FATF Links Net Betting to Money Laundering

7 February 2001
The Internet gaming industry has caught the ire of the Financial Action Task Force as being a leading avenue for illegal money laundering.

Charged with coordinating efforts to combat money laundering, the Paris-based group says in its most recent report on areas which attract money laundering that Internet casinos are being used as covers for criminal gangs.

In its Report on Money Laundering Typologies 2000-2001, the group cites three known money-laundering schemes that are spanning the globe.

The FATF is quick to point out in the report that the Internet, especially the online gaming sector, has elements that are very enticing to money launders.

"It is three characteristics of the Internet that together tend to aggravate certain ‘conventional’ money laundering risks," the report states. "(1) The ease of access through the Internet, (2) the depersonalization of contact between the customer and the institution, and (3) the rapidity of electronic transactions."

In addition to Internet casinos offering all three of these elements, the FATF reports that it's easy for organized criminal gangs to set up bogus casinos specifically for funneling their own money.

The report provides an example of an Internet casino set up in an unnamed European country through which an unusual amount of funds were being moved. An ensuing investigation, the FATF reports, revealed that a criminal group was using the virtual casino--along with an Internet Service Provider and a server maintained in the Caribbean--to cover the tracks of the dirty money.

The report also supplies information on a sports tout service scheme that netted the brains behind the project $178 million. Still another ploy had crooks switching user accounts for a service supplied at a legitimate domain over to a closely related domain only to defraud the visitors and the bank handling the transactions. Under the plan, the domain name gamblerz.com was registered. The domain name was close to a legitimate site, gamblers.com. A third site was created, gamber.com, which was an abbreviation of both sites. The operator of the abbreviated site then got thousands of account holders to transfer their accounts to the fraudulent site.

Unfortunately, just like its land-based brothers, online casinos offer a quick pay-out and a usable means for laundering money. Players can buy chips for an Internet casino with dirty money only to turn right around and cash their chips in for a check which can then be deposited into a legitimate account or bank with very little suspicion.

Surprisingly the FATF report doesn’t offer too many viable options for correcting or stopping money laundering through Internet Casinos.

To help solve the problem, the report says that any form of regulation and legalizing Internet casinos would help give governments a controlling arm against money launders. However, the only real concrete solutions the offered put the enforcement role on the shoulders of the IPSs--perhaps an unrealistic expectation for an industry that favors privacy for its users.

Among the solutions offered by the group:

  • Require ISPs to have reliable subscribers register with appropriate identification information.
  • Require ISPs to establish log files with traffic data relating Internet-protocol numbers to subscriber and to telephone numbers used in connection.
  • Require that the log information files be kept and maintained for a reasonable period (six months to a year).
  • Ensure that information can be made available internationally and in a timely manner.

Click here to view the report.