How easy is money laundering at the online casino?

It is an open secret that the gambling industry is sometimes used by criminals to launder money. This applies to both land-based and online casinos. Inadequate player identification can facilitate money laundering activities. Today we would like to answer the questions of how money laundering works in online casinos and how easy it has been, or in some cases is being, made for criminals.

Money laundering is the process of converting funds of illegal origin into the legitimate economy. In most cases, the illegal funds originate from criminal activities such as drug or arms trafficking, robbery or extortion. In the summer of 2021, we reported, among other things, on the laundering of millions of dollars at the Crown Casino in Melbourne. However, this article will focus specifically on money laundering in the online gambling sector.

How does money laundering work in the online casino?

For example, if a criminal earns money from crimes such as drug dealing, prostitution or tax evasion, he cannot simply deposit the money in his bank account. Sooner or later, they will be forced to 'launder' the illegal funds in order to bring them back into the legal economy. On the face of it, an online casino is not the best place to do this. After all, cash payments are not possible.

However, to launder the money, the perpetrator can use anonymous or pseudonymous means of payment such as prepaid cards or cryptocurrencies. This is followed by the layering phase. This is where the illegal money is used by the perpetrator in the online casino, for example on slot machines or table games. Naturally, low-risk games are particularly popular, so that as much of the illicit money as possible can be laundered. Criminals accept small casino losses as the "price" for laundering money. However, it is doubtful whether the criminals would try to recoup their casino losses afterwards.

The perpetrator then has the rest of the money paid out using the desired means of payment. The money can now be used freely. If questioned, it can be pointed out that the money was won in an online casino. The origin of the money is thus largely concealed. Back in March, we reported that the money laundering law in Germany had been reformed to make money laundering even more difficult.

How do online casinos prevent money laundering?

Naturally, casino operators are most interested in preventing criminal activity such as money laundering in their online casinos. They don't want to get a bad reputation and they don't want to help criminals commit crimes. For this reason, reputable online casinos today have strict measures in place to prevent money laundering.

For example, closed-loop payments are often used. This means that players must use the same payment method to make a withdrawal as they used to make a deposit. However, some payment methods can only be used for deposits and not for withdrawals.

In addition, reputable online casinos are placing more and more emphasis on clear verification of the player's account. Players are often required to upload not only a copy of their passport, but also other proof such as a utility bill. Otherwise, money launderers could simply use stolen identity documents to do their deeds.

More and more online casinos are also trying to trace the origin of funds, at least for larger amounts. This is called Source of Funds Control (SoF). There are also checks on the origin of the funds. This is called Source of Wealth (SoW) control.

In addition, more and more online casinos are using technology to detect suspicions of money laundering. An experienced casino operator will be suspicious if large deposits are made using certain payment methods, the funds are then wagered only a few times in the casino and then paid out directly. In an article published in May 2021, we tried to answer the question of whether the risk of money laundering is particularly high in online gambling.

Conclusion

Today, money laundering is not as easy as it was a few years ago, at least in reputable online casinos. However, this does not mean that money laundering is no longer a relevant issue in online casinos. The fact is, however, that money laundering is unlikely to be attractive to criminals, at least in online gambling houses with a German licence. This is mainly due to the strict official controls as well as player protection measures such as a game duration of five seconds and a maximum stake of one euro per game round. Here, the money launderers would probably need several hours and days to launder even a few thousand euros.

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