PRACTICAL SOLUTIONS
Crypto as legal tender
As of now , cryptocurrency is mostly accepted as legal tender for placing bets by some online casinos ( aka online crypto casinos ), which are registered in either unregulated or more tolerant jurisdictions . The risks are self-evident and affect the prospective users , the online gaming platforms , LE agencies and regulating bodies alike . The crypto-related challenges described above not only extend to online gaming platforms but are also augmented when considering other issues , including but not limited to the legality and trustworthiness of the online gaming platforms , the assurance of repayment of bets , the prevention of fraudulent gaming results , and the associated risk of the development of problem-gaming behaviors regarding patrons who had previously self-banned from physical casinos .
According to FATF ’ s 2019 report on virtual assets , casinos , whether land-based or online , may be used to launder the proceeds of crime , primarily through the purchase of chips or gaming tokens , which are then cashed out . 1 The report and its 2020 complement “ Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing ,” 2 also highlight the emerging use of cryptocurrencies for money laundering , particularly through exchanges with inadequate AML / CFT controls .
Europol ’ s report , “ Internet Organized Crime Threat Assessment 2018 ,” also states criminals are using virtual currencies to launder the proceeds of their illegal activities , and online casinos may be one of the channels that they may use to exchange virtual currencies for cash . The report goes on to say that the anonymity of virtual currencies and the lack of regulation of some virtual currency exchanges make it easier for criminals to launder money . 3
In response , agencies in many jurisdictions have introduced new regulations and guidelines aimed at increasing transparency and reducing the risk of money laundering and other financial crimes in the cryptocurrency sector .
One noteworthy improvement to the standards and methodologies prescribed in FATF ’ s 2021 “ Updated Guidance for a Risk-Based Approach to Virtual Assets ( VAs ) and Virtual Asset Service Providers ( VASPs )” 4 is the inclusion of the proliferation financing issue within the broader context of the standards . The updated guidance widens its reach by including new categories of digital assets and service providers under the umbrella of VAs and VASPs . As a result , no financial asset will be completely excluded from FATF ’ s standards . In June 2023 , FATF again issued a targeted update on the implementation of its standards on VAs and VASPs , regarding country compliance “ with FATF ’ s Recommendation 15 and its Interpretative Note ( R . 15 / INR . 15 ), including the Travel Rule , and updates on emerging risks and market developments , including on Decentralized Finance ( DeFi ), Peer-to-Peer transactions ( P2P ), and NFTs , unhosted wallets , and stablecoins ,” noting that “ 75 % of jurisdictions are only partially or not compliant with FATF ’ s requirements .” 5
The use of cryptocurrencies , stablecoins , and , to a lesser extent , CBDCs ( e . g ., the digital yuan [ e-RMB ]) will remain a controversial legislative , regulatory , jurisdictional , logistical , technical and political matter . Reputable casinos can only operate under the clear assumption of legality and must strive to uphold the regulations of the jurisdictions that govern them . This , in turn , will increase trust in the industry and drive business forward .
Conclusion
Over the years , various jurisdictions have augmented legislation focused on AML / CTF , counter-proliferation financing and targeted financial sanctions in an effort to mitigate those risks . The financial sector , and the gaming industry by extension , has consequently become one of the most highly supervised and regulated areas of the economy .
These regulatory programs rely on risk-based approaches that include customer due diligence procedures , ongoing transaction monitoring , the reporting of suspicious activity and high-value operations to regulatory authorities , along with massive surveillance capabilities . Nevertheless , emerging compliance challenges such as those presented by digital currency and the potential for anonymity in transactions at casinos underscore the importance of effective compliance programs . By implementing robust and novel programs , casinos can help to prevent money laundering and terrorist financing activities , protect their reputation , and contribute to a safer and more secure society .
Carlos Cardoso , CAMS , CC , investigations manager , MGM Macau , carloscardoso @ mgm . mo
Anne Marie Lacourse , consultant , Sayari Labs , USA , annemarie @ sayari . com
1
“ Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers ,” Financial Action Task Force , June 2019 , https :// www . fatf-gafi . org / en / publications / Fatfrecommendations / Guidance-rba-virtual-assets . html
2
“ Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing ,” Financial Action Task Force , September 2020 , https :// www . fatf-gafi . org / en / publications / Methodsandtrends / Virtual-assets-red-flag-indicators . html
3
“ Internet Organised Crime Threat Assessment ( IOCTA ) 2018 ,” Europol , January 11 , 2019 , https :// www . europol . europa . eu / internet-organised-crime-threatassessment-2018
4
“ Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers ,” Financial Action Task Force , October 2021 , https :// www . fatf-gafi . org / en / publications / Fatfrecommendations / Guidance -rba-virtual-assets-2021 . html
5
“ Virtual Assets : Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers ,” Financial Action Task Force , June 2023 , https :// www . fatf-gafi . org / en / publications / Fatfrecommendations / targeted-update-virtual-assets-vasps-2023 . html
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