Compliance in Casinos: 5 Common Mistakes and How to Avoid Them

There are plenty of AML articles on compliance in casinos, yet these are often too generic to help tackle the actual problems that businesses face.

To give companies something a bit more useful, we have analyzed the UK’s regulated market and gathered the most typical cases of AML fines and the reasons behind them. Scroll down for a practical insight from our legal experts.

Mistake 1: improper identity checks

Casinos are often found negligent in their execution of identity checks, by failing to adequately automate their processes and fraud detection mechanisms. Just like that, Videoslots (fined £1m) failed to perform an accurate identity check on their client, who managed to pass verification with a fraudulent driving licence.

Lessons to be learned

Identity verification is a very important step in singling out the fraudsters and underaged users, who are trying to access a casino service. To stop yourselves getting into trouble legally and financially, there are a few things that you can do.

• A compliant KYC/AML system
  To stay up to date with the regulatory requirements and properly conduct checks, companies require you to adopt an accurate, compliant system that falls in line with the active legislation of the relevant regions.
• Proper AML guidelines
  To make sure that employees know what they are doing, it is important to specify the guidelines of identity verification. For example, what is asked of a user, how the information should be processed to safely confirm its validity, what happens if the submitted document is rejected as invalid or fake, etc. Compliance officers have to carefully follow the guidelines to thoroughly verify every client.
• Automated checks
  Partially automating your document verification process helps to identify fake applicants faster and more accurately.

Get up and running in minutes, with the help of the right KYC solution.

Mistake 2: failure to verify proof of source of funds

Second on the list is an inadequate source of funds (PoSoF) check, which is a serious AML violation. Casinos are often found failing to check PoSoF; they trust that they have received a valid document and proceed to allow customers to gamble. This leads casinos into the dark about the source of the money that they have processed, money that could have been easily obtained illegally. Casumo (fined £5.85m) and Betfred (fined £322k) both went down the same road.

Lessons to be learned

Determining a client’s source of funds must be the first item on the agenda for any casino. This way, businesses can block fraudsters, who deposit illegally obtained funds, or addicts, who steal from their family to place a bet.

• Upfront PoSoF verification
  Don’t put it off until later, it is better to verify proof of source of funds immediately upon registration. The business will be aware of the user’s salary and block their account if their losses exceed their level of disposable income.
• Proper PoSoF guidelines
  Casinos must make sure that they are maintaining the right standards. For that, they need to specify when PoSoF will be requested, how it is checked by compliance officers, and what happens if the submitted document is rejected as invalid or fake.
• Automatic triggers
  Setting up automatic triggers for PoSoF verification helps to ensure users go through the check. If a business implements these triggers, their system will block the user’s account until the appropriate document has been submitted and verified. An example of such, could be a losing streak trigger.
• Employee training
  Making sure that the relevant staff are adequately trained is invaluable to a casino’s compliance procedures; the compliance teams need to know when to request and how to verify PoSoF.

Make your proof of source of funds verification smarter.

Mistake 3: poor client monitoring

Going further, we should pay attention to failures in consistent monitoring. Once a client has been onboarded and verified, some casinos end their watch. Yet, failing to scrutinize the source of funds, and all the transactions a client undertook throughout their customer lifespan, is another serious violation of AML laws. Daub Alderney (fined £7.1m) is a real life example of such conduct—a casino that failed to conduct appropriate ongoing monitoring of a business relationship.

Lessons to be learned

It is important to remember that evaluating and observing clients doesn’t stop after their onboarding or first deposit. Ongoing monitoring persists throughout the business relationship and ends only when a client leaves the casino.

• Non-stop monitoring
  The surveillance of an individual shouldn’t stop after the user has been onboarded, but should continue until the user leaves the Casino.
• Careful assessment of each user case
  Monitoring has to be thorough. It is important to pay close attention to the sources of information, the accounts users hold, and transaction patterns.
• Compliance reports on monitoring
  It is crucial for businesses to always document their AML processes to then prove their actions to regulators, if money laundering was detected on the platform. Without these reports, casinos are likely to receive bigger fines.

Further reading: Introduction to Suspicious Activity Reports and Best Practices

Mistake 4: loose risk assessment and EDD

There are casinos that neglect proper risk assessment , fail to spot clients with a higher risk of money laundering, and skip over requesting a proof of source of funds. Mr Green (fined £3m) was one of those casinos.

Lessons to be learned

Enhanced due diligence is the ultimate defence against suspicious high-risk and criminal users. So, casinos must make sure that their employees have up-to-date knowledge of the AML regulations, and can determine cases that demand a more profound assessment to avoid trouble.

• EDD triggers
  Businesses use EDD triggers to help them quickly detect and ensure a more thorough verification for high-risk customers such as PEPs.
• Critical document assessment
  It is important to critically assess the documents that prove one’s source of funds and source of wealth, to make the right decisions in confidence.
• Clear risk-based policies
  Another essential practice for casinos is to create clear and up-to-date risk-based policies that are tailored to their business. They should control the implementation of these policies and thoroughly train their employees.
• Compliance reports on EDD
  Again, if a business is documenting the entire process, it will help them later on to prove their actions to regulators.

Further reading: Enhanced Due Diligence: Guidelines and Checklist

Mistake 5: undetected problem gambling

When gambling becomes more than just a hobby, and turns into an addiction, things can go south. Customers could spend their money without having proper income, selling their property or stealing money from their relatives to have another shot at the game. Ultimately, the casino will be one of the parties to blame and bear fines for this.

The list of casinos who failed to check if their customers had gambling addiction goes on without end—William Hill (fined £6.2m), Paddy Power Betfair (fined £280k), Sky Bet (fined £1m), Caesars Entertainment (fined £13m), 32Red (fined £2m).

Lessons to be learned

One of the biggest problems that casinos get into trouble for is being unable to recognize addictive behavior in their customers. This is indeed a requirement under the UK license. Casinos must be able to recognize when a user suddenly starts spending beyond their means or shows erratic spending patterns.

• Upfront PoSoF verification
  Casinos must verify the source of funds of the customer upon onboarding. For all you know, a customer might be spending all of their savings, betting loans and money borrowed from family.
• Restrictions for the self-excluded
  All clients must be checked for self-exclusion. The self-excluded are problem gamblers who registered themselves to avoid relapsing in moments of weakness. Prevent them from entering the casino or opening duplicate accounts.
• Addictive gambling triggers
  Casinos can set up triggers for addictive gambling patterns and signs. For example, when users place high-outcome but risky bets, chase losses, or show erratic betting patterns.
• Targeting the right audience
  Adjusting marketing campaigns will ensure that a casino doesn’t promote to those on the self-excluded list.

Criminals often target casinos as their main money laundering engine, which can cost casinos up to $16 million, the highest recorded fine. Of course, forewarned is forearmed, and being a little more cautious with the implementation of right AML policies is the correct way to go.

Further reading: Guide to KYC & AML Compliance and Responsible Gambling for Betting

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