FATF Looks to I-Gaming For Input

10 July 2002

The Financial Action Task Force, a leading international organization aimed at eliminating money laundering, is turning to the interactive gaming industry for help in shaping how it tackles the issue.

The FATF released a consultation paper on the Forty Recommendations on Money Laundering--the global anti-money laundering standard--and is hoping to get input from a range of industries that are affected by money laundering.

Interactive gaming plays a big part in the consultation paper; it dominates a section devoted to "Non-Financial Business and Professions."

The section takes a close look at industries outside of banking that have seen a rise in money laundering activities or are vulnerable to money launderers.

FATF Executive Secretary Patrick Moulette said his group is now actively getting input from various industries, but has yet to hear from anyone within the gaming sector.

Moulette said the report has only been out in the public for a couple of weeks and that he still hopes hear from the industry.

"We would like to have some comments because that is the whole purpose of the exercise, to get comments and views from interested parties," he said. "It doesn't mean that we will follow the views of the industry but it is important to get their views."

The release of the paper is the latest step in what will be a multi-year process. In the spring of 2001, the FATF established various working groups to submit papers on several issues. Those reports were then merged to form the consultation paper. After getting public input on the paper, FATF officials will work on ratifying the report. Moulette expects the process to be complete by the first quarter of 2003, although he said there is no hard deadline to do so.

Last year the FATF released a report that focused on industries that are vulnerable to money laundering. Interactive gaming caught the group's attention then, too, said Moulette.

Moulette said the FATF isn't a law enforcement agency and doesn't check transactions or monitor rates of money laundering. Instead, he said, it communicates with international law enforcement agencies to determine which industries are of concern.

Those communications with other agencies have led to the awareness that online casinos and sports books were being used for money laundering, he said.

"We noticed the increased use of Internet gaming and have been following it closely ever since," he said. "There is some evidence that interactive gaming sector is vulnerable to money laundering."

Although Moulette said there is known evidence of the gaming industry being used for money laundering, he said couldn't go into specifics.

Rick Smith, executive director of the Interactive Gaming Council, said industry officials will be in contact with Moulette's staff before the August deadline and hope to shape the way the final version of the report looks.

The FATF report tackles numerous issues pertaining to a variety of industries, but its main focus is broken into three areas:

  • Customer identification and due diligence, suspicious transaction reporting and regulation and supervision;

  • Information on the beneficial owners and controllers of corporate vehicles, such as companies, trusts and foundations;

  • Categories of non-financial businesses and professions that have been increasingly identified as being misused for money laundering. Casinos and other gaming operations are included in the list of seven industries that have been tagged as possible problem areas.

The section focusing on gambling and casino activity contains a host of interesting points. The report points out that financial services at casinos, both online and offline, are similar or identical to those provided by banks. These services can include customer deposit or credit accounts, facilities for transmitting and receiving funds transfers directly from other institutions and check cashing and currency exchange services.

While casinos and banks often provide the same services, the report says, casinos don't have the same security measures that are used by banks.

The report also gives various examples of how money could be laundered through a land-based casino or an online one. There is evidence, according to the report, that telephone account wagering services have been used by money launders.

The end of the section offers a variety of options that could be adopted by industries to counteract the money laundering activity.

Moulette reiterated that the main goal of the report is to make those in the gaming industry aware of the risks, and to take steps, either by regulation or otherwise, to establish a system to counter them.

When compared to the other seven non-financial industries mentioned in the section with gambling, Moulette said it is hard to determine if one area is a higher risk sector than another.

"I don't think anyone can really rank various sectors in terms of their vulnerabilities to money laundering," he said. "We know, though, that money laundering is now a problem beyond the financial sector."

Meanwhile, Moulette hopes to hear from not just the IGC, but also other members of the gaming industry as his group takes the next steps in creating a proposal to counteract money laundering. Anything the FATF recommends, he said, will be aimed at giving industries and regulators guidance and will not be international law.

"It is a decision for governments to take," he said. "It will help guide them in monitoring their money laundering activities in their jurisdictions. These are the sectors that we feel should be regulated by anti-money laundering measures, but they are only options."

To read the full report, click here.