AUSTRAC National Risk Assessments on Money Laundering and Terrorism Financing – important insights for the gambling sector
Author: Daniel Lovecek
AUSTRAC’s recently released Money Laundering in Australia and Terrorism Financing in Australia National Risk Assessments are important reading for gambling industry participants. The Assessments present both a rating and outlook for risk across the sector and assist in building an understanding of some of the key risks that businesses may be exposed to and, in turn, the development of awareness and controls to manage those risks.
In the gambling sector, it is likely to be unsurprising that casinos have been assessed as posing the highest money laundering risk in the gambling sector (with a rating of High and outlook of Stable). AUSTRAC note that despite industry reforms and sustained regulatory and law enforcement efforts, exploitation of casinos by criminal entities continues on a large scale with both sophisticated transnational crime groups and opportunistic, low-level offenders participating in this activity. AUSTRAC cite structuring, chip exchange between parties and the trade in tickets from electronic gaming machines (EGMs) as being the key methodologies used. The key vulnerabilities that arise include:
high-risk customers (particularly high-value customers, criminal entities, PEPs and anonymous customers)
a capacity to accept large transactions, including in cash
high-stakes wagering and high-volume gambling
a diverse suite of products and services that facilitate rapid transfer of value between customers within and outside of casino venues
a high level of exposure to higher-risk foreign jurisdictions, including those with currency or gambling restrictions and where informal remittances such as offsetting or community funding are used
In the wagering vertical (which covers tote operators, betting exchanges and corporate bookmakers) the risk has been assessed as Medium with a Stable outlook. AUSTRAC cite the relative ease with which funds can move into and out of operators with particular mention made of cash bets and electronic betting terminals and vouchers on account of those methods having less visibility and lower monitoring. The Assessments confirm that operators should ensure that their AML/CTF Programs and risk assessments are responsive to strategies to launder funds which include:
the use of third-party betting accounts, also known as ‘bowler accounts’
structuring bets across multiple domestic bookmakers
structuring bets with a bookmaker/s by a syndicate, which may include bowler accounts
placing structured cash wagers through electronic betting terminals and retail betting outlets
transferring betting vouchers
using cashed-out winnings to place further bets or purchase a betting voucher
the use of arbitrage betting strategies to minimise losses
A number of these typologies are regularly identified by operators which highlights the importance of responding to each instance in a considered manner and which follows a properly considered AML/CTF Program and procedures.
Pubs and clubs have also been assessed as posing a Medium risk and a Stable money laundering vulnerability over the next 3 years (which arises primarily on account of a high volume and value of transactions (including cash) as well as exposure to high-risk customers). AUSTRAC have stated that AML/CTF capability and capacity across the sector could be improved and that a number of entities are highly vulnerable to money laundering. The ability to detect and report suspicious transactions to AUSTRAC is stated to remain low.
EGMs are considered to present one of the highest-risk gambling services available due to the scale of funds that can be moved. Specific methodologies observed by AUSTRAC (and which venues must seek to manage the risk of) include:
high-volume cheque payouts
machine payouts with little or no play
collecting the machine credit in the form of a ticket, cheque payout or funds transfer
cheque-buying
collecting payouts from EGMs played by third parties
buying and selling winning tickets
We note that AUSTRAC have recently completed a large-scale review of the sector and identified wide-spread need for uplift. We encourage all participants to ensure that they have an up-to-date AML/CTF Program and risk assessment that is tailored to their specific circumstances and risks and supported with training and resources for staff. It is critical that these are also revisited and independently assessed as required in order to mitigate the risk of exploitation and also regulatory enforcement action where deficiencies exist.
Importantly, AUSTRAC have also assessed the money laundering risks presented by online offshore gambling which is considered Medium and Stable. Criminal exploitation of online offshore platforms by Australians is noted as occurring but without evidence that it is widespread. The platforms are often based in locations which have varying degrees of licensing or regulatory sophistication and oversight. The growth in the use of digital currencies by these platforms is noted as also being a complicating factor in identifying and addressing money laundering activity.
The Senet team has significant experience in assisting operators to navigate the complex and dynamic financial crime and regulatory landscape. This includes implementing AML/CTF Programs, conducting appropriately considered risk assessments, controls development, providing training and documentation to support staff to identify issues and comply with their regulatory obligations and undertaking independent reviews.
If you have any questions or would like to discuss the topics covered in this article, please contact the team at Senet .
