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Navigating the Changing Landscape of Money Laundering Through Online Gambling

The Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) released a Special Bulletin in January 2024 (the “Bulletin”) addressing the rise of money laundering through online gambling (“iGaming”) platforms. The Bulletin explores key points and insights provided by FINTRAC, aiming to raise awareness among reporting entities, banks, and money services businesses on the risks associated with this growing issue.

The digital era has witnessed an exponential surge in iGaming, with the industry expected to reach $100 billion USD by 2026. The COVID-19 pandemic further accelerated this growth as traditional land-based casinos had to close their doors, pushing players toward online platforms. In Canada, this growth has coincided with regulatory changes, such as the legalization of single-event sports betting in 2021, and Ontario opening Canada’s first regulated iGaming market that same year.

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The Bulletin highlights the inherent risks of money laundering and terrorist financing associated with iGaming. Organized crime groups are said to exploit both regulated and unregulated gambling platforms, especially those situated in jurisdictions with weak anti-money laundering measures. The Bulletin emphasizes the need for reporting entities to identify, assess, and mitigate risks associated with money laundering, to help prevent criminal activities.

FINTRAC conducted a comprehensive analysis of suspicious transaction reports related to iGaming from 2016 to 2023. The exploitation of financial entities and money services businesses for money laundering through regulated and unregulated gambling platforms emerged as a significant concern. FINTRAC identified the following key methods of money laundering:

  1. Bank Accounts: Criminals use bank accounts for the placement of layering of proceeds through iGaming websites, making them vulnerable to various laundering methods.
  2. Prepaid Cards and Vouchers: High-risk funding methods, such as prepaid cards and vouchers, are utilized to obscure illicit sources of funds, often acquired through cash transactions.
  3. E-Wallets and Payment Service Providers: Criminals frequently use these platforms to facilitate deposits and withdrawals between bank accounts and iGaming websites.
  4. Virtual Currencies: Although not legal tender, virtual currencies are increasingly used on unlicensed iGaming platforms for instantaneous and pseudo-anonymous cross-border payments.
  5. Exploitation of Licensed Platforms: Criminals may attempt to exploit licensed iGaming platforms, attempting to subvert identity verification processes and mislead operators.

FINTRAC provides a comprehensive list of indicators for reporting entities to identify potential money laundering activities related to iGaming. These include transactional activities which are inconsistent with a client’s apparent financial standing or usual pattern of activities, excessive transactions with unregulated iGaming platforms, direct or indirect exposure to virtual currency mixers and iGaming websites, and suspicious behavior such as chip-chumping and round-dollar transactions.

The Bulletin serves as a crucial tool for reporting entities, banks, and money services businesses, offering insights into the complex landscape of money laundering through online gambling. Vigilance, due diligence, and adherence to anti-money laundering measures are essential in combatting the evolving tactics employed by criminals in the digitalized world of iGaming. FINTRAC encourages reporting entities to report suspicious financial activities. By doing so, these entities enable FINTRAC to disclose actionable financial intelligence to law enforcement and national security agencies, aiding them in detecting, deterring and preventing money laundering and the financing of terrorist activities.

If you have any questions about FINTRAC, money laundering, reporting obligations or you would like to discuss how these changes may impact you, our team would love to hear from you. Please do not hesitate to contact us at 1-800-604-1312 or https://segevllp.com/contact-us/.

Disclaimer

***The above blog post is provided for informational purposes only and has not been tailored to your specific circumstances. This blog post does not constitute legal advice or other professional advice and may not be relied upon as such.***