Money laundering is the process of illegally concealing the origin of money obtained from illicit activities, by converting it into a legitimate source through investment in businesses or the purchasing of legitimate products and services.
This complex and global issue is underscored by the United Nations Office on Drugs and Crime (UNODC), which estimates up to 5% of global domestic product (GDP) is laundered each year, amounting to USD 2 trillion, in economies around the world.
As is the case with many businesses, lotteries and sports betting operators must adhere to different regulations, including international, regional and national, for instance, recommendations by the Financial Action Task Force (FATF), which provide a comprehensive framework of measures to help countries tackle illicit financial flows.
Against this backdrop, it is vital for WLA members to understand such risks, and be proactive in tackling them, by implementing effective measures to prevent money laundering.
The attraction of betting markets for money launderers
Over the past decade, the rapid evolution of digitalization and a boom in global sports betting, in part also because of the legalization of online sports betting in many jurisdictions worldwide.
Whether online or offline, casinos, sports bookkeepers, or other gambling institutions the legal lotteries and sports betting industry may be targeted in different ways by money launderers who are looking to hide vast profits from their illicit activities. On this point, the European Commission 2022 Supranational Risk Assessment Report (SNRA Report) to the European Parliament and Counsel on the “risk of money laundering and terrorist financing affecting the internal market and relating to cross-border activities” assigned the maximum risk level to the online gambling (including betting) sector.
Evolving technologies
The vast, complex and global nature of betting markets allows criminals to place bets quickly in different jurisdictions, for a growing number of products. Technologies allow the easy set up of multiple accounts, often untraceable, and products may be bet on in new formats on the Metaverse, which may escape regulation.
Rapid payment through online currencies, such as crypto, and sophisticated virtual platforms, make it very challenging to track large amounts of money, and who is paying. Additionally, the increased use of third parties can obscure the fund source or ownership gambled by customers, as well as their identities. This is further compounded by the different payment processors available to bettors, with varying degrees of anonymity and payment limits.
Illegal betting operators
Such technologies and platforms have greatly boosted the global, illegal sports betting market operators, who enable money laundering opportunities that are increasingly challenging to detect, track and combat.
Establishing AML measures
WLA lottery and sports betting operators members should take the following steps to protect themselves from potential money launderers:
- Establish and comply with an anti-money laundering (AML) program that is appropriate for your jurisdiction, which includes:
- Employee training
- Customer due diligence (KYC)
- Ongoing monitoring
- Detection of suspicious operations
- Assessment and reporting
- Follow responsible gambling guidelines – from underage gambling to marketing ethics. Find out more about the WLA Responsible Gaming Principles and the WLA RG Framework Submission Procedures 2024.
- Comply with key security standards and practices, by certifying to the WLA Security Control Standard.
More information can be found in Money laundering through the betting market, a report developed by the Council of Europe.
The report examines the vulnerabilities of betting markets with regards to money laundering, including: the nature of betting markets, both physical and online, regulatory structures, and means of payment. It also considers the strengths and weaknesses of current prevention, detection and prosecution frameworks at national and international levels, and provides operational recommendations to assist and enhance law enforcement for money laundering through sports betting.