FATF Names the Red Flags for Casinos and Online Gambling in a Global Study

The Financial Action Task Force has spent a year on gambling, with input from more than 80 jurisdictions, and its report reads as a supervisory checklist rather than a warning. The finding operators will least enjoy is that online platforms show more documented terrorist-financing misuse than the land-based sector.

• The Financial Action Task Force has published a report finding that online gaming platforms are increasingly used for money laundering and terrorist financing
• More than 80 jurisdictions, industry associations and researchers contributed to the year-long study, which covered casinos, gambling and video gaming, including the illegal sector
• It identifies cash, e-wallets, mobile money and virtual assets as payment methods vulnerable to a range of laundering risks, because they allow rapid, anonymous, cross-border movement and conversion of value
• The report sets out red-flag indicators for compliance teams, regulators and law enforcement, including mismatched IP and stated location, and large cumulative deposits and withdrawals with little betting activity
• FATF president Giles Thomson said that without robust safeguards the sectors "can be attractive getaways for fraudsters, professional money launderers, and organized criminal networks"

A Standard-Setter, Not a Trade Body

The Financial Action Task Force, the Paris-based global financial crime watchdog, has published a report concluding that online gaming platforms are increasingly used for money laundering and terrorist financing, and that the spread of unlicensed and offshore platforms using a range of payment methods has created risks that are not well regulated.

The study is unusually broad. More than 80 jurisdictions, industry associations and researchers contributed over a year, and it examined risks across casinos, gambling activities and video gaming, taking in both the licensed and illegal sectors.

Payments are the centre of it. FATF found that methods associated with gaming, including cash, e-wallets, mobile money and virtual assets, are vulnerable to a range of laundering risks, because the variety of options accepted by operators increasingly permits rapid, anonymous, cross-border transactions and the conversion of value between forms.

Its findings on online platforms are sharper than on land-based ones. FATF found online casinos and sports betting platforms more exposed to laundering risk, with money able to move in and out of accounts even without significant gambling activity, and transactions structured into smaller amounts, a practice known as smurfing, to stay below the thresholds that trigger know-your-customer or anti-money-laundering checks. The study found online gaming platforms have more documented terrorist-financing misuse.

The report also draws in the platforms around gambling rather than just the operators. Online gaming and gambling services are increasingly interlinked with social media and other digital platforms, FATF said, which raises risk because social media can be used to coordinate illicit activity, including competition manipulation, advertising illegal or unlicensed gambling, recruiting money mules, and disseminating terrorist propaganda and fundraising.

The practical output is a list of red-flag risk indicators aimed at compliance executives in land-based casinos and online gaming companies, at regulators and at law enforcement. They include a mismatch between a customer's IP address and stated location, a customer located in a country where gambling is illegal, reluctance to provide the source of funds, customers in or enquiring about moving funds to a higher-risk jurisdiction, and large cumulative deposits and withdrawals accompanied by little betting activity.

FATF president Giles Thomson urged governments to note the indicators and put risk-based responses in place, ranging "from strengthening oversight and cracking down on illegal and offshore operators to boosting international co-operation and deepening public-private collaboration".

This Is the Document the Sector Has Been Missing All Week

Two industry-funded studies landed this week putting the illegal market at €12 billion in Europe and $50 billion globally, and both ran into the same problem: every number came with a sponsor attached. FATF has no commercial interest, sets the standards that national supervisors are assessed against, and has just published risk findings drawn from 80-plus jurisdictions. It does not size the illegal market, which is the one thing the trade bodies wanted. What it does is give regulators a mandate to act on the payment rails, which is what both of those reports asked for.

Red-Flag Indicators Become Examination Questions

FATF language has a predictable afterlife. Indicators published in a report of this kind turn up within a year or two in national supervisory guidance, then in examination checklists, then in enforcement notices citing a failure to detect them. An operator reading "large cumulative deposits and withdrawals with little betting activity" should understand that as a control its regulator will eventually ask to see evidence of, not as an observation. The same goes for the IP and stated-location mismatch, which is a harder ask than it sounds for any operator serving a jurisdiction with heavy VPN use.

The Terrorist-Financing Finding Changes the Category of the Conversation

Money laundering through gambling is an established supervisory concern that operators are resourced to argue about. A finding that online platforms carry more documented terrorist-financing misuse than land-based ones moves the subject into national security, where the tolerance for a slow remediation plan is considerably lower and where the agencies involved are not gaming regulators. It sits alongside the social media findings: recruitment of money mules and terrorist fundraising are described as happening on the platforms that also advertise unlicensed gambling. Operators who have treated affiliate and social channels as a marketing compliance question now have a second reason to look at them.

FATF has not told the industry anything it could not have inferred. It has written it down, in the document that supervisors are measured against, which is a different thing entirely.