The range of games in online casinos has long been an ideal target that was often misused for money laundering. Of course, this procedure is and always has been illegal, but nevertheless “dirty money” was “washed clean” in casinos when playing. In the gambling industry, online casinos and casinos are among those obliged to comply with the Money Laundering Act (AMLA). The operators are required to exercise a certain amount of care in identifying players and their money payments. With the entry into force of the new German State Treaty on Gaming in summer 2021, it will no longer be so easy to launder illegal funds in casinos or virtual casinos, at least in Germany.
Online casinos with license from other EU countries
What is money laundering?
Illegally earned money, such as drug money or income from prostitution, robbery, embezzlement, undeclared work or other criminal activities, cannot be brought into the normal, legal financial circuit or economic circuit so easily. If you own larger assets and want to deposit them into an account, for example, you usually have to provide your bank with proof of the origin of the money. Financial institutions now require proof of origin for deposits or transactions of €10,000 or more.
Without this measure, illegally obtained funds could easily slip past law enforcement. In order for illegal assets to be brought into the legal financial cycle, small amounts of cash must be used somewhere and thus “laundered”. If this is successful, it is no longer possible to trace where the funds came from.
Criminal gangs have chosen online casinos for this purpose. On the internet, several gang members deposited money via untraceable payment services such as Paysafecard, played games, accepted losses and then paid out the remaining money as winnings.
This prevents money laundering in online casinos
White-collar crime is still a current topic. Therefore, more and more measures are being taken by the government to prevent money laundering activities. Also in online casinos. The new gambling law in Germany has finally put an end to the whitewashing of illegal income in online casinos. In the meantime, all players have to be verified with their ID documents using Video-Ident when registering, and the deposits of the players are now also completely documented by the operator. This makes it quite difficult for criminals who want to bring their illegally earned income, i.e. black money, into the legal money cycle.
The know-your-customer principle ( KYC principle ) plays a key role in preventing money laundering when new casino accounts are opened. Sources of money that cannot be traced will no longer be accepted. That is why there is hardly an online casino with a German license that allows Paysafe as a payment method.
German casinos are no longer attractive to money launderers
With the new gambling law, there are many changes for online casino providers who are trying to obtain a license from Germany. Although the EU Money Laundering Directive also obliges all gambling providers from other EU countries, the handling in Germany is still a bit stricter. The legal requirements in the State Treaty on Gambling not only specify the procedure for money laundering prevention, but also some clauses regarding player protection.
One of them, for example, is the monthly deposit limit of a maximum of €1000 . These €1000 per month are not suitable for illegal machinations, which is why you can be relatively sure that no more money will be laundered in the online casino Germany since mid-2021 at the latest.
Foreign authorities are also taking a close look and are very keen to put a stop to the criminal activities. However, not too much has happened in the EU-licensed virtual casinos in this regard. With regard to the disclosure of player data and transaction control, one is even more cautious here. Most online casinos in the list above are monitored internally and player safety is controlled by government regulators. But you can still deposit real money at many with payment methods whose source cannot be proven one hundred percent. There is a need for action here, because in the case of online casinos, the money flows can hardly be traced afterwards.
Money laundering in brick-and-mortar casinos and arcades
Land-based gaming venues used to be a veritable gold mine for infiltrating illegal funds into the financial cycle. Scammers could buy chips with cash, play a few rounds and then withdraw the remaining money including any winnings as ‘clean money’. It was thus possible to disguise the criminal origins of many a fortune. These places, where large sums of money are constantly changing hands between their owners, were an Eldorado for money laundering gangs.
Hardly any area of gambling – be it horse betting, lotteries, sports betting, gaming libraries or casinos – is not associated with money laundering. In the past you could just walk into the casino, buy chips and take part in the game, but today you are forced to reveal your personal data at the entrance. So there is an immediate check. You don’t get a receipt for winnings that you cash out at the end – so you still have no proof that the money came from a legal source and that you earned it cleanly and lawfully. Transfers to an account are also not common.
Casinos abroad are a bit more lax in this respect, even if video cameras are now used here and every change of cash into chips is recorded. At least afterwards, it is still possible to see on the tapes for a while who, when and how much money passed over the croupier tables.
Online casinos are more prone to illegal money flows
Whatever the authorities, online gambling is vulnerable to player money laundering. More vulnerable than land-based casinos, as some can even be played more or less anonymously. Although the operators of online gambling halls are obliged to report any suspicion to the anti-money laundering authority, the Financial Intelligence Unit, they are damaging their own business by doing so. Unlike banks, casino operators earn a lot of money from their players’ bets.
It should therefore hardly be surprising if the so-called suspicious activity reports do not materialise. The fewest reports of suspected money laundering come from the non-financial sector. The coordination of money laundering prevention is also lagging in Germany and state institutions are shifting responsibility back and forth between the individual institutions and authorities.
A multi-million dollar business
Why do the authorities find it so difficult to control and coordinate all this? The answer is relatively simple, because it is about money. Money that fills our empty tax coffers. According to the European Gambling Association, the German online gambling industry has a volume of almost 3 billion euros. It is difficult to estimate what proportion of this comes from illegal gambling or is used for money laundering. With the new State Treaty on Gaming, it is now the task of the gaming supervisory authorities in the individual federal states to take care of money laundering prevention and to weed out black sheep. No easy task!
The Bafin and the European Central Bank are completely left out, arguing that other foreign payment institutions are sometimes connected between the domestic banking institutions and the online casinos.
Players can make their deposits with payment providers such as Paysafecard, Giropay or Onepay. The banking supervisory authority then only sees the flow of money to these payment service providers, but cannot see the further path that the money takes. It is also not possible to completely prevent payments to foreign gambling providers and it is difficult if not impossible to precisely trace the flow of money. But it is possible that people are only too willing to look the other way because the banks do not want to forego their income from fees that are incurred through the online gambling business.