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Gambling: a money launderer’s paradise?

Gambling: a money launderer’s paradise?

26.05.2022

Efficient Frontiers International

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There has been recent media coverage regarding hefty fines as a result of social responsibility and money laundering failings; the Gambling Commission has therefore made an example of firms that are guilty of shirking their moral and legal responsibility to protect their customers.  

Gambling Industry Failings 


Social responsibility code provision 3.4.1 indicates the following: 


"Licensees must interact with customers in a way which minimises the risk of customers experiencing harm associated with gambling. This must include identifying, understanding and interacting with customers who may be at risk of or experiencing harm associated with gambling." 

A firm was found guilty of falling short of measures that should have been put in place to protect their customers; in short, they were not conducting sufficiently in-depth customer reviews in multiple scenarios. The repeated failure to efficiently perform Customer Due Diligence raises concerns within the gambling industry; it is well known how dangerous gambling addiction can be, and the legal responsibility to protect customers where they cannot protect themselves is a huge issue.

It is concerning that this damage has been caused and a firm has been subject to a large fine simply due to insufficient Know Your Customer controls. In respect of gambling accounts, Know Your Customer is not too dissimilar to the methods used in both wholesale and retail banking firms; it appears that gambling organisations are behind the curve with Know Your Customer controls, and should be making considerable efforts to streamline their processes and maximise efficiency. 

Anti money laundering failings 


The implementation and continuation of a policy whereby customers were allowed to deposit £40,000 before carrying out source of fund checks is a damning indictment on Know Your Customer processes within some areas of the gambling industry. There is no information in regard to when this policy was put into place, however regardless of the time it was left without review, there are clear Anti Money Laundering failings throughout the chain of command to allow such a policy to be left in place.

To reinforce the point about consistent Anti Money Laundering failings, analysts responsible for overseeing customer accounts accepted verbal assurances as to employment income and relied on open-source information to validate source of funds. There was also no policy in place to outline which documents were to be accepted as part of source of funds checks; this is a basic Know Your Customer requirement that would be expected of any industry.  

Failed know your customer checks 


This case arrives in the wake of a recent warning from the gambling commission regarding insufficient due diligence checks by gambling firms that hold licenses granted by the commission. From an official statement released on the 10th of February 2022:

“The Gambling Commission expects to see significant improvements by licensees around their money laundering and terrorist financing controls.”

The commission comments specifically that there are too many instances whereby licensees are failing to meet Anti Money Laundering requirements, and all licensees are urged to review their current policies, procedures and controls.  


Alarmingly, the Commission has become aware of gambling operators failing to conduct sufficient due diligence on third-party businesses such as new investment. This is particularly concerning from a money laundering perspective, as this has been earmarked as a pain point for regulators where significant money laundering can occur – gambling firms are known targets for criminal enterprises. It remains clear that this is an area where the Gambling Commission are tightening the squeeze on gambling businesses, use this as a warning to get ahead of your Know Your Customer processes in order to comply.  


EFI boasts decades of top-level regulatory expertise within our KYC functions: contact us today to get your KYC controls in order.