The vulnerability of casinos was recognised in the revision of the FATF 40 Recommendations, with obligations on casinos being significantly enhanced. However, there remained a lack of recent regional or global typologies on casinos and gaming, which this report seeks to address.
This APG/FATF report considers casinos with a physical presence and discusses related money laundering (ML) and terrorist financing (TF) methods, vulnerabilities, indicators to aid detection and deterrence, international information exchange. The report considers vulnerabilities from gaps in domestic implementation of anti-money laundering / combating the financing of terrorism
(AML/CFT) measures. Data in the report was derived from members of the FATF, APG, other FSRBs and open sources.
Online gaming and illegal gambling are beyond the scope of this study.
Overall, there is significant global casino activity that is cash intensive, competitive in its growth and vulnerable to criminal exploitation. This paper identifies significant gaps in awareness of ML typologies, gaps in regulatory and law enforcement responses, gaps in online gaming typologies, issues with controls over junkets / VIP programs, and significant issues with controls over “high seas” gaming. The report identifies significant gaps in global coverage of AML/CFT controls over the sector, which represents a significant vulnerability. The report is a resource for policy formation.
The report identifies significant ML vulnerabilities and related case studies and typologies, but does not identify any instances of TF through the sector.
Chapter 1, The Casino Sector, presents a global overview of casinos organised by regions (some 100 countries). The overview sets out the numbers, locations and, in some cases, ownership of each sector and coverage of AML/CFT controls. The chapter discusses some statistics and estimates of revenues (over USD70 billion globally) and profits (where known). The chapter discusses emerging casino markets, including a number of developing countries with governance and capacity challenges.
Chapter 1 briefly discusses casino sector risk assessments as a basis for allocating regulatory and law enforcement resources. The report highlights the need to identify ML risks for both those jurisdictions with or without a casino sector.
Chapter 2, Money laundering Methodologies and Indicators, considers vulnerabilities such as casino chips, casino cheques, casino accounts and facilities, structuring through the casino, currency exchange, employee complicity, etc. The paper describes typologies, case studies, and includes a summary of practical indicators for the industry, regulators and law enforcement.
Casinos undertake high volume/speed financial activities that are similar to financial institutions, but in an entertainment context. Casinos are generally large cash-based businesses. Foreign exchange facilities and reduced transparency of “high rollers” in VIP rooms present substantial challenges. The use of foreign holding accounts where funds in one jurisdiction are available for use in a casino in another jurisdiction without the need for a cross border remittance presents further issues.
Chapter 3, Sector Vulnerabilities and emerging Issues, explores a number of additional vulnerabilities and emerging issues. Casino-based tourism or “junkets” are identified as a vulnerability as they involve the cross border movement of people and funds and often target high net-worth / VIP clients. Transparency of the movement of funds is an issue with junkets, due to gaps in controls, and weak implementation and supervision.
The emerging issue of high-seas cruise ship casinos and associated junkets is a challenge for regulators and law enforcement. The question of who has jurisdiction is prominent, including where the vessel is registered, where it operates from and where it visits. The paper notes that few jurisdictions regulate this sector.
With respect to VIP rooms and “high roller” customers, vulnerabilities are noted with identifying source of funds and movement of funds. In many casino markets high-roller clients make up a large majority of casino turnover, yet only a very small percentage of casino patrons.
Other vulnerabilities discussed include corrupt or inadequately trained staff, new markets opening and terrorist financing.
Chapter 4, Policy Implications, reiterates various key findings of the report and discusses a number of policy implications, including:
- Online gaming requires further typologies study and sharing of cases and regulatory models is needed;
- A significant number of jurisdictions do not subject their casino sector to AML/CFT controls;
- When casinos are subject to AML/CFT controls, many jurisdictions lack effective implementation of preventative measures (CDD, STRs, internal controls);
- There is a lack of regulatory tools that carry effective, proportionate and dissuasive sanctions;
- AML/CFT controls over casino foreign branches, offices or subsidiaries are not well regulated and there is a need for international guidance and best practice;
- Casino foreign holding accounts are not clearly covered for AML/CFT, which allows movement of funds without sending a cross-border wire transfer;
- Controls over VIP rooms vary and some jurisdictions lack clear powers regarding collecting and sharing information of VIP program participants;
- High-seas gaming is a large market over which there is little regulatory control;
- Many jurisdictions’ casino regulators lack AML/CFT capacity and experience;
- International cooperation between casino regulators on AML issues is lacking and it is not always clear who are the competent authorities for information sharing.
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