FATF: offshore gambling has become a serious threat to the financial system

FATF: offshore gambling has become a serious threat to the financial system

At the same time, in a number of countries, the illegal sector is comparable in scale to or even larger than the legal sector, according to a report.

💡 The FATF report, published on September 9, compiles survey data from 80 jurisdictions, written submissions from 29 jurisdictions, as well as consultations with industry associations, analysts and industry participants. It is the first detailed study of the risks associated with both legal and illegal gambling.

💡 Illegal operators are present in all jurisdictions, regardless of the level of restrictions. They attract customers through promotional advertising, offering a high degree of confidentiality. They may also pose as legal operators, taking advantage of differences between national licensing systems and anti-money laundering (AML) procedures.

💡 Illegal gambling is closely linked to corruption schemes, cyber fraud, professional money-laundering networks and organized crime. The risk of money laundering is particularly high in casinos, including online casinos, and sports betting.

💡 Digital payments are contributing to the growing number of channels through which funds can be moved, including cross-border online platforms. Cash, e-wallets, mobile payments and virtual assets are among the high-risk channels. Online platforms enable funds to be moved rapidly across borders and different forms of value to be converted.

💡 In addition, gambling is strengthening its links with social media, marketplaces and providers of various types of software, many of which fall outside the scope of national anti-money laundering and counter-terrorist financing controls. Illegal platforms are promoted on social media, money mules are recruited, and fund withdrawals are coordinated. Although there are still relatively few cases of terrorist financing through gambling, the FATF considers this risk to be significant.

💡 Red flags:

⏩ deposits followed by withdrawals with minimal gaming activity;

⏩ repeated small-value transactions below reporting thresholds;

⏩ payments from third-party accounts;

⏩ use of multiple gambling accounts from the same device or IP address;

⏩ use of VPNs;

⏩ systematic betting on all available outcomes, with the aim of minimizing the risk of losing funds during the money-laundering process.

💡 At the corporate level:

⏩ complex cross-border ownership structures concealing beneficial owners;

⏩ agreements to provide services under another party's brand;

⏩ agreements with software, marketing or consulting providers without adequate controls.

💡 Recommendations: strengthen licensing and registration requirements to prevent gambling from becoming intertwined with criminal activity, and apply the RBA (risk-based approach).

💡 Context: according to the report by the European gaming and entertainment industry organization, over the past 6 years, the size of Europe's illegal gambling market tripled, precisely amid the tightening of prohibitions and restrictions.

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