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Are Casinos Involved in Money Laundering?

Learn how to spot them early and play safe.

Casinos don't launder money, but they are vulnerable to it. This exposure stems from the large amounts of cash used and the potential for anonymity. Criminals abuse and find loopholes in the system to disguise their illegal profits as gambling winnings.

This article explores money laundering in casinos, and how it works, and also highlights the importance of implementing global Anti-Money Laundering or AML programs and preventive measures to constantly adapt to this ongoing battle.

What is Money Laundering?

Money laundering is when criminals try to make money from illegal activities look like it came from a legal source. They move the money around, usually via different financial transactions, commonly like the casinos.

This way, they will use the money without getting caught for their illegal activities. It's like washing dirty money to make it look clean. Casinos are excellent targets for money launderers due to their large cash volumes and weak systems.

Money laundering in casinos is a big problem and casinos must have effective AML measures in place to maintain the industry's reputation and keep criminals from taking advantage.

How Does Casino Money Laundering Work?

The worldwide gambling industry has ballooned to nearly $540.3 billion in 2023, steadily growing over the past five years. This growth provides great opportunities for criminals to launder money.

There are several common money laundering schemes that criminals use in casinos.

Cash in, Cash Out (Smurfing)

This is a simple method. Criminals bring in dirty cash, convert the money into chips, play minimal, and then cash out. Smurfing makes it seem like the money came from legitimate gambling.

Collusion

Also known as intentional gambling. This involves working with another person, possibly even a casino employee. They will pretend to gamble against each other. The criminal might intentionally lose a significant amount of their dirty money to the accomplice. This could involve:

  • Marked Chips- Pre-arranged signals might indicate which chips the criminal should lose.
  • Staged Bets- They might make losing bets that seem plausible but are strategically planned.
  • Non-Competitive Play- They might purposely play poorly to ensure the accomplice wins.

The accomplice will cash out the chips, making it appear as if they won the money legitimately. They can then split the seemingly clean money with the criminal as agreed.

The Vancouver Model

This sophisticated strategy involves some geographical deception. A criminal deposits dirty money in a casino and has a trusted associate in another location deposit a similar amount in a different casino. Separating the deposits by location helps avoid suspicion, especially in different countries.

The term "Vancouver Model" gained traction during investigations into money laundering in British Columbia, Canada, specifically Vancouver.

Buying Chips

Criminals have their eyes glued on those who won legally in casinos. They will then approach them and offer cash at a premium in return for their chips or cheques. This way, the dirty money becomes the winnings from someone else's lucky streak.

Gambling Accounts as Banks

Online casinos provide another avenue. Criminals deposit dirty money into their online casino accounts and then slowly withdraw it over time, making it look like a series of smaller winnings. In 2020, about $150 billion was laundered via online gambling outlets in China.

Combo

Criminals are creative. They may combine any of these laundering methods or add extra layers of intricacy by using non-gambling-related instruments and assets, such as real estate, cryptocurrencies, and other properties to make it even harder to trace the source of their dirty money.

Regulatory Framework and Compliance Measures

Executing regulations and compliance measures against money laundering will protect the financial system's integrity. These measures create a fair and safe environment for gamblers and discourage criminal activity. Here's a breakdown:

Regulatory Framework

The Financial Action Task Force (FATF) establishes international standards for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) that all member countries including those with casinos need to implement.

These standards outline:

  • Customer Due Diligence (CDD)- Verifying customer identities and understanding the source of funds, especially for large transactions.
  • Suspicious Activity Reporting (SAR)- Reporting any transactions or activities that could be linked to money laundering or terrorism financing.

National Laws

Each country implements its own AML/CFT laws based on the FATF guidelines. These laws specify:

  • Reporting thresholds- The amount above which casinos need to report transactions.
  • Record-keeping - How long do casinos need to retain customer information and transaction records?
  • Licensing and penalties- The licensing process for casinos and the penalties for non-compliance with AML/CFT regulations.

