Money Laundering In Online Gambling

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Two differing views have been expressed on the laundering of funds through online gambling channels. One is the view of the US government and the other is the view of online gambling experts in Europe.

The US Department of State alleged that online gambling was one of the money laundering channels operating in Costa Rica. Costa Rica is the licensing jurisdiction to a number of online casinos and sports books. There are also several unregulated online gambling operators functioning from Costa Rica that represent significant risks for money laundering. This was reported in the newspaper AM Costa Rica, which quotes a study from the Money Laundering and Financial Crimes division of the US Department of State. However, US officials acknowledged that the Costa Rica government has made progress in installing anti-money laundering measures. This included Costa Rica’s latest legislation aimed at increasing international tax transparency. But much remains to be done, including fully utilizing tools such as cooperating witnesses, confidential informants, electronic surveillance and undercover operations.

The cited potential for money laundering in online gambling operations is being used to outlaw the activity in certain regions and subjecting it to exclusive governmental control in others. However, experts in this arena in Europe have again challenged this view. The occasion was a meeting in Brussels of top European politicians and experts that was called to discuss online gambling safety standards. One of the key speakers was Dr. Friedrich Schneider, Professor of Economics at Johannes-Kepler-University in Linz. He has carried out extensive research in this subject. He opined that using online gambling websites to launder money was not a viable proposition. The total volume of funds passing through online gambling sites is insignificant when compared to other economic channel possibilities.

Sven Stiel, director of northern European operations of PokerStars agreed with Dr. Schneider. Stiel also pointed out that in online gambling most player deposits and withdrawals are conducted via licensed banks that have rigorous anti-money laundering controls in place. Online players for real money have to verify their identities prior to cash-outs. In addition, sophisticated tracking and recording software is used by online gambling companies that provides accurate traceability and discourages potential money launderers.

MEP Creutzmann, who had organized the meeting, proposed that online gambling regulations to combat money laundering should follow a risk based approach that has been laid out by the fourth EU Anti-Money Laundering Directive. This directive clarifies the types of situations in which simple customer due diligence will be appropriate, and those where it would be necessary to conduct enhanced checks. These directives have been supported by the European Betting and Gaming Association, the premier trade representative body of European online gambling operators.

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