Risks of money laundering and terrorism financing in gambling

Games of chance fall under the Act on the Prevention of Money Laundering and Financing of Terrorism (Wwft), which is intended to prevent abuse of the financial system. With the introduction of new European policy (the AMLR Regulation) and changes in the sector (especially due to the Koa Act, 2021), there was a need for an updated assessment of the risk in the various subsectors of games of chance. The results of this research serve as input for the policy decision on whether certain subsectors of games of chance qualify for an exemption from (part of) the AMLR obligations, such as client due diligence and reporting of suspicious transactions. Dialogic conducted this research in collaboration with Prof. Dr. Thomas Incalza.

Analysis framework

In the research, potential routes for money laundering and terrorism financing have been identified for each subsector. For each route, the following steps are taken to assess the risk.

1. For each money laundering route, we determine the likelihood of a route being exploited, as a function of the maximum input, return and success rate. The resilience of a subsector, i.e. the preventive effect of the existing legal, supervisory and operational framework, is taken into account. This is based on current regulations.
2. For each route, we determine the current risk. The current risk is a function of the likelihood of the route being used and the consequences of using the route for the financial system and society.
3. If the current risk of a route warrants it, we describe any potential new mitigating measures and their impact on the route and risk. This leads to a judgment on the residual risk per route.
4. Taking all routes in the subsector into account, we determine the risk for the subsector. We consider the vulnerabilities of the subsectors, identified in the most recent supranational risk assessment for money laundering and terrorism financing (SNRA), the national risk assessment (NRA), collectively. If the risk is assessed as low, the ministry - with approval from the European Commission - may grant an exemption from the AMLR obligations for this subsector.

Results

For land-based sports betting (art.15 Wok), we conclude that the current risk of money laundering is not low. This is due to the higher possible stakes through various sales points, leading to a high likelihood of this route being taken (with amounts between €2,000 and €10,000). The risk assessment is established by this high likelihood, combined with the potentially significant consequences for the financial system and strengthened by signals from the National Police. As a mitigating measure, we propose that bets must be placed through an account with verified identity if the stake exceeds a certain threshold, for example, €200. With this measure, the residual risk of land-based sports betting is assessed as low. The other subsectors, namely lotteries (art. 2, 8, 14a and 27a Wok), gaming machine halls (art. 30b and 30h Wok), the Totalisator (art. 23 Wok) are all assessed with low current risk. The addendum with the risk assessment of online gambling (art. 31a Wok) will be published at the end of April.