Online gambling

The European Commission denounces the inattention to money laundering in online gambling

Posted: November 3, 2022, 9:52 a.m.

Last update: November 3, 2022, 11:41 a.m.

The European Commission (EC) has completed a review of how gambling operations in countries under its umbrella handle anti-money laundering (AML) controls. The results are not good for the online gaming segment, which may soon become tighter than it already is.

Ursula Gertrud von der Leyen, President of the European Commission
European Commission President Ursula von der Leyen delivers her State of the Union address at the European Parliament in Strasbourg, France, on September 14. The commission reviewed the AML activity of the European gaming industry and found that there was room for improvement. (Image: Associated Press)

The EC has raised the money laundering threat it attributes to online gambling, giving it the highest possible threat level. As a result, she called on countries and operators to lower due diligence thresholds to get the segment back on track.

As the online segment declines, the land segment improves. The CE review revealed that it works better than ever.

iGaming faces crackdown

Following previous money laundering and terrorist financing risk assessments in 2017 and 2019, the EC decided it was time to do another one this year. He paid special attention to the gaming industry as it is undergoing rapid changes.

When it finished its report, the EC gave online games a “very high” risk in terms of AML weaknesses. He found the segment particularly vulnerable due to the use of cryptocurrencies, although these have no legal basis in a number of countries.

[The] exposure to money laundering risks in online gambling is still quite high, as it encompasses important factors such as the remote element, huge and complex transaction volumes and financial flows,” explained the EC.

The risk assessment of land-based casinos has seen significant improvements. The EC has determined that the land-based casino segment, since the adoption of the European Union’s Anti-Money Laundering and Anti-Terrorist Financing (CTF) policies, has improved the vertical sector’s risk rating of ” medium” to “very high”.

According to the assessment, the greatest risk in the vertical came from the infiltration of casino staff involved in money laundering schemes. At the same time, casinos owned by the government or public companies are less at risk. Yet land-based casinos retained a higher threat level as a “moderately important” target for criminal activity.

The EU added that law enforcement agencies continue to identify weaknesses in the retail segment. It is an indicator that either some regulators are not applying the rules correctly, or some operators are not following them correctly.

Risk levels for poker and retail betting remain high, while the risk level for lotteries, slots and other non-casino games of chance is medium. Bingo had the lowest level of risk in the assessment.

It’s time for another review

The mixed results between the two segments show that there have been some improvements. Although self-regulation has been successful in some markets, the commission said authorities need to provide more clarity to industry.

Malta fell onto the Financial Action Task Force (FATF) gray list last year due to anti-money laundering concerns. The FATF removed it this year, but Gibraltar was added around the same time.

Both have long been hubs for gambling operations. However, their approaches – like those of other jurisdictions in Europe – are very distinct. This creates confusion for operators.

The EC claimed that many operators do not believe they are getting the necessary advice from financial and gaming regulators that they need to ensure compliance. This could eventually lead to broad pressure for unified EU-wide regulations, which the EU and some member states are already calling for.

In its report, the EC offers several suggestions to its members in order to make improvements. He said they should lower the earnings threshold, subject to customer due diligence policies, below the current level of €2,000 (US$1,955). Additionally, he wants operators, with the help of their respective jurisdictional regulators, to ensure that users cannot create multiple accounts.

This last recommendation is something that is already happening in Europe. The UK Gambling Commission is leading the charge and is set to introduce a “single customer view” across all operator platforms nationwide.