Financial Crime in the Spotlight: Anti-Money Laundering in the Gambling Sector

Money laundering is a significant risk for many businesses doing business in the UK, but the way in which this risk materialises and crystallises varies depending on, among other things, the nature of a business’s activities. Given the different risk profiles across sectors, businesses need to adapt their systems and controls to identify, manage and mitigate their relevant risks. In this briefing, we look at the key money laundering risks affecting the gambling sector and some practical steps businesses can take to manage these risks.

Main risks

The growth of the UK gambling market, particularly online, has brought new opportunities for exploitation by criminals. Awareness of how criminals can use operators to launder the proceeds of crime and robust controls to prevent this are therefore essential.

The UK government has identified the UK gambling sector as a low-risk sector for money laundering and terrorist financing.¹However, risks within the sector vary, with remote gambling, non-remote casinos and off-course betting being characterised as high risk by the UK Gambling Commission (VKGC) compared to other gambling subsectors²Remote gambling is particularly attractive to criminals because of the large number of transactions and the possibility of anonymity.

Key money laundering risks that operators should consider include the following, although they do not apply equally across all sub-sectors:

Infiltration by organized criminal gangs: This can include criminals attempting to acquire or gain control of gambling businesses to launder criminal proceeds, UBOs of gambling businesses being involved in criminal activity, casino employees collaborating with criminals and/or a lack of competence of key personnel and licensees which can then be exploited. The UKGC has also reported an increase in fraud and online scams targeting vulnerable individuals and the use of third party ‘mule’ accounts to move criminal proceeds without triggering financial threshold alerts.
Problem and vulnerable gamblers: in particular, repeated failures by operators to understand the links between problem gambling and money laundering risks that the UKGC has observed in enforcement actions. In particular, the UKGC has said that it “contains significant evidence of cases where problem gamblers have stolen money to fund gambling activities… along with cases where people in positions of trust and high-risk professions have fraudulently obtained money from employers or vulnerable victims for gambling purposes…Risk indicators for problem gambling include loss-chasing; reluctance of customers to give up their profession; and spending patterns that are inconsistent with legitimate income.
Crypto assets and cashless payments: Crypto asset transactions are considered high risk by the UKGC and should only be accepted if operators can comply with both their AML and safer gambling measures, including identifying the source of funds and source of wealth. Other digital payment methods can also pose a high risk of money laundering, particularly when used anonymously by players. For example, the UKGC has observed a high risk of ‘smurfing’ through the use of prepaid cards by customers.
Use of Money Service Providers (MSBs): specific risks identified for MSBs by the UKGC³ include the use of MSBs by clients from high-risk jurisdictions, funds transferred from unlicensed MSBs and the structuring of foreign currency transactions to avoid reporting thresholds and facilitate layering.
Clients and funds from high-risk jurisdictions: The UKGC is particularly concerned about the risks to licensing objectives in relation to casinos that rely on the patronage of high net worth individuals, including PEPs, who are typically resident in jurisdictions that pose higher risks of money laundering, terrorist financing and corruption.⁴.
Weak controls on money laundering: random affordability and customer research (CDD) thresholds that are not aligned with a customer’s risk profile can lead to insufficient visibility into player and deposit behaviour, and therefore prevent monitoring of unusual transaction patterns that indicate criminal activity (e.g. smurfing). Other issues include operators not adequately training staff to assess and verify source of funds information, and policies not being updated to reflect new regulations or technologies.

Main guidelines

Both remote and non-remote casinos fall under the UK Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. MLRs). It sets out what relevant businesses must do to prevent their services from being used for money laundering and terrorist financing. Operators subject to the MLRs must establish and implement certain AML/CTF controls in their businesses, including risk assessments, appropriate CDD and record-keeping practices and appropriate senior management oversight.

Whether or not they are subject to the MLRs, all UK operators must comply with the licensing objectives set out in the Gambling Act 2005, the first of which is to prevent gambling from becoming a source of, associated with or used to support crime. In addition, the UKGC requires all licensees to meet certain AML responsibilities (for example under the Proceeds of Crime Act 2002) and to adopt a risk-based approach consistent with the licensing conditions guidance and codes of conduct (LCCPIn particular, operators must comply with licensing condition 12.1.1, which applies to all operating licences, with the exception of technical licences for slot machines and software licences for gambling, and which concerns anti-money laundering risk assessments and controls.

The guidance published by the UKGC aims to help operators address the risks posed by criminals seeking to exploit the sector. This guidance includes:

Key Points

The UKGC has made it clear that in addition to guidance, operators should also consider lessons learned from enforcement actions when conducting AML/CTF risk assessments and controls.

In public statements against Hillside (UK Gaming) ENC and Hillside (UK Sports) ENC for anti-money laundering and corporate social responsibility failures from April 2024⁵the UKGC published the following list of questions that operators can use as a guide to meeting expectations for an effective AML compliance program. Operators should ask themselves the following:

Do you have formal processes in place to measure the effectiveness of your AML and safer gambling policies and are findings accurately recorded?
Do you efficiently record all compliance related decisions and can you provide evidence of ongoing assessment, evaluation and improvement to the UKGC upon request?
Are the lessons learned from public statements incorporated into your policies and procedures?
Do you perform financial sanctions checks on customers before they make their first deposit?
Are your customer risk profiles based on or linked to your money laundering and terrorist financing risk assessment?
Do you have a formalized process for analyzing the effectiveness of customer interactions, to ensure that assessments are adequately documented and that the approach is consistent?
Do you record the types of behavior that led to an interaction with the customer and do you keep sufficient records of the interactions, as well as of decisions not to interact, particularly in terms of the level of detail you provide?
Have your employees received sufficient training in the areas of money laundering and corporate social responsibility?⁶

Operators must take immediate action to address any deficiencies identified above. Controls must also be periodically evaluated to ensure continued compliance.

If you have any questions about the AML/CTF risks affecting the gambling sector, including the implementation of policies and procedures to support compliance with legal and regulatory requirements and reporting obligations, please contact the authors.

Thanks to Joshua Creutzberg for his work on this briefing.