The European Commission upped the threat level for money laundering in the online gambling space to the highest possible level. At the same time it called for lower thresholds for due diligence checks to prevent criminal activities.
Periodical risk assessments
The European Commission makes risk assessments periodically to determine the risk of money laundering and illegal funding of terrorist activities across various sectors. In 2022 the third assessment was carries out, after previous assessments in 2017 and 2019.
The idea of the assessment is to analyze risk regarding money laundering and funding of terrorist activity, and to come up with actions to address them. On top of this it also assesses the degree to which the Commission’s recommendations for mitigating measures in the previous report have been implemented.
Strong focus on gambling industry
The gambling industry always had a strong presence in the report. Each gambling vertical is addressed separately in the research and each vertical receives its own risk level.
Just like in the previous report online gambling is perceived as a high risk industry. According to the report the online gambling industry is very vulnerable to money laundering and financing of terrorism. The current risk level is ‘’very high’’ which is the highest level possible.
“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.”
According to the European Commission one of the things that make the risk level very high is digital currencies. The use of e-money, e-wallets, digital currencies, and virtual currencies gives customers a higher level of anonymity which increase the risk of illegal activities.
Reasonable degree of success
The European Commission has said that many operators have integrated new policies which have had a reasonable degree of success. Although this is the case there isn’t enough clarity from the authorities to guides operators to the best level of security.
‘’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,” it 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.’’
To reduce to general risk level the Commission has announced various recommendations for its EU member states. One of the most prominent recommendations it the recommendation to lower the threshold for customer due diligence. According to the Commission the current €2,000 threshold is too high.
In addition to this change member states should ensure that gambling operators organize training sessions for staff and compliance personnel on a regular basis. During these sessions the staff should be briefed with the most important common practices.
Risk level of brick-and-mortar casinos
Although the European Commission was very critical about the risk level in online gambling, it was very happy about the results of brick-and-mortar casinos. The commission has seen major improvement at land-based casinos since the last assignment in 2019. This resulted in a drop of the risk level from ‘’very high’’ in 2019 to ‘’medium’’ in 2022.
One of the main reasons why the risk level dropped significantly is that its seems that casinos have improved their risks in the personnel department. Previously the Commission was afraid that personnel could easily be involved in money laundering schemes. But due to new fit-and-proper- person tests these risks have significantly dropped.
“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. 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.’’