Are Your Customers Laundering Money?

7 March 2000
How often do Net betting customers use your gaming site to launder money? Many Internet gambling opponents would have you believe that it happens frequently, but does it?

While money laundering is known to occur in land-based casinos, few cases involving online gambling sites have been reported. William Kisby, vice president of gaming for the National Fraud Center believes there's a huge potential for money laundering through Internet gambling sites, although he couldn't provide any figures.

Kisby did, however, quote the 1997 Organized Crimes Digest, which estimates that money laundering racks up $300 billion a year in costs in the United States alone. Of that figure, $88 billion relates to narcotics and organized crime and $215 billion relates to white collar, violent crimes and terrorism. Additionally, the United Nations estimates that $750 billion is laundered every year worldwide. Nowhere, however, is there any money laundering attributed to online gaming.

At least one online gaming software developer scoffed at the idea. Since at least 95 percent of all transactions are done via credit cards, they're traceable, the anonymous source explained.

Website operators would agree. "I haven't run into anyone trying to launder money for the reasons I assume you ask," said Buzzy Lynch from Venezuelan sportsbook, TopCatSports. "What you can see is people who make deposits under other relatives or whatever names, to receive the extra signing bonus that many Internet casinos/sportsbooks offer, as most only off the bonus for the first deposit."

A representative from Playersoffshore, a relatively new online sportsbook, echoed the thought, adding that they had never experienced any suspicious activities.

Representatives from Sportingbet, which is licensed in Alderney, were more forthcoming on the subject. "We have reported a very small number of 'suspicious activities' as per our licensing regulations," said Joanne Casey, a customer service manager for the site. She added, "Of course, there may be a genuine explanation for a customer's actions and if so, a customer would fully understand our position with regards to money laundering."

"The procedures that we have in place to monitor 'suspicious' transactions (i.e. transactions over a certain amount) will ensure any customer falling into this category that may appear to be laundering funds is immediately referred to the States of Alderney for investigation," she explained. "We are also required to ask any client that falls into this category to provide a brief explanation of their actions, which will also be forwarded to the States of Alderney."

Sportingbet's money laundering detection procedures are fairly straightforward. "If a customer requests a refund from their betting account with us, we always check that the customer has used all or most the funds they deposited for betting purposes," Casey explained. "If a customer has made a deposit to their account and then requested a refund without placing bets or placing a very small amount of bets in comparison to the amount they deposited, they would then fall into the suspicious transaction category."

Australian operators don't see a lot of money laundering activity on their sites either. "We believe that money laundering is more difficult in a regulated online gaming site than a physical casino or other gaming venue," said David Ohlson, executive manager for special projects, Lasseters Online.

"We do not believe that we have had money launderers as our system provides a very big disincentive for money launders. When a player first registers at our site, they can only spend $500 in any one month, this is too small an amount of money for a serious money launderer," Ohlson explained. "We also request player identification and send a cheque to a physical address. When you add all these barriers together, our site is very unattractive to money launderers."

He added, "In an online casino, every transaction, no matter how small, is recorded. We know when a player enters the site, what games they played, how long they stayed, how much they deposited and how much they cashed out. With this information, we are able to produce an automatic reporting system to identify potential money laundering."

Additionally, the Australian Senate, which has been studying the Internet gaming industry, heard testimony last week from Dr. Aziz Gregory Melick of the National Crime Authority. Melick explained that because credit cards are so easily obtained, they could be easily used for money laundering purposes while gambling online. He indicated, however, that money laundering was rarely heard of in Internet gambling. (You can read his full testimony in "What's that Aussie Senate up To?")

So, is money laundering by players a non-issue for the Net betting biz? "My guess is that it hardly ever occurs, probably less than in other industries and activities," said Charles Crawford of Crown Management Services. "There is no evidence, at all, that it is occurring in online gaming and certainly no more than in land gaming. Although, I have heard of some operators being suspicious of a 'wash' by certain customers, on the scale of tens of thousands of dollars. "My theory is that if criminals want to money launder, they would choose easier ways. Secondly, if they are going to do it, why do it in an industry that is being watched like a hawk?"

Riptide, a risk management company that has been contracted by the Interactive Gaming Council to provide the industry's first industry-wide risk management system, has developed a two-fold approach that will be able to watch for money laundering. They will marry two products--Integrity, an auditing system, and Citadel, a risk management database--available from subsidiary eSuccess.

By tying together these two products, explained Rob Sutherland, risk management director for eSuccess, the company can better track transactions made among numerous betting sites. For example, eSuccess would be able to track when customers bet on both sides. It's possible that a punter could bet both sides of the line through two sportsbooks. eSuccess would note this as a suspicious activity that could be a sign of money laundering. (Of course, the punter could just be middling, but that's a different story.)

Sutherland admits that he hasn't heard of money laundering problems from operators, but it does concern at least one government that licenses online gaming. (eSuccess will make more announcements on that soon.)

He also pointed out that tracking potential money laundering is new for the company. They may have to learn and apply new tracking methods over time, he explained, before being able to verify whether money laundering is a big problem in the Internet gaming industry.

Based on our research, however, it seems that money laundering by online players is really a "perceived" problem, and not the demon so many Internet gambling opponents believe it to be.

Vicky Nolan joined the IGN staff in October 1999. She's best known for inventing fire, the wheel and swiss cheese. She can be reached at