How do online gambling sites prepare for the latest anti-money laundering directive?

As long as there have been casinos, they have been used for money laundering. Criminals would enter casinos with “dirty” money (i.e. money obtained from criminal activities), convert it into casino chips, gamble for a short period of time, cash in their chips for a cheque and then the dirty money could be passed off as gambling winnings.

The explosion of remote gambling (online gambling) has opened up even more opportunities for criminals and even terrorists to launder money. Organised crime is nothing if not opportunistic and so the possibilities offered by online gambling to offenders has been grasped with both hands.

This trend has not gone un-noticed by authorities. There are a number of Parliamentary Acts which stipulate how remote gambling operators should protect against money laundering.

Specifically, these are the Proceeds of Crime Act (2002), the Gambling Act (2005) and the Money Laundering Regulations (2007).

This final act was the UK adoption of the European Commission’s Third Anti-Money Laundering Directive. As organised crime doesn’t respect national boundaries, it is widely agreed that there is an important role for the European Union to play in combatting money laundering.

One month ago, the European Commission published the Fourth Anti-Money Laundering Directive. The directive has yet to be approved by the Council of Ministers and still has to go through the European Parliament and be adopted by member states and transposed into national law. However there are a number of features of the new directive that operators of remote gambling sites should be aware of.

The most important element of the Directive is that gambling operators need to be aware of is that they could be required to conduct customer due diligence checks in line when their customers, in a single transaction, wager stakes and/or collection winnings worth at least €2,000.

It is worth pointing out that there will be exemptions for this. For non-casino operators (betting sites, bingo sites and lottery sites), if there is a “proven low-risk” of money laundering and terrorist financing, they will be exempt. However, the challenge will be on the operators to demonstrate this low-risk and it will, ultimately, be up to the UK Gambling Commission to grant exemptions.

However, for casinos and non-exempt non-casino sites, the proposed requirements will put increased pressure on know-your-customer (KYC) systems for operators. Already, meeting KYC requirements can add time to the three key elements of remote gambling transactions; registration, deposit and withdrawal.

If more checks are required for high-rollers, this will add time to already lengthy processes.

The challenge for remote gambling operators as they prepare for what the Fourth Directive could involve is to examine how they can meet new anti-money laundering requirements without adversely affecting customer experience.

One way is by adopting new authentication techniques which allow customers to verify themselves in a swift and secure fashion, automating what can be a manual process and cutting down on registration, deposit and withdrawal times.