Meeting the growing threat of money laundering in gambling

Operators need to start acting on 6AMLD but thinking a bit bigger. So says Zac Cohen, General Manager at Trulioo.

Gambling operators have become accustomed to a rapidly evolving and ever-more-complex regulatory environment. The sheer volume of regulation within the sector, stemming from both European and national bodies, has increased dramatically over the past five years. Governments are continuing to search for ways to protect consumers, while at the same time combating new forms of crime that have emerged within an industry that is increasingly digitally-driven. Of particular concern is the relatively new phenomenon of bad actors using gaming and gambling as a means to launder money.

So, while some operators may be feeling as though they have only just bedded down the new systems and processes required to comply with the 5th EU Anti-Money Laundering Directive (5AMLD), the reality is that they now need to start focusing on the next wave of AML regulation.

The 6th EU Anti-Money Laundering Directive (6AMLD) is due to be transposed into national laws by December 2020, with firms within member states required to implement the new regulations by 3rd June 2021.

6AMLD is highly significant because it provides clarification and context around many of the new money laundering threats which are emerging across the global economy, and notably within the gambling sector.

If 5AMLD was about expanding the scope of businesses’ obligations in countering money laundering, 6AMLD goes deeper, providing a more detailed definition of these requirements. As is often the case, regulators cast the net wide in order to tackle issues and are now refining these rules to make them more effective and practical.

The new regulation lists 22 predicate offences relating to money laundering, providing for clear definitions of each specific crime. Importantly, the last of these offences is cybercrime, which for the first time is included within AML regulation. This is significant because it enables organisations and regulators to root out money laundering crimes more easily and effectively across a wide range of online activities.

No hiding place for bad actors

In addition to this, 6AMLD is noteworthy because it is very clear in its objective to pinpoint the individuals within an organisation who are responsible for money laundering crimes. The introduction of new offences such as ‘aiding and abetting’ and ‘attempting and inciting’ also extends criminal liability from those directly responsible for converting the proceeds of crime to accomplices in the laundering process. No longer can individuals hide behind a business entity; the regulation is designed to provide complete transparency around who owns and controls these entities.

And, of course, the increase in punishments will grab the headlines, with minimum prison sentences increasing from one year to five years.

AML compliance at a higher level

Whilst 6AMLD is very much consistent with the spirit of both 4AMLD and 5AMLD, it will require operators to review their AML monitoring processes and identify areas for improvement within their customer onboarding and operational models.

In response, operators are likely to look to regulatory technology (RegTech) to automate more of their onboarding processes and access a wider and more robust pool of information on prospective customers.

However, while 6AMLD represented the next major deadline for risk and compliance professionals within gambling, it is in reality just another marker in a never-ending battle against money laundering. As new threats continue to emerge, the frequency and scope of new regulation will only increase.

Against this backdrop, operators should look to take a broader view of their compliance and operational best practices. Rather than taking a reactive approach and focusing solely on being compliant with 6AMLD come June 2021, operators should focus their attention on instilling a more flexible approach to compliance. Establishing a governance framework which operates at a higher level than the current rules means that it is easily adaptable to future regulation.

Forward-thinking operators are now accepting that the traditional ‘do the bare minimum’ approach to compliance is simply not feasible in the digital economy. Instead they are approaching compliance, and in particular the adoption of RegTech, as a key strategic priority and differentiator within the market.

By ensuring they have the flexibility to adapt to changing regulatory requirements easily and quickly, these operators ensure they can be first to market with new products and services, whilst at the same time minimising their risk.