You can find out more in our Responsible Gambling Guide.
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Whether online or offline, casinos, bookkeepers, and other gambling institutions have historically been used for money laundering and other criminal activity, leading many jurisdictions to impose restrictions. Despite all this, the regulatory landscape is quickly changing. And since such institutions generate millions in revenue, traditionally gambling-averse jurisdictions are starting to change their tune.
Vietnam, a country where gambling has been illegal for centuries, is thinking of legalizing sports betting. The Netherlands and Germany legalized online gambling in 2021, following moves by their European neighbors Spain, Italy, UK, Belgium, Switzerland, France, and Denmark. iGaming—a new internet gaming industry—began operating in Ontario, Canada just in April last year.
As similar as these activities may sound, this article considers the key differences between gaming, gambling, and betting, as well as how to comply with regulations in different countries.
Differences between casino gambling, gaming and betting
Why AML program is a top priority for the three industries
Responsible gambling guidelines—from underage gambling to marketing ethics
The main difference between all three lies in the degree of certainty and risk.
“Gaming” and “gambling” are often used interchangeably, however the former depends on a certain degree of skill (i.e. Poker), whereas the latter is based entirely on games of chance (i.e. roulette and other online casino games).
Suggested read: The 6 Most Popular Forms of Money Laundering in Casinos
Betting can involve strategic prediction of real-life events supported by data and research. The most common examples are bets on sporting events, reality shows and elections.
Crypto gambling is a type of online gambling that uses virtual currencies as a means of payment. The benefits of this method include the additional security offered by blockchain technology, and the ability for players to instantly withdraw money from their accounts, unlike in traditional online casinos.
Suggested read: Crypto Gambling Regulations in the US, UK, and Canada
Sumsub prepared a KYC guide for the gaming industry in the USA and Canada to help businesses understand the gaming laws in these countries and optimize their verification flows. You will learn how to combat fraud, build proper verification processes, screen users for money laundering, and maintain high conversion rates:
2. Why an Anti-Money Laundering (AML) program is a top priority for these industries
Gambling, gaming, and betting have always been attractive for illegal funds.
In 2009, the Financial Action Task Force (FATF) revised its Recommendations to further increase AML obligations for casinos. As a result, FATF member countries have strengthened the regulatory landscape for casinos, bookmakers, etc.
To comply, an appropriate AML program is essential. Its purpose is to prevent suspicious customers and transactions from entering the financial system. However, criminals constantly invent sophisticated methods of flying under the radar. Therefore, a truly effective AML program must handle new and complex fraud attempts. Otherwise, businesses expose themselves to financial and reputational losses.
Live CasinoSuggested read: 6 Key Components of an AML Compliance Program
Although AML laws are the same for online casinos and betting apps , betting still has its own specifics, and the chances of coming across money laundering are high.
Money laundering in betting takes the following forms:
Criminals leverage low-outcome bets to deposit dirty money and withdraw it as “winnings.”
Money obtained from illegal sources is used to sponsor betting as a leisure activity.
Criminals directly invest in/ acquire betting shops. This is what allegedly happened in Bremen, Germany. As a result, the city’s authorities decided to shut down all betting shops.
AML compliance program. To prevent betting businesses from becoming a source of crime and comply with betting regulations, a thorough AML compliance program must be in place. Among other things, it should define how the company detects, assesses, and reports financial crime.
AML compliance program. To prevent betting businesses from becoming a source of crime and comply with betting regulations, a thorough AML compliance program must be in place. Among other things, it should define how the company detects, assesses, and reports financial crime.
Customer Due Diligence (CDD). Before a customer is allowed to bet, they must go through a Customer Due Diligence check. This involves obtaining the customer’s information to verify their identity and evaluate whether they are involved in any crime.
Enhanced Due Diligence (EDD). In cases of higher money laundering risk, companies apply what is known as Enhanced Due Diligence. One of the most vital components of EDD is checking clients’ source of funds to ensure that they don’t come from illegal activity.
Ongoing customer monitoring. This is an extra layer of risk management that involves ongoing due diligence checks on the customers and scrutiny of their transactions.
Independent AML audits. Such audits allow businesses to detect their deficiencies and failures in their AML strategies, and correct their problems before regulatory inspections. Thus, firms can be protected from high regulatory fines.
Gambling operators must comply with laws and regulations aimed at preventing casino money laundering and terrorist financing (ML/FT). This is an especially vulnerable industry due to its high-risk nature, and online casinos often commit painful mistakes resulting in huge fines.
Suggested read: Casino Compliance: 6 Common Mistakes and How to Avoid Them
Let’s discuss what casino firms can do to safeguard themselves:
AML compliance program. Online casinos must develop their own compliance programs aimed at fraud prevention. Such programs must define how the company detects, analyzes, and reports criminal incidents such as gambling money laundering and fraud attempts. There is no one-size-fits-all compliance regime, so each online casino must develop one in accordance with the specifics of their business.
Like in betting, a reliable AML compliance program should include: