Using AML Transaction Monitoring To Prevent Money Laundering

Online casinos are unlike their brick-and-mortar counterparts in the sense that they share the virtual and online space on the internet. Unfortunately, this space is also filled with criminals including hackers, fraudsters, identity thieves, terrorist financiers and more. This puts them at a risk of having their platform taken over or used by these criminal elements; this being money launderers and terrorist financiers. 

In this article, we shall be finding out how online casinos can use AML transaction monitoring to prevent money laundering.

What Are Online Casinos?

Online casinos, commonly referred to as Internet casinos or virtual casinos, are essentially digital copies of real-world casinos. You may use your computer or mobile device to gamble and place bets on casino games because they are web-based. 

Online casinos include a wide range of games, including slots, blackjack, roulette, poker, and baccarat, much like brick-and-mortar casinos do. They provide customers with convenience, a wider game selection than the brick-and-mortar casinos and bonuses and promotions for staying loyal customers.

What Is Money Laundering in Online Casinos?

Money laundering in online casinos involves the process of disguising the origins of illegally obtained money, typically through a series of complex financial transactions, to make it appear as if it was obtained from legitimate sources. This illegal activity is done to hide the illicit nature of the funds and to integrate them into the legitimate financial system.

While some online casinos are not involved in money laundering, it is rather difficult to know those who are involved. Hence, if you run an online casino, you need to know how online casinos can use AML Transaction monitoring to prevent money laundering. Moreover, seeing that the EU has upped the online gaming risk of money laundering to the highest level, you should also up your game.

What Do Online Casinos Have To Do With Money Laundering?

Money laundering organisations find it easy to target online casinos, because they deal with large amounts of cash, provide clients with anonymity and can have cash converted and moved quickly.

What Laws Are Against Money Laundering By Online Casinos In South Africa?

The National Gambling Act 7 of 2004 (NGA) makes provisions for money laundering in casinos and other players in the gambling sector in item 7, Part B of Chapter 2, showing that gambling in relation to illegal activities unlawful: 

“Despite any other law, a person must not- 

(a) engage in, conduct or make available a gambling activity if the outcome of that activity depends directly, indirectly, partly or entirely on a contingency related to an event or activity that is itself unlawful in terms of any law;

(b) permit any gambling machine or device under the person’s control to be used for the purposes of a gambling activity contemplated in paragraph (a);

(c) maintain or operate any premises, whether or not such premises are licensed

premises, for the purposes of a gambling activity contemplated in paragraph

(a); or 

(d) permit any premises under the person’s control, whether or not such premises

are licensed premises, to be used for the purposes of a gambling activity

contemplated in paragraph (a).”

The “event or activity that is itself unlawful” part being money laundering.

In South Africa people who are found guilty of money laundering are liable to a 30-year jail term. This also backs up the fact that businesse are required to establish and maintain robust AML programs under the Prevention of Organised Crime Act of 1998. 

What Are The Risks Of Money Laundering In Online Casinos?

The risks online casinos stand to face on the issue of money laundering include:

1. Regulation fines and penalties: The National Gambling Board may suspend the licence of online casinos and impose heavy fines on them for failing to prevent money laundering.
2. Reputational damage: An online casino's brand image and consumer trust can be seriously harmed if they are found to have ties to money laundering operations.
3. Criminal activity: The casino may also face further legal issues if the money laundering charges they are involved in are connected to other illegal activities.

These risks are however avoidable if only online casinos know how to use AML transaction monitoring to prevent money laundering. By implementing strong anti-money laundering (AML) compliance, conducting thorough due diligence, and fostering ongoing innovation, online casinos will not only meet regulatory requirements but also establish fresh benchmarks for financial safety and honesty.

As a frequent online casino player, there are some ways you can also verify the honesty of online gambling sites. You may also want to know how to navigate the maze of anti-money laundering in the gaming industry.

Why Is Anti-Money Laundering (AML) Compliance Critical For Online Casinos?

