Ever wondered why casinos always seem to be under the regulatory microscope? It’s not just about keeping the games fair; a darker side exists. The constant flow of cash and chips makes them surprisingly attractive for money laundering. Yes, those glittering halls can sometimes be a haven for illicit funds.

Casinos offer a perfect smoke screen for money launderers. After all, who’s going to question a sudden influx of wealth when you can claim a lucky streak at the tables? This is why money laundering usually happens during the initial placement and layering phases in these establishments.

So, how exactly do these shady transactions go down? Let’s pull back the curtain on a few common techniques.

Chip Conversion: Turning Dirty Cash into “Clean” Checks

One classic trick involves buying a mountain of chips with cold, hard cash, no questions asked. Then, after some minimal play, they cash out, requesting a check from the casino. Voila! The dirty money now looks like legitimate gambling winnings. It’s a simple yet effective way to wash funds.

Cross-Border Credit: An International Shell Game

Here’s where things get a bit more James Bond. Picture this: a gambler buys chips in one casino, perhaps in Vegas. Instead of cashing out there, they claim they’re heading to another branch of the same casino chain, maybe in Monte Carlo. They request a credit transfer, and then, in a different jurisdiction, they withdraw the funds as a check. This adds an extra layer of complexity, obscuring the money’s origin.

Credit Line Shenanigans: Borrowing to Launder

Casinos often offer credit lines to high rollers. Criminals can establish these credit lines and then repay them with dirty money. This seemingly legitimate transaction makes the funds appear clean. It’s like using the casino’s own system to legitimize their ill-gotten gains.

Gambling With Bad Intentions: The Calculated Risk

Believe it or not, some launderers actually gamble the money they’re trying to clean. The aim is to recover their stake as verifiable winnings. This makes it harder to prove the money laundering because, on the surface, it looks like they simply had a lucky streak.

Junket Operations: The Murky World of Casino Tourism

Now, let’s talk about junkets – those high-roller casino tours often organized by third parties. These operations can present significant money laundering risks. These junket operators often move funds across borders and through multiple casinos. This creates a web of obscurity around the source of funds and the identities of the players. Some jurisdictions even allow junket operators to manage private gaming rooms, handling credit and player activity. Unlicensed sub-junket operators may have links to organized crime, posing even more risks.

Red Flags: Spotting Suspicious Behavior

So, how can casinos and regulators spot these illicit activities? Here are a few key red flags:

• Structuring: Breaking transactions into smaller amounts to avoid reporting thresholds.
• Minimal Gaming: Buying large amounts of chips with minimal play.
• Unusual Patterns: Covering both sides of bets or hedging.
• Third-Party Payments: Requesting checks payable to third parties.
• Multiple Instruments: Large deposits using multiple small-denomination instruments.

Online Gambling: A New Frontier for Money Laundering

The rise of online gambling has created new challenges. It’s regulated in some places, but many companies operate illegally. The UK Gambling Commission requires licenses for remote gambling operations. Antigua and Barbuda also have regulations.

Online gambling is vulnerable due to:

• Credit card transactions.
• Unregulated offshore operators.
• The difficulty of tracing funds.

Some credit card companies now block online gambling transactions. Alternative funding methods, like virtual currency, complicate matters further.

Red Flags in the Virtual World

MONEYVAL (Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism) has identified red flags:

• Collusion: Money launderers working with offshore operators.
• Stolen Identities: Using fake IDs to gamble.
• Multi-Country Logins: Accessing accounts from multiple countries.
• PEPs: Identification of Politically Exposed Persons.

A Real-World Example: The Crown Melbourne Scandal

The Case of Crown Melbourne

In 2019, Australian regulators uncovered that Crown Melbourne had been complicit in money laundering activities since at least 2014. The casino facilitated high-rolling gamblers in moving illicit funds, revealing significant control failures within the organization.

Key Issues Identified:

• Large Cash Deposits: Crown accepted substantial cash deposits from Chinese nationals in VIP rooms managed by junket agencies. These transactions were conducted with minimal scrutiny, raising concerns about the source of the funds.
• Use of Shell Companies: The casino employed shell companies to conceal transactions with entities in China, effectively bypassing reporting requirements and aiding clients in evading capital controls.
• Staff Complicity: Employees attempted to obscure these activities by aggregating multiple deposits to avoid detection and regulatory reporting thresholds. Patterns such as numerous deposits just below reporting limits and repeated transactions by the same individuals across different branches were observed, indicating deliberate efforts to circumvent regulations.

Regulatory Findings:

• Identity Verification Failures: Regulators identified significant shortcomings in Crown’s customer due diligence processes, particularly concerning high-risk clients.
• Non-Reporting of Large Transactions: Crown repeatedly failed to report substantial transactions as mandated by law, highlighting a disregard for Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) obligations.
• Inadequate Oversight: The investigation revealed a lack of effective monitoring systems, insufficient Know Your Customer (KYC) procedures, and inadequate staff training, contributing to the facilitation of money laundering activities.

Consequences:

• Financial Penalties: In July 2023, the Federal Court of Australia ordered Crown Resorts to pay a $450 million fine over two years for breaches of the AML/CTF Act.
• Operational Reforms: The case prompted significant scrutiny and led to operational changes within Crown, including leadership restructuring and enhanced compliance measures.

The Crown Melbourne scandal serves as a stark reminder of the critical need for robust AML controls within the casino industry. It underscores the importance of stringent regulatory compliance to prevent financial institutions from being exploited for illicit activities.

Final Thoughts

Casinos will remain in the crosshairs of regulators because of their inherent vulnerabilities. Only through robust AML programs, diligent monitoring, and a commitment to ethical practices can they hope to stay ahead of the curve and keep dirty money out of the game.