Compliance Measures

To further strengthen the regulations, casinos have to enforce various measures to comply such as:

Know Your Customer (KYC)- This step forms the basis of AML compliance for casinos. They are required to comprehensively authenticate the identity of their customers by collecting government-issued identification documents, and proof of address, and to have a clear idea of the origin of funds for significant transactions.

Transaction Monitoring- Casinos monitor all transactions for suspicious activity. This might involve looking for:

  • Structuring- Breaking down large deposits into smaller amounts to avoid reporting requirements.
  • Unusual payment methods- Using multiple payment methods or cash deposits for large wagers.
  • Source of funds inconsistency- Customers gambling large sums with no apparent source of income to support it.

Employee Training- Staff members at casinos must undergo extensive training to identify signs of money laundering and report any suspicious activities.

Internal Controls- Using internal controls to prevent collusion, such as separating staff for deposits and payouts, for proper oversight.

Collaboration- Casinos should often collaborate with financial institutions and law enforcement agencies to exchange information and jointly investigate any suspicious activities.

Ideally, all casinos should have AML programs. But, not all casinos worldwide execute money laundering regulations to the same extent.

How to Combat Casino Money Laundering

Combating money laundering in casinos is an ongoing battle. Criminals are constantly devising new techniques, so casinos need to adapt and enhance compliance measures. However, there are some ongoing challenges:

Technological Advancements- Criminals may use online gambling platforms or cryptocurrencies for money laundering. Casinos must keep pace with these technological advancements and update their monitoring systems accordingly.

Cross-Border Activity- Money laundering schemes involve multiple countries. International cooperation between regulatory bodies and law enforcement is crucial to track and disrupt these activities.

Casinos fight money laundering through a layered approach:

  1. Spotting Suspicious Activity- Casinos monitor transactions for red flags, like large unexplained deposits or players using multiple accounts.
  2. Focusing on High-Risk Players- They prioritize investigating players who show typical money laundering behaviors.
  3. Following Regulations- Staff are trained to recognize suspicious activity and report it. Regular checks ensure casinos follow anti-money laundering rules.
  4. Collaboration with Authorities: Casinos work with financial watchdogs and regulators who investigate suspicious activity and enforce anti-money laundering laws.

Consequences of Money Laundering in Casinos

Money laundering has a ripple effect, causing problems not just for the casinos, but also for society.

  • Financial Penalties- Regulatory bodies may impose big penalties on casinos that fail to prevent money laundering. These fines can be significant and damage a casino's profitability.
  • License Revocation- In severe cases, casinos that repeatedly violate AML regulations could face license revocation, forcing them to shut down entirely.
  • Reputational Damage- Being associated with money laundering severely damages a casino's reputation. Customers may be hesitant to gamble at a casino known for such activity.

Effects of Money Laundering on Society

  • Funding Crime- Money laundering lets criminals keep illegal profits, fueling organized crime and illegal activities.
  • Loss of Trust- Money laundering in casinos erodes trust in the financial system, creating a perception of rigging and unfairness.
  • Economic Distortion- Dirty money in casinos distorts the economy; inflated asset prices, unfair competition, and hindered growth.

 

Conclusion

Money laundering is a considerable threat to casinos posing financial and reputational hazards. Enforcing technological solutions like facial recognition and following AML regulations assessed by international bodies like the FATF is crucial in mitigating these risks.

Ensuring a safe and secure environment should be a top priority for casinos. To achieve this, they must be diligent in identifying red flags and training their staff to report any suspicious activity.

While implementing stricter anti-money laundering measures may have an impact on the level of anonymity for gamblers, the benefits of maintaining a secure environment far outweigh any concerns in this regard.

The future of money laundering in casinos will likely be a continuous battle. Casinos and regulators will need to constantly adapt, share information, and cooperate internationally to make money laundering a much riskier proposition for criminals.

GameChampions takes these issues seriously which is why we strongly recommend responsible gambling. Here's a list of reputable gambling sites.

Alex Cabal from Game Champions

About the author

Alex Cabal

I'm a gambler who loves betting on just about everything, from soccer, esports, roulette, tennis and even slap contests. If you can bet on it, you can be sure that I've taken a chance on it.

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