The European Commission has made a series of recommendations to EU member states regarding online gambling. Among its recommendations, it highlights lower thresholds for customer due diligence activities and the need for frequent training sessions for staff and compliance officers. The commission also recommends that a player should not be able to hold multiple accounts with one brand.
The European Commission is responsible for periodic risk assessments, reviewing and establishing newly identified and existing risks of money laundering and terrorist financing across European States to aid global compliance. This edition, 2022, is the third after previous releases in 2019 and 2017.
“As with the previous reports, this third edition analyses the present ML/TF risks and proposes comprehensive action to address them,” the European Commission said. “It also assesses the degree to which the Commission’s recommendations for mitigating measures in the 2019 report have been implemented and evaluates the remaining risks.”
The 2019 edition saw land-based casinos rated highly vulnerable. This was dropped to medium in 2022. Online gambling, on the other hand, was found to be especially vulnerable to money laundering and terrorist financing and classified as the highest possible risk level, “very high” risk.
The European Commission said:
“Despite several risk-based measures already being implemented by many EU online operators (for example anti-money laundering training sessions for employees, customer due diligence and ‘know your customer’ processes), the exposure to money laundering risks in online gambling is still rather high as it encompasses significant factors such as the non-face-to-face element, huge and complex volumes of transactions and financial flows”
Emphasizing the fact that digital currencies can make online gambling further vulnerable to money laundering, they added:
“Although not based on cash, it is closely connected to the use of e-money, and digital and virtual currencies which, for example, also increases the degree of anonymity for customers,” it said.
Money Laundering and Land-Based Casinos
The risk status of land-based casinos was dropped to medium in 2022 from initially being rated very high in 2019.
It is said that infiltration is the biggest risk for money laundering at casinos. It is possible due to staff members being connected with money laundering schemes. However, proper screening of staff has greatly reduced this risk.
“Casinos are considered to be exposed to infiltration risks, although for casinos owned by the state or public companies, this level of risk is lower,” the Commission said. “Hence, the risk of casinos being exploited to money laundering appears high, and the level of the threat posed by money laundering to casinos is considered as moderately significant.
“Despite an overall good picture, law enforcement agencies are still identifying some weaknesses, which suggests that the current legal framework is not correctly applied. The number of money laundering cases investigated by law enforcement agencies seems to show that there is still room for improvement.”
Including casinos in the EU-wide AML/CFT framework has also had a mitigating effect on the risk of money laundering in land casinos according to the commission.
“The inclusion of casinos in the list of obliged entities in the Fourth Anti-Money Laundering Directive, as well as in earlier EU AML legislation, has undoubtedly played a role in the quality of the checks in place,” it said. “It appears that, overall, casinos manage to address the need to put in place several layers of checks, knowing that most of the time several gaming activities may be played in a casino.”
Other Regulations & Self Regulation
The commission added a number of recommendations for EU member states. Among these included “promoting a lower threshold of winnings subject to customer due diligence” than the current winning threshold of €2,000.
It also added that
“member states should ensure that online gambling operators organise regular training sessions of the staff and AML compliance officers on a regular basis” and players should not be able to hold more than one account with the same brand.
From the point of self-regulation, the commission stated that many market operators have practised self-regulation with a good degree of success but the authorities have lacked in providing the industry with clarity.
“In many member states online gambling operators have developed a good level of self-regulation and risk assessment, although their cooperation with competent authorities and financial intelligence units could be improved,” the commission said.
“Operators believe that they do not get clear guidance on how to properly address the risks considering, in particular, the lack of feedback from financial intelligence units on suspicious transaction reports,” it added.