Gambling Becoming a Major Channel for Money Laundering, FATF Study Finds

^{Giles Thomson, President of FATF}

The Financial Action Task Force (FATF*) has identified 123 indicators that could signal the use of gambling for money laundering and other financial crimes.

The indicators were compiled following a year-long study involving more than 80 jurisdictions, industry representatives and researchers. It is FATF’s first in-depth assessment of money-laundering risks linked to online gambling and illegal betting.

One of the clearest red flags is when large sums are deposited into a gambling account but little actual betting takes place. A player may place only a handful of small or low-risk bets, often at short odds, before withdrawing the money soon afterwards.

Another warning sign is a large balance being left untouched in a betting account for an extended period.

Other indicators highlighted by FATF include:

• coordinated bets by different players on opposite outcomes of the same event;
• breaking deposits into smaller amounts to avoid mandatory reporting thresholds;
• a single player using multiple payment methods registered under different names;
• deposits made by third parties with no apparent connection to the account holder;
• multiple accounts registered under different names but accessed from the same device or IP address;
• bets placed by people directly involved in a sporting event, including athletes;
• unusually large or coordinated bets on events already flagged by monitoring services as potentially manipulated.

FATF considers casinos — both land-based and online — as well as sports betting to be among the gambling sectors most exposed to money-laundering risks. Lotteries were assessed as presenting a lower risk.

Illegal gambling poses a separate challenge. In some countries, the illicit sector is comparable in size to the regulated market or even larger. FATF also highlights so-called “sham merchant” schemes, in which an unlicensed operator disguises itself as a legitimate business and processes betting payments as ordinary purchases.

Online gambling creates additional challenges for regulators and financial institutions. E-wallets, mobile payments and virtual assets can make it easier to move funds quickly across borders and obscure their origin.

Video games are used for money laundering less frequently, and the schemes involved tend to be less sophisticated. However, FATF notes that documented cases of terrorist financing involving online video games are more common than those involving gambling.

* FATF is an international body that sets global standards for combating money laundering and terrorist financing.