Money laundering not a major threat in online gambling

The accusation that online gambling websites are fertile grounds for money laundering operations is frequently made by anti-internet gambling supporters, politicians and self-interested national regulators trying to justify exclusive regulatory regimes, but European experts this week again refuted the idea.

The poker information site Flushdraw reports that according to the publication Gaminglaw.eu the issue was discussed by top European politicians and experts at a meeting in Brussels this month on internet poker safety standards.

Arranged by Jürgen Creutzmann, a member of the European parliament who has been prominent in EU regulatory strategies in the past, the meeting considered the threat of money laundering in the industry, with Professor of Economics at Johannes-Kepler-Universität in Linz, Dr. Friedrich Schneider, briefing those present on the results of extensive research into the subject as applied to unlicensed online gambling websites.

He concluded that using online gambling websites to launder money was simply not worthwhile, pointing out that even if all the money wagered on internet poker sites was devoted to money laundering, its total volume would still be so small relative to other economic channel possibilities that it would not be attractive to criminals.

Another delegate at the meeting, Detlev Henze, CEO of TÜV Trust IT GmbH, also doubted that money laundering was a serious problem in the online gambling industry, noting that his organisation was currently carrying out a research study.

The preliminary results from this study have resulted in the development of a check list that will assist in the assessment of security risks through a matrix that will enable interested parties to factually judge the effectiveness of individual operators’ in-house security measures, he revealed.

Speaking from his deep experience as director of northern European operations for online poker giant Pokerstars, Sven Stiel opined that the risk of money laundering in online poker is barely relevant.  He said that the overwhelming preponderance of online poker financial transactions were for relatively small sums that would have little value to money launderers.

On the high stakes side of the business, those involved were usually professional and well-known players, he said.

Stiel also noted that in online poker virtually all player deposits and withdrawals are conducted via licensed banks that have themselves already subjected funds passing through their system to rigorous anti-money laundering surveillance.

Accepting that it was possible to deposit using pre-paid cards, he pointed out that the majority of such cards have very low limits, typically around Euro 100 -150.

Online poker players for real money additionally have to verify their identities prior to cash-outs, and the sophisticated tracking and recording software used by internet gambling companies militates against inter-player money laundering, and provides an accurate traceability that discourages would be launderers, he observed.

MEP Creutzmann proposed that online gaming regulations to combat money laundering should follow a risk based approach. This has already been suggested by the fourth EU Anti-Money Laundering Directive published by the European Commission in January this year, he said, advising:

“It acknowledges that the levels and types of action required to be taken by member states, supervisors and firms will vary according to the nature and severity of risks in particular jurisdictions and sectors, and clarifies the types of situations in which simplified customer due diligence will be appropriate, as against those where it is necessary for firms to conduct enhanced checks.”

These recommendations have reportedly been supported by the European Betting and Gaming Association.

In related news, the rapporteur for online gambling to the European Parliament, MEP Ashley Fox, this week published his Committee on the Internal Market and Consumer Protection report, which contains a recommendation noting that online gambling is a non-cash-based environment and that – given the dependency on third-party financial service providers – additional safeguards against money laundering can [already] be found in the EU’s regulatory framework for establishing and licensing financial service providers.

Related and similar