Operators in the UK’s gambling industry are being urged to remain vigilant in their anti-money laundering (AML) practices as new challenges emerge that threaten to undermine progress made in the sector.
In a blog published on 14 February, Gambling Commission enforcement director John Pierce said that some operators are “not appropriately obtaining and scrutinising source of funds and source of wealth information in line with the risks seen”.
According to Pierce, this included cases of operators over-relying on customers’ self-declarations and open-source information to manage money laundering and terrorist financing risks and operators not following their own procedures to obtain Source of Funds (SoF) information at certain points.
“A key failing identified is operators not appropriately scrutinising the SoF information they receive,” said Pierce.
“We emphasise that we expect SoF information to be requested on a risk-based approach but, where this is done, it should not be treated as a tick-box exercise. It is key that staff are given sufficient guidance on how to review documents and identify red flags, how to verify SoF information, and how to record their decision making,” he continued.
Pierce also encouraged operators to review their monitoring procedures and customer profiles “to ensure that a customer’s risk profile aligns with a full range of risks, such as geographic, customer transaction and product risk”.
Customer risk profiles should reflect all the information the business holds on a customer, he confirmed.
Although the Gambling Commission believes that the gambling industry has improved in recent years, the regulator has found cases where customer risk profiling and ongoing monitoring does not reflect the risks that the business has identified in their risk assessment.
The Commission also continues to see cases of operators with enhanced customer due diligence and know your customer (KYC) triggers that are “ineffective at managing money laundering and terrorist financing risk”.
This includes:
- Procedures that do not appropriately take customer salary or wealth into consideration to identify disproportionate spend.
- High financial triggers that allow large sums of money to be transacted before the first AML review is undertaken on a customer.
- Operators relying on financial triggers alone, rather than taking a risk-based approach and considering the knowledge they hold of the customer and their risk profile.
To combat this, Pierce suggested that operators should consider setting realistic and effective monetary and non-monetary thresholds and triggers for determining when further information should be sought from customers, as well as seeking such conversations earlier on in the customer relationship.
A robust approach to AML practices is particularly important considering several key emerging threats that operators in the UK’s gambling sector need to be remain vigilant about.
These include customers using artificial intelligence (AI) to forge ID/SoF documents, ID farming (where individuals or companies have collected personal data to obtain bank accounts and open gambling accounts for use in fraud), an increase in the organised use of mule accounts and the use of crypto currencies.
Enforcement director John Pierce stressed the need for a collaborative approach to AML defences within the UK’s gambling sector to combat the future challenges it faces.
“The Commission and I fully recognise the importance of ongoing collaboration between industry and the regulator in tackling and managing money laundering and terrorist financing risks,” commented Pierce.
“Combating money laundering and terrorist financing is a challenge we must tackle together.
“These risks pose a serious threat to businesses, consumers, and society as a whole; and the Commission remains steadfast in addressing them,” he said.
Read the full report here.
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