UKGC Highlights Crypto’s Growing Role in Gambling and AML Challenges

The United Kingdom Gambling Commission (UKGC) has said that it expects cryptocurrencies to become more prevalent.

In London, John Pierce, the UKGC’s Enforcement Director, spoke at the Gambling Anti Money Laundering Group (GAMLG) Training Day last week. During the day, he shared that although not new, the use of cryptocurrencies presents the gambling industry with new challenges.

There are no regulated crypto sportsbooks or crypto casinos in the United Kingdom. The regulator expects this may shift in the future, as it outlines, “we expect more payment providers to offer crypto payment facilities. Operators need to have full understanding of the services provided by their payment providers.”

At the training day, Pierce shared the progress made by the Gambling Commission and recent relevant case work highlighting key AML failings in the industry. Pierce addressed the sector, urging: “By working together, we can prevent criminal and terrorist actors from gaining a foothold in Great Britain and reduce the risk of money laundering across the gambling sector.”

Gambling Operators Struggle with Money Laundering Risks, Says UKGC

The UKGC emphasized that it has found operators with enhanced customer due diligence and know-your-customer triggers that are “ineffective at managing money laundering and terrorist financing risk.” These include:

• Procedures that do not identify disproportionate gambling spend as a result of failing to take customer salary or wealth into consideration.
• Having an AML threshold that is simply too high, thus allowing large sums of money to change hands before a review is undertaken on the specific customer.
• Some operators over-rely on financial triggers. The UKGC recommends taking a risk-based approach to building data-driven individual risk profiles.

Furthermore, the UKGC encourages operators to set “realistic and effective monetary and non-monetary thresholds and triggers” to decide when to approach a customer for further information and establish two-way conversations earlier in the transactional relationship.

Another area identified by the Commission that needs further work is around the source of funds procedure when operators are carrying out AML reviews. Errors reported included:

• Gambling companies over-relying on customer self-declarations, and open-source information when assessing money laundering and terrorist financing risk.
• Operators fail to follow internal procedures to obtain information on the Source of Funds.

The UKGC has described operators not adequately scrutinizing the information received from the Source of Funds as a “key failing.” Whereas the information “should be requested on a risk-based approach,” checking it should not be as simple as a tick-box exercise. The Commission suggests that staff need to be given guidance on how to review and verify documents, identify red flags, and adequately record a decision.

Emerging threats shared with GAMLG included changing customer demographics in the high-end brick-and-mortar casino sector, artificial intelligence being used to forge identification and source of funds documents, mule accounts, and the emergence of cryptocurrencies.

Whereas cryptocurrency poses a threat when used for nefarious activity, it also provides opportunity. The benefits of blockchain regarding transparency are well documented, with statistics showing approximately one in ten British citizens holding digital currencies.

Earlier this week, the UKGC announced that crypto giant Stake would be leaving the UK market amid an investigation into using an adult actress with the company’s branding outside a British university.