New tech tools help reduce AML risk

Douglas Wolfson, Director, Financial Crime Compliance, LexisNexis Risk Solutions.

Casino managers have a growing array of technology tools at their disposal to help them overcome money laundering risks, both in online and land-based gaming.

Casinos and online gaming sites have long been the target for criminals seeking to launder illicit funds. Although casinos have significantly stepped up their efforts to understand who is playing at their tables, there are still opportunities for one to walk in with cash, convert it to chips, play for a while, then convert the chips back to cash, without ever giving a name or any personal information.

Online gaming also has an anonymity problem. While a registered user must give their name and some personal information to open an account, the site never meets that individual, so it’s difficult to know whether the registered user and the actual user are the same.

To ensure that physical and online casinos are being frequented by good, rather than bad actors, management needs to adopt the most up-to-date technology available to them, resulting in transparency in their player pool, whether in person or online.

Casinos generally begin actively managing risk with high rollers who gamble with tens of thousands to millions of dollars. Although most already screen these players prior to arrival, the latest technology allows more to be done.

These days, most high rollers pre-wire their money or take a marker before they arrive at the casino. This creates risk, as it is not necessarily clear who deposited the funds. Casinos can now harness technology that allows the monitoring and analysis of where the wire transfers are sent from and the pattern of actual money movement, reducing the likelihood that it is for money laundering purposes.

However, casinos can also take steps to reduce their risk before cash is deposited or a marker is requested. Prior to receiving wire transfers or the arrival of a high roller, a casino can collect information on clients to perform know your customer (KYC) and anti-money laundering (AML) checks. Casinos can now use a mobile app to collect vital information to validate the identity of a client before he or she arrives. 

In addition to monitoring where the money comes from, casinos can monitor where money goes after a player cashes out. Ideally, the outgoing transfer should be restricted to the same account or accounts that it originated from, but in all cases its destination should be monitored. Digital intelligence tools can quickly analyze incoming and outgoing transfers to identify potentially risky transactions and trigger Suspicious Transactions Reports filings.

If a casino allows a client to “pre-register” their national identity card or passport via a smartphone camera (including a selfie for a facial recognition match), the client’s identity can be authenticated before arrival and double checked on arrival. In addition, by using an app to collect information about the device holder, the casino has a higher chance of knowing that the smartphone owner and registered user are the same person and can check a database to determine whether that device has ever been used in potentially illegal ways. These relatively simple procedures are the first steps in reducing the risk and likelihood of a casino inadvertently onboarding criminals.

Together, these applications represent an integrated screening and monitoring platform to help mitigate risk by complying with AML and KYC requirements. Combining these technologies with global identity intelligence, industry-recognized data and analytics and time-tested expertise should help casinos streamline their compliance obligations.

A recent study estimated that the global online gambling market is set to grow at a rate of 11 percent per annum between 2018 and 2022, and that 44 percent of this growth will come from the APAC region alone.

Anonymity risk is not unique to online gaming sites. Rather, it exists for any company that wants to do business over the internet. To overcome this anonymity, a site must analyze a client and the way they use their device, to determine whether they are potential criminals or if their device has been compromised. As a follow on to this process, the operator needs the technology to block high-risk players in real time and authenticate players transparently to not only protect revenue and reputation, but also to deliver a frictionless digital experience to trusted players.

This digital behavioral analysis can highlight patterns that help establish a user’s digital identity, revealing if certain devices, locations and IP addresses have been associated with bad actors in the past. This is a powerful tool for stopping the most obvious threat of cybercriminals gaining access to customer accounts and draining them of funds, or virtual currencies, or trying to exploit free bonuses offered when new accounts are opened.

That said, more complicated fraud cases like collusive play can also be identified in this manner, preventing fraudsters from manipulating gambling outcomes by using a series of linked accounts to control several hands at a single online poker table. This, and similar types of attacks, can lead to huge losses for casinos and frustration among trusted users who are trying to enjoy online gaming.

The opportunities for online gaming companies to reduce online risks via KYC and AML practices goes far beyond these tools, however. New methods of reducing the likelihood of financial crime are being developed daily. A simple example is the ability to monitor both the apparent IP address of a device, and to use monitor the apparent IP and virtual private network (VPN)  – or proxy address – of a device. If the actual IP address is from a sanctioned country, for example, the gaming site would know immediately the risk at hand.

As impressive as these methods seem, identifying potential money laundering can be like aiming at a moving target. For instance, a money launderer might look to use 10 or 20 accounts to place offsetting bets on a sporting event. This strategy can be difficult to detect. However, by capturing not only login data, but also the underlying device data, a gaming site can get a significantly better understanding of the activity being undertaken.

Casinos and online gaming sites will always be at a high risk for money laundering, given the anonymity provided by chip conversion at physical casinos or the use of online gaming sites. It is possible, however, to significantly reduce money laundering risk by using state-of-the-art technology. That technology can be deployed and tuned depending on the risk appetite of each individual casino and the type of business that they would like to run.

Existing technology can be deployed as the entity sees fit, meaning that the activity that a casino or online gaming site allows is ultimately a risk-based decision. As governments, regulators and companies grapple with the growing money laundering threat, technology is a key part of the jigsaw puzzle to beat criminals.