Online-gaming platforms are increasingly used for money laundering and terrorist funding, as the spread of unlicensed and offshore platforms that use various payment methods has created additional risks that aren’t well regulated, a report discovered.
The Financial Action Task Force (FATF) report found that certain payment methods associated with gaming, such as cash, e-wallets, mobile money, and virtual assets, are vulnerable to a range of money-laundering risks.
The variety of payment methods accepted by online gaming and gambling operators increasingly allows rapid, anonymous, cross-border transactions and the conversions of value onto different forms, FATF said in a report Wednesday.
FATF also provided a list of “red-flag risk indicators” for compliance executives at land-based casinos and online-gaming companies, gaming regulators, and law enforcement. They include when IP addresses and stated location don’t match; a customer is in a country where gambling is illegal; and a customer is reluctant to provide the source of their funds.
Other risk indicators are customers located in a higher-risk jurisdiction or enquires about moving funds to a higher-risk jurisdiction and large cumulative deposits and withdrawals with little betting activity, according to the FATF, a global financial-crimes watchdog based in Paris.
“Without robust safeguards, these sectors can be attractive getaways for fraudsters, professional money launderers, and organized criminal networks,” FATF President Giles Thomson said in a statement.
Thomson urged governments to take note of the risk indicators and put in place appropriate risk-based responses from “strengthening oversight and cracking down on illegal and offshore operators to boosting international co-operation and deepening public-private collaboration.”
The FATF found that online casinos and sports betting platforms are more exposed to money-laundering risks, with money able to go in and out of accounts even when there’s not significant gambling activity. Transactions can also be structured into smaller amounts, known as “smurfing,” to stay below thresholds that might trigger know-your-customer or anti-money-laundering checks. The FATF study found online-gaming platforms have more documented terrorist-financing misuse.
The report found that online-gaming and gambling platforms are also increasingly interlinked with social media and other digital platforms, which can increase the risk of money laundering and terrorist financing.
Online social media can be used to communicate and co-ordinate illicit activity, such as competition manipulation, advertising illegal or unlicensed gambling, recruitment of money mules, dissemination of terrorist propaganda, and terrorist fundraising, the FATF said.
More than 80 jurisdictions, industry associations, and researchers contributed to the FATF’s year-long study. It examined risks across casinos, gambling activities, and video gaming, including online and illegal-gambling sectors.
“The project also markets the FATF’s first detailed examination of risks associated with online and illegal gambling,” the agency said.
