Online gambling and money laundering are linked—but how? How does it work? What risks are involved and how is the industry tackling this issue? Today, we are going to take a deep dive into the shady world of laundering money through offshore gambling platforms to make black money white. Criminals have many tools and techniques that they use to tiptoe around regulations, but regulators are not sitting idle either.
We are going to take a look at this ever-changing equation.
What is Money Laundering in Online Gambling?
The connection between online gambling and money laundering is based on a relationship of convenience. It is natural for high-rollers to make big deposits and big plays. This is why casinos often have higher limits on player deposits. This can be exploited by criminals to dump a lot of money in their casino accounts, and then wager it to whitewash it.
At its core, money laundering is the process of making illegally obtained funds appear legitimate by moving them through financial systems. Criminals can use casinos and betting platforms to clean dirty money to this exact end.
As bigger, offshore online casinos offer anonymity and large-scale cash flows, criminals often find it easier to mask illicit funds through them than, let us say, a bunch of shell corporations.
The high transaction volumes and the international nature of online gambling provide the cover for these illicit activities, making them harder to trace or stop. Things are even simpler with cryptocurrency casinos where privacy is respected above all else and the maximum deposit/withdrawal limits are insanely high.
The best gambling sites in the UK will not allow users to engage in any shady practice. If there are any red flags, or even if big deposits are being made all of a sudden, they can put your account on hold until you provide proper identification and reasons. UKGC-licensed casinos and bookies have KYC requirements anyway, making it harder for criminals to use these platforms to launder their money.
Anti Money Laundering
Common Money Laundering Method
Let us talk about the various tactics used by criminals to move money through online gambling.
- Smurfing: Criminals deposit small amounts across multiple gambling accounts to avoid detection. This way, the large transaction alerts are not triggered, making it a fairly low-risk procedure.
- Chip Dumping: A player can deliberately lose a game in a poker room by folding or placing small bets. What they are doing is moving the money between accounts under the guise of gameplay.
- Betting on Both Sides: A bad actor can also place bets on opposing outcomes in the same game or event for a guaranteed win. The winnings are cashed out as legitimate funds.
- Multiple Accounts: Multiple player accounts make transactions seem unrelated and harder to track. This distribution of illegal funds helps criminals evade anti-money laundering (AML) algorithms built into casino platforms.
- Cryptocurrency and Anonymity: Cryptocurrencies offer greater anonymity in transactions. Criminals may deposit illicit funds using crypto, gamble small amounts, and then withdraw winnings in a more legitimate form, often using cryptocurrency exchanges to further obscure the trail.
How Criminals Cash Out?
So, you have understood the relationship between online gambling and money laundering, but one question might still be bugging you—how do these buggers actually cash out the “legitimate” funds?
Generally, a criminal only uses the gambling platform to clean the money and is okay with a little bit of loss. Carrying around tainted money is far riskier than losing a little on bets and games. Typical bank transfers, e-wallets, and cryptocurrency wallets are used to withdraw winnings, as the funds are now clean.
But there is another way as well. Oftentimes, funds are layered by converting them from one form to another, such as transferring between accounts or switching currencies. Once all that is done, they integrate the laundered money into the economy through gambling wins that seem legitimate.
In some rare cases, criminals also use third parties like mules or even unsuspecting individuals to withdraw and transfer money to further distance themselves from the illegal funds.
Combating Money Laundering Through Online Casinos
The battle between clean online gambling and money laundering is an age-old dilemma. How are we combating it?
- The UKGC and the Financial Action Task Force (FATF) have strict AML guidelines.
- Licenced operators implement KYC measures to verify identities before players can gamble.
- Suspicious Activity Reporting (SAR) is one of the most important procedures. Online casinos need to report suspicious activity or transactions over a certain threshold to relevant authorities.
- Operators often use automated systems to track and flag unusual deposits and withdrawals (large amounts, frequent transactions, or anonymous payments).
- There are also transaction limits, withdrawal thresholds, account restrictions, and other measures aimed at reducing the risk of money laundering through online gambling.
Online gambling is a big industry and it is not possible to make it fully transparent to regulators. A lot of high-rollers who are not criminals want to protect their privacy, for example. However, laundering illicit funds through online casinos is common knowledge. Going ahead, institutions might require global cooperation, cryptocurrency regulations, stronger KYC measures, or even AI systems for the automated tracking of transactions to spot patterns.
Only time will tell how effective we will be in stopping money laundering through online casinos.