Online casinos in South Africa must comply with anti-money-laundering legislation because of the following reasons:

1. Risk mitigation: Complying with AML helps online casinos steer clear of the legal and reputational pitfalls that come with money laundering.
2. It safeguards the sector: Robust anti-money laundering procedures protect the internet gaming sector overall.
3. Encourages responsible gaming: Anti-money laundering procedures can assist in detecting and stopping problem gambling.

Online casinos show that they are committed to responsible gaming and safeguard themselves against the risks of money laundering by putting in place strong AML compliance procedures which include Transaction monitoring and an optimal Know-Your-Customer (KYC) system.

What is AML Transaction Monitoring?

Financial service firms, especially online casinos, use a continual procedure called AML Transaction Monitoring to examine client transactions for any indications of possible money laundering. It serves as a watchful watchtower, continuously looking for unusual trends that might point to criminals attempting to conceal their illegal money's true source. 

What Ways Do Transaction Monitoring Help Online Casinos Prevent Money Laundering?

It is worth pointing out that Transaction Monitoring cannot function effectively in an online casino’s system without working with an optimal Know-Your-Customer (KYC) system.

The following are some ways that transaction monitoring helps online casinos prevent money laundering:

• Identifying Red Flags: AML Transaction monitoring helps examine transactions for traits that are frequently linked to money laundering schemes, such as odd or big deposits or withdrawals, structuring; which involves dividing large amounts into smaller transactions; and irregular behaviour across different geographic locations.
• Real-Time Analysis: Another tool used is real-time analysis which is a sophisticated system which notices suspicious behaviour, monitoring transactions in real-time and taking prompt action.
• Risk-Based Approach: Transaction monitoring can also be tailored in online casinos to a customer's risk profile, focusing more scrutiny on high-risk players.

How Does KYC Help In Transaction Monitoring For Online Casinos?

KYC comes in handy for helping online casinos prevent money laundering through transaction monitoring in the following ways:

• Identifying High-Risk Individuals: KYC procedures help identify Politically Exposed Persons (PEPs) and individuals associated with high-risk countries or activities.
• Verifying Source of Funds: Understanding where a customer's money comes from helps assess the risk of money laundering. For large transactions, casinos may require documentation to verify the source of wealth.
• Building a Customer Profile: KYC establishes a baseline for a customer's typical financial activity. This allows for easier identification of deviations that might indicate suspicious behaviour. 

When the system brings up red flags about a suspicious activity, it then gathers information about the activity and notifies the organisation about it. They will set up an inquiry to check if the activity is illegal and may contact the customer associated with the account or push the report up to the Financial Intelligence Centre (FIC) for action.

What Are The Key Differences Between Transaction Monitoring And KYC?

The key differences between these two concepts of preventing money laundering in online casinos are:

• Focus: Transaction monitoring focuses on activity, analyzing the flow of funds. KYC focuses on the customer, verifying their identity and financial background.
• Timing: KYC is typically a one-time (or occasional) process when onboarding a new customer. Transaction monitoring is continuous, happening throughout the customer relationship.
• Information Source: Transaction monitoring relies on transaction data. KYC gathers information directly from the customer through documents and declarations.

Working together, effective KYC and transaction monitoring provide online casinos the foundation for understanding the customer and their risk profile, while transaction monitoring allows for continuous vigilance and detection of suspicious activity.

Conclusion

The fight against money laundering is one every financial organisation, especially online casinos seeks to win. AML transaction monitoring helps South African online casinos win this fight by watching for suspicious transactions, stopping criminals and protecting both players and the casino from harm. Technologies like YvOS advanced monitoring systems and automation makes this process faster and more effective. This creates a safer online gambling environment for everyone. 

Discover how over 750 global enterprises utilize Youverify for customer KYC and AML screening to ensure compliance and real-time risk mitigation within the gaming sector. Request a demonstration today.