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Uk Casino Money Laundering Case
Uk Gambling Commission Money Laundering
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Gambling Commission January 2018 letter to all online casino operators

Following a review of the online casino sector to consider how well operators are meeting their current obligations, the Gambling Commission has written (January 2018) to all online casino operators expressing concerns about the sector’s approach to anti-money laundering and social responsibility. In the letter the Commission sets out how it expects operators to review all of their processes aimed at tackling money laundering and meeting their social responsibility obligations.

Due to the serious nature of the Commission’s findings, it has already begun investigations into 17 online operators, and is considering whether five of these require a licence review. None of the operators under investigation has been named by the regulator.

The following is an overview of a casino operator’s responsibilities under The Proceeds of Crime Act 2002 (“POCA”), The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“The 2017 Regulations”), and the money laundering guidance and advice issued by the Gambling Commission. Unless otherwise stated, it is relevant to all casino operators, terrestrial and on line. It is an introductory overview only, and should not be taken as an alternative short-cut to becoming familiar with the Act itself and the Regulations and the Commission’s various publications, which must be read in full and re-read as they are amended or updated.

Casinos and Money Laundering: an overview

Introduction

The Gambling Commission has identified three stages in a typical laundering of criminal proceeds:

placement – this is the initial placing of the money (such as the cash proceeds of a drugs deal) into the financial system.

layering – this is when the source of the criminal proceeds is disguised by creating complex layers of financial transactions which obscure the audit trail.

integration – this is when the laundered money (now looking clean) is integrated into the legitimate financial system, and assimilated with other assets.

Casinos are amongst those businesses in which there is said to be the highest risk of money laundering taking place. The Gambling Commission points out: “the land – based gambling industry is particularly vulnerable during the placement stage as the use of cash is prevalent and the provenance of such cash is not always easy to determine“. On the other hand, online casinos could be said to carry their own particular risks arising from the ease with which transactions may be conducted with anonymity.

POCA and the 2017 Regulations place a miscellany of duties on casino operators (and those employed by them) with the aim of preventing and/or detecting attempts by customers to launder money. Upon the detection or reasonable suspicion of money laundering, there are various reporting requirements. Broadly speaking, for every statutory duty there is a corresponding criminal offence for failure to discharge that duty.

In addition to his statutory duties, a casino operator is bound by the LCCP (to which the operating licence is subject) to act in accordance with the Gambling Commission’s guidance on anti money laundering: “The Prevention of Money Laundering and Combating the Financing of Terrorism”:September 2017.

Definitions of ‘money laundering’

Uk Casino Money Laundering Case

The popular understanding of ‘Money Laundering’ is that it is the means by which the proceeds of criminal conduct are made to appear to have derived from a legitimate source. The position in law, however, is that ‘money laundering’ is a much broader concept.

The anti money laundering regime created by POCA and developed in the 2017 Regulations defines ‘money laundering’ by reference to certain criminal offences that may be committed in relation to the proceeds of crime: sections 327-329 of POCA create the offences –

(a) concealing, disguising, or converting the proceeds of crime, or transferring or removing them out of the jurisdiction;

(b) entering into or becoming concerned in an arrangement which a person knows or suspects facilitates the acquisition, retention, use or control of the proceeds of crime;

By way of examples, it will readily be seen that wagering ‘dirty money’ (which includes the direct or indirect benefit from the proceeds of crime) in a casino, in the hope of winning and converting the money into ‘clean money’, would fall within (a) above; whereas the wagering, merely, of ‘dirty money’ for recreational purposes only, would fall within (c): (a common instance is someone who steals to support his gaming habit). If a casino operator (righty) suspects that the money being wagered is the proceeds of crime, and allows the wager, then that most obviously would fall within (b), but might also fall within (a) or (c).

A failure to report known money laundering by a casino customer might be thought to amount to an offence under (b) above in its own right: but POCA and the 2017 Regulations create discrete offences –

Where a person working in the ‘regulated sector’ (which includes casinos) knows, suspects or has reasonable grounds for knowing or suspecting that another person in engaged in money laundering (i.e. the three areas of offending in paragraph 6 above) but fails to disclose that knowledge or suspicion to a relevant officer, that is a “failure to disclose” offence.

Where a person working in the ‘regulated sector’ knows or suspects that another person’s suspected involvement with money laundering has been disclosed to a relevant UK investigatory authority, or that an investigation is in contemplation or is being carried out, it is an offence to make any further disclosure to any other person which is likely to prejudice any investigation: that is a “tipping off” offence.

Where any person, whether working in the ‘regulated sector’ or not, knows or suspects that an investigation is in contemplation or is being carried out by an appropriate officer, it is an offence to make a disclosure to any other person which is likely to prejudice the investigation, or to interfere with material which is likely to be relevant to such an investigation: that is the offence of “prejudicing an investigation”.

Summary of casino operators’ obligations

In this section I will deal with what a casino operator is obliged to do and also what it is prudent he should do in order to protect himself against inadvertent offending.

General recommendations

The following is a list of recommended actions: it is should not be taken as exhaustive.

A casino operator should understand the broad scope of money laundering, as defined by POCA and explained by the Gambling Commission Guidance, and summarised above.

That understanding should, by training, be given to all staff working in the casino, at all levels. Although the 2007 Regulations excluded ‘ancillary employees’ such as bar staff from the training obligations it created, I take the view that the broad definition of “relevant employee” in regulation 24 of the 2017 Regulations is capable of bringing certain bar-staff into the class of employees who must receive training. In any event, it would be prudent to give bar staff some trai