FATF Report Does Not Address I-Gaming

14 February 2003

Representatives of the industry's largest trade organization are cautiously optimistic that a new money-laundering report could be the first sign of changing attitudes toward online gaming.

In November officials with the Interactive Gaming Council opened the line of communication with the Financial Action Task Force, an independent, international body aimed gaining world cooperation to fight money laundering and other banking issues.

The FATF sought comments from various industries that money launders typically use to cut down on the amount of money laundering.

Every year the FATF releases its Report on Money Laundering Typologies, and has often included the interactive gaming industry as a leading sector for money laundering.

The 2002-03 report, though, has no mention of the industry, instead focusing on the securities sector and the gold and diamond markets.

Being left off the report doesn't necessarily mean the industry is free and clear of the FATF radar.

"It could just mean that we have said all that we have to say about it at this point," said FATF media relations representative Helen Fisher.

While Fisher's reasoning is a distinct possibility, Keith Furlong, the Deputy Director of the IGC, who has worked closely with the FATF, feels what is included in the report and the fact that the interactive gaming industry isn't tied into it should be seen as a small victory.

The first chapter of the report is devoted terrorist financing and how various industries could be laundering money to bankroll terrorist activities all around the world. This argument has been bantered about on Capital Hill in the United States as a main reason why Congress should look at a prohibition bill aimed at the industry.

Many who champion the prohibition cause have found it easy to get others to support their initiative by tying online casinos and sports books to terrorists groups.

The FATF doesn't necessarily see it that way though, or at least isn't addressing that concern in the 2003 report.

Instead the FATF focused on the misuse of non-profit organizations and how they can manipulate funding they receive and funnel it towards terrorists groups or directly fund terrorist activity.

Furlong said he is cautiously optimistic about the lack of a connection between terrorist cells and the interactive gaming industry.

"I would consider it good news," he said. "But I just have to wonder if the prohibitionist on Capital Hill really need hard evidence of the industry somehow being used to funnel money to terrorist groups. If they can use enough scare tactics and convince enough people that the threat alone is serious, then there cause could be helped."

Furlong said he isn't so naïve to think there isn't a threat of money laundering being conducted through interactive gaming but he questioned whether the industry was being unfairly targeted by those on Capital Hill to use the threat to pass legislation that has failed over the last four or five years.

On an international scale though Furlong said he is confident that the communication that began last fall between the IGC and the FATF could lead to a better understanding of the industry's position regarding money laundering.

"We made it clear to them that we feel a logical process of regulation is the best prevention for money laundering," he said. "In fact with modern technology there are things that we can do online to enforce responsible gaming that can't be done at our land-based counterparts."

In addition to the typologies report, the FATF removed Grenada from its list of Non-Cooperative Countries and Territories (NCCTs). The jurisdiction was removed after the implementation of significant reforms to its anti-money laundering system.

The current list of NCCTs contains the Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria, Philippines, St. Vincent and the Grenadines, and Ukraine.

Not only is the Philippines on the list, but the FATF recommended that its members impose additional counter-measures against the Philippines due to the failure of the Philippines to enact legislation to address previously identified deficiencies in their anti-money laundering regime. If the appropriate legislation isn't passed by March 15 the FATF said it would enact counter-measures against the country.

To read the FATF's report, click here.