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The US Treasury has warned of the growth of the online gaming sector in its 2024 assessment of the national money laundering threat landscape.

The report highlighted that the size and rapid growth of the online gaming industry in the US has led to “unique money laundering risks”.

All US casinos have a number of obligations laid out in the country’s principal AML law, the Bank Secrecy Act (BSA).

Since many operators are licensed through a BSA-covered market access deal with a casino, they should be legally bound by the law’s requirements.

However, as the report noted, operators may not be aware of the BSA obligations required, may be licensed directly with the state gaming regulator, or indeed the relevant casino may not have insight into whether the operator is complying with the law.

“These factors, in addition to the volume of the betting activity, the rapid growth of the sector, and the lack of uniform requirements or regulations of these services across state, territorial, and tribal jurisdictions, present significant and increasing money laundering risks,” said the report.

Industry calls for online-specific BSA guidance

Alex Costello, vice president government relations at industry lobbying group the American Gaming Association (AGA), told that the industry has long called for online-specific BSA guidance to combat the money laundering threat.

“It is our long-held view that new forms of legal gaming, like online sports betting and iGaming, require specific BSA guidance to ensure the US financial system is protected from money laundering,” he said.

“In the absence of such guidance, AGA members have built on decades of experience from robust casino compliance to create and deploy AML controls for online gaming.

“Our members stand ready to work with the Department of Treasury to ensure that legal, online operators have the guidance needed to build on our current programs and meet the high standards already employed by the casino industry.

“This is in stark contrast to the illegal, offshore marketplace. These predatory websites—which rely on cryptocurrency and employ no AML safeguards—pose the most significant risk of gambling-related financial crimes.

“The federal government must prioritise enforcement against these bad actors to protect American consumers and the US financial system,” he added. 

Treasury outlines potential laundering schemes

The report argued there exist multiple kinds of money laundering scheme in online sports betting, many of which resemble traditional casino-based criminal plots.

These include the practice of depositing the proceeds of a crime into a betting account and then withdrawing to disguise the funds as betting earnings.

The Treasury highlighted several recent cases where this was done.

These included criminal charges filed in August 2023 outlining a Georgia man who funnelled $1m through a betting account to hide the source of the money, which came from donations from faith-based charities and individual donors.

The Treasury report also said offshore illegal gaming, accounting for roughly 40% of the US sports betting market, represents another important source of AML risk.

It added that crypto casinos have grown rapidly in importance since 2020, and present a unique challenge for combating flows of illicit finance.

The 2024 NMLRA

The US Treasury’s 2024 National Money Laundering Risk Assessment (NMLRA) aims to give private and state actors an up-to-date understanding of the current state of illicit finance.

“Treasury, through our National Risk Assessments, is at the cutting edge of analysing the global risk environment to protect the US and international financial systems from abuse by illicit actors,” said under secretary of the treasury for terrorism and financial intelligence Brian E. Nelson.

“We urge both the public and private sectors to engage with these reports, as well as our forthcoming National Strategy for Combatting Terrorist and Other Illicit Finance.”

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