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Preventing money laundering in the gambling industry Nicola Sharp, of business crime solicitors Rahman Ravelli, on a case that emphasises why it is so important for those in the gambling industry to prevent money laundering.

15 August 2018

Online gambling provider 32Red has had to pay more than £2 million after failing to tackle the problem of money laundering.

The fine was also issued by the Gambling Commission due to 32Red’s failure to meet its obligations on social responsibility. According to the Commission, 32Red failed to both identify signs of money laundering and recognise that a so-called VIP customer had a gambling problem.

The regulator claimed that 32Red failed to identify that one of its 'VIP' customers may have had a gambling problem and did not pick up on signs of potential money laundering. No in-depth checks were made on the customer’s salary or to verify the source of his wealth – despite him depositing £758,000 with 32Red between 2014 and 2017.

32Red admitted its failings. It is also implementing recommendations on how to improve its anti-money laundering procedures, following an audit by a third party of the way it had been functioning. Whether this will prove enough to tackle 32Red’s problem remains to be seen.

But it is important, for two reasons, that this case is not treated as an isolated one. Its significance goes beyond the internal workings of 32Red.

The first reason is, quite simply, that this is not an isolated case. Earlier this year, William Hill was fined £6.2M for the same failings over a similar period of time. The case of 32Red, therefore, is not unique. Which brings me to the second reason why this case cannot be treated as a one-off: it has to be seen as a warning to all those running gambling enterprises about what can happen if they fail to show any awareness of money laundering risks or make any effort to minimise them.

There will be many in the gambling industry that need to take a close look at the way they function and their vulnerability to those looking to launder money.

The government’s “National Risk Assessment of Money Laundering and Terrorist Financing 2017’’ repeated its 2016 assessment’s claim that gambling operators were allowing money launderers to use their facilities due to poor compliance with money laundering legislation. The authorities are aware that the anonymity of non-online betting attracts those looking to spend the proceeds of crime.

The Gambling Commission has published its own guidance, “Prevention of Money Laundering and Combating the Financing of Terrorism’’, which emphasises the importance of instilling an anti-money laundering culture from the top down. It calls for a culture backed by systems and controls, with commitment from senior management, thorough customer records, proper staff training in the risks and appropriate procedures for reporting suspicions.

Gambling providers have a duty, under the Proceeds of Crime Act 2002 (POCA), to report any knowledge or suspicion that a customer is using the proceeds of crime to gamble or is using the gambling facilities to launder money. Failure to do so is an offence that carries a maximum penalty of five years imprisonment and/or a fine. For that reason alone, no one with an interest in the running of a gambling provider can afford to be ignorant or cut corners when it comes to money laundering prevention. The irony of losing everything by taking such a gamble should not be lost on them.

And POCA is just one aspect of the authorities’ desire to tackle money laundering.

The Money Laundering Regulations 2017 require casinos to conduct a written assessment of their risk to money laundering. The Regulations also state that a casino must carry out enhanced due diligence on any customer placing bets totalling 2,000 euros or more in a 24-hour period.

The authorities are now more determined than ever to tackle money laundering – and they see the gambling industry as an area worthy of their attention. If a gambling operation’s measures to prevent money laundering are not good enough – or are non-existent – it could only be a matter of time before it faces major problems.

There may well be perfectly legitimate people running gambling providers who are aware of their responsibilities but unsure how to ensure they comply with them. Awareness is not enough. They have to be capable and confident when it comes to both assessing their company’s vulnerability to money laundering and devising and implementing the most appropriate measures. And such measures must be regularly assessed for their effectiveness and amended whenever necessary. They cannot be created, introduced and then never reviewed, like an exercise in doing the bare minimum. If that happens, they will be of little value if and when money laundering is found to have been carried out.

Procedures that are inadequate, poorly executed or never reviewed and amended when necessary will be of little or no value. They will not prevent money laundering and will do nothing to convince the authorities that you have tried to tackle the problem.

The gambling industry is attractive to money launderers. As a result, it is also attracting the attention of those who have the task of investigating money laundering. Anyone involved in this industry who does not take the appropriate action to prevent money laundering is, therefore, taking the greatest possible gamble. And it is highly likely that they will lose…like 32Red.

Authors


Nicola Sharp
Senior Associate Solicitor
nicola.sharp@rahmanravelli.co.uk
+44 (0)1422 346666



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