling on the rise around the world, mainly due to the massive increase in online casinos, the authorities of most countries are increasing their efforts to curb illegal activity and keep everything above board.

So, what exactly is money laundering, and how does it apply to casinos? Here we take a look at how the two became closely linked, and at some high-profile cases over the years. We also look at what some prominent jurisdictions are doing to prevent money laundering in casinos both online and in physical establishments.

What is money laundering, and how does it apply to casinos?

Money laundering, as the name suggests, is the process of making ‘dirty’ money ‘clean’. In other words, money that is acquired through criminal activity is processed in a way that makes it look like it came from a lawful source. Common crimes associated with money laundering include tax evasion, embezzlement, theft, and narcotics trafficking. The proceeds from such crimes are often funnelled back into a criminal enterprise, or used to fund terrorist activities.

A common method used to launder money involves buying valuable assets such as real estate or precious gems and selling them on. Modern online financial services and cryptocurrencies have also given money launderers new avenues for their activities. Casinos also provide a way to clean money, for example by purchasing casino chips, playing only a little, and then claiming the chips back as winnings converted to a cheque or with a receipt. A similar method can be used at an online casino.

Notable cases of money laundering at casinos

One of the most shocking cases of casino money laundering was uncovered recently in Australia, implicating the country’s largest casino operator Crown Resorts in schemes allegedly going back to at least 2014. At the Perth location, a shell company owned by Crown received deposits all under the threshold of $10,000 – the amount at which transactions must be reported to the financial monitoring agency AUSTRAC. It is believed that hundreds of millions of dollars have been processed this way.

The scandal is likely to force a reckoning in Australia over financial crimes at the country’s largest gaming group. The CEO has been obliged to step down, and a newly-built resort in Sydney will remain unopened for the time being. The deeper issues exposed relate to the regulators, who have failed to address the illegal activities despite concerns being raised with the watchdog several years ago. Crown is owned by James Packer, who gained notoriety outside of his home country when he was briefly engaged to the American singer Mariah Carey.

The events in Australia appear to be linked to Chinese organised crime, with the Crown group pulling out of their Macau interests in 2017 after being investigated by the Beijing authorities. It was a similar story when rampant money laundering was uncovered in casinos in British Columbia, Canada, going back as far as 2009. The investigation is still ongoing, and it is expected to take a long time to unpack how and why the system failed.

In what became dubbed the ‘Vancouver Model’, the scheme was allowed to continue because of flawed oversight and alleged corruption. It is also asserted that the members of the organised crime groups had become so powerful in the area that it was too dangerous to investigate the money laundering effectively. The former minister for gaming in BC, Rich Coleman, stands accused of turning a blind eye to the activities, at best.

A conflict of interest?

Money laundering in casinos has been going on for many decades. The mobster Bugsy Siegel opened the Flamingo in Las Vegas in 1946, and the association between casinos and crime has continued to this day. One of the big issues in modern casinos, critics argue, is a fatal conflict of interest at the heart of the regulatory process.

In the cases in both Australia and Canada, the casinos in question are an enormous source of tax revenue for the government. Crown Resorts in addition made sizeable donations to political parties on both sides. The government regulatory bodies that oversee gambling activities therefore have a dual role – to try and ensure maximum profit but also to stamp out illegal activity.

These two roles can be perceived to be at odds with each other. In both Canada and Australia, it is alleged that the responsible agencies were warned multiple times about high levels of money laundering, and the officers who were responsible chose not to take action. In BC, the regulators raised the stake limit for high rollers from $5,000 to $100,000, arguing that it was in the public interest to maximise revenue.

What is being done to prevent money laundering?

The examples we have seen here both occurred as a result of existing anti-money laundering (AML) laws being circumvented. Without a robust system of independent and external regulation, crimes like these are allowed to proliferate. Fortunately, in both cases major investigations are underway, and in Canada AML procedures have been considerably strengthened.

Recently Germany also regulated the market with aim to protect consumers. As reported, Germany will implement deposit limits and a national shared user database in 2021. Both measures will severely limit money laundering in online gambling. Even in local bar with a slot machine one will have to check who is playing.

In the UK, the UK Gambling Commission oversees all such activities, including online gambling. The UKGC recently published updated AML guidance for operators, which emphasise the importance of thorough staff training, regular risk assessments and mandatory reporting of any suspicious behaviour.

One advantage for the UKGC is that there are a lot of operators in the market, and no one casino provides a disproportionate share of the tax revenue. This means that there is less incentive to turn a blind eye to anomalies, and the Commission have shown on many occasions that they are not afraid to revoke licenses and issue fines.

All customers are now required to provide proof of identity and address, and to prove a source of funds for large deposits. Even historic failings can be penalised, as a large casino group based in Malta recently discovered. Despite a change in management and strengthening of their AML procedures, the UKGC issued a £6 million fine for poor implementation going back to when the company started in 2012.

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Money Laundering in the Casino Industry

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