| Casinos and money laundering |
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Casinos are a dream vehicle for the
money launderer with dirty notes to absorb into the system.
Money goes in and out of casinos with such speed and in such
quantities that regulators and cashier struggle to track it
efficiently. That is why the law places great reporting burdens
on companies that operate casinos. They are treated as financial
institutions in much the same way as banks and are subject
to money laundering regulations contained in the Proceeds of
Crime Act 2002. The owners of casinos are likewise subject
to scrutiny and their anti-money laundering procedures required
to comply with defined reporting procedures.
Money laundering through casinos started
with the drug, hooch and mafia barons in the United States
in the 1920s and 1930s. They set up gambling dens in offshore
centres like Cuba and The Bahamas to hide their dirty money
from the authorities' gaze. Al Capone and Meyer Lansky took
cash to the islands in suitcases and simply mingled it with
that running through the gambling system. These off-shore locations
might today be the chosen bases for on-line casinos, as local
regulation is minimal and graft and corruption are rampant.
Their host of name-plate banks makes them convenient repositories
for money that casinos create.
Casinos today are very reluctant to
accept cash and any one who seeks to buy their chips with large
quantities of cash are likely to be the subject of a report
to the National Criminal Intelligence Service. Like banks,
casinos must make a report on anyone seeking spend £10,000
worth of cash or more. But many casinos will go one further,
and require a punter to use a credit card to pay for his chips.
That allows the casino to identify the user, as well as the
source of his cash. 'Casinos have bought into the 'know your
customer' regime applied to banks,' said one investigator.
'They are tightly controlled. The days when they were laundromats
for dirty cash have gone.' Casinos are also required to register
large cash pay outs, to protect them against a money launderer
falsely claiming that he won dirty money at a casino. |
| The grand buildings in central London
or the provincial leisure and shopping facilities planned by
the Government offer little money laundering risk. The real
worry today is the abuse of the on-line casino that resides
in cyber space. Control here is minimal, and scope for abuse
rampant. |
| One investigator told of a drugs baron
who lived the life of Reilly in the West Indies. His bank account
was in his home town and he wanted to pull together in a single
account the profits from his drugs business which were scattered
around the Caribbean and further afield. His solution was dangerously
simple. He set up an on-line casino based in his West Indies
island. He then gave each of his far-flung operatives a credit
card and told them to use the cards to merrily gamble away
a fixed sum on his casino. Their losses were clearly the casino's
gain, and he deposited them at the local bank. The mafioso
paid the credit card bills with his dirty money, so ensuring
both the transfer of the earnings to his account, and the removal
of some compromising cash. |
| 'On-line casinos are ready made for
money laundering,' says Michael Adlem, the managing director
of Protivity, the UK risk consultancy. 'This criminal activity
relies on the use of credit cards, and the only way it can
be stopped is if Visa and Mastercard are excluded from the
gambling arena. That would kill on-line laundering stone dead,
but the credit card firms would resist it fiercely. For them,
it is a money machine.' |
| 'Due diligence of on-line gambling
is not as stringent as it is in other financing institutions,'
says Frank Yu of Hong Kong's Ion Global. 'The on-line gambling
site can be properly legitimate. But many fail in performing
the due diligence of finding out who they are accepting money
from and who they are giving money to.' Similar concern was
expressed by Rick McDonnell, the head of the Asia Pacific Group
money laundering division, a part of the Financial Action Task
Force. 'Internet gambling is a vulnerable area. It is a risk.' |
| Casino owners who engage in money
laundering have been found using sophisticated technology included
in slot machines offering very high pay-outs. These owners
can override the machine's random system, using a 'backdoor'.
They can then arrange for someone who is part of the plot to
make a big winning. The 'winner' has not had to supply the
casino with personal details, as he would have to do if he
were a conventional gambler, and the money can be taken without
the casino making a report. |
| Cash reporting systems within casinos
are the bulwark upon which the government's control apparatus
is based. But this system is subject to vulnerable to abuse
by an outsider, who may try to bribe an employee to overlook
a cash payment or deposit. So i n June 1998, four casino employees
working at three casinos in Nevada were arrested and charged
with laundering $400,000 for undercover agents whom they believed
to be drug . |
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