Anti-Money Laundering in Casinos: A

Anti-Money Laundering in Casinos: A Safety Net

Casinos are always at a risk of becoming a target of money laundering. Hence, we take a dive into security and vigilance mode of casinos to stay away from dirty money.

By Donna Amo

As casinos handle copious amounts of money, security is any casino’s top priority. In places where huge amounts of cash are involved, criminal activity is just lurking around the corner. It then becomes the responsibility of casinos to put measures and guidelines to prevent these kinds of illicit activities from taking place. While there are various kinds of casinos crimes that can occur, money laundering is most often associated with casinos.

Since casinos are a cash-based industry, it is not uncommon to see people come or leave with truckloads of money. However, this is precisely the kind of place that criminals look for when starting a money-laundering operation. Casinos are always at a risk of becoming a target of such activities, and hence, security and vigilance play an essential role.

A Sneak Peak Into Money Laundering

Money laundering is the illegal process of turning large sums of black money, i.e., money generated by criminal activities like drug or sex trafficking, into clean cash from a legitimate source. This process, known as money laundering, is a way to clean or ‘’launder’’ dirty money. While the concept of money laundering is easy to understand, the actual process itself is a bit more complicated.

The process has three stages, namely placement, layering, and integration. In the placement stage, the illegal money gets deposited into legal, financial systems like bank accounts registered to anonymous corporations or offshore accounts. Here, the criminal money is cleaned and disguised as coming from a legal, economic system. The second stage is called ‘’layering,’’ where criminals make the illegal money difficult for authorities to detect in these laundering activities. This is done by obscuring the money trail through the various strategic layering of transactions and falsified bookkeeping. This is a crucial stage in the process as the source of the money is concealed.

The third and final stage is ‘’integration,’’ where the criminal money is integrated into the economy. This is where criminals pass the money through places like casinos or invest it in real estate, where they can now create a plausible reason for the source of the funds. After this, criminals can then reunite with their ‘’legal’’ money. It becomes tough to distinguish between legal and illegal wealth after this stage. It should be noted that these stages overlap with each other, with some forms of money laundering skipping the first step of ‘’placement.’’

Enrique Pena Nieto, Former President of Mexico, once said, “I think money laundering is giving oxygen to organised crime.” Money laundering is illegal because it is a way that allows criminals to profit from their crimes. Without laundering their ill-gotten gains, criminals will have difficulty explaining from where they got these vast sums of money. According to a United Nation’s report, 90% of the global money laundering activities go undetected every year. Once the money has been integrated into the economy, tracking its source becomes close to impossible. The statistics show how effective the method is if done right and why criminals continue to look for ways to commit the crime.

Casinos - An Easy Target

Since financial transactions in casinos usually take place on a large scale, it is easy for criminals

Enrique Pena Nieto, Former President of Mexico

to use them to launder money. This is done by buying chips from the casinos in exchange for the cash they have in hand. Criminals can then return without gambling and take checks from the casinos after returning the chips. Once these checks get deposited in the bank, they are then used to purchase any goods. This is the process through which money gets laundered in casinos. The illegal cash now has a legitimate source created by submitting cash and receiving a check in return for the chips. However, staff and security teams in legal casinos are now very well-trained to spot any suspicious activities taking place. This is an important measure taken by casinos because any form of criminal activity is harmful to legitimate businesses and should be prevented.

Preventing Money Laundering in Casinos

While gambling is largely prohibited in India, it is permitted as an official activity in many other nations. One of the primary motivations for the growth of legal gambling is that it gives considerable revenue to governments and jobs to community groups. They are responsible for paying income taxes to the revenue authorities. However, the societal costs of illegal gambling outweigh the advantages when considering the influence of gaming on crime. Furthermore, more than half of gambling addicts turn to crime and fraud to feed their habit.

Casinos must be even more vigilant with their security measures to prevent these kinds of criminal activities. Once the security of the casinos is compromised, these kinds of activities can remain unchecked, allowing criminals to continue with their illegal operations. This is why there are specific guidelines upon which casinos base their antimoney laundering (AML) policies.

For employees working in casinos, an AML course is a compulsory training program to spot money laundering activities. Here staff are trained to recognised red flags of money laundering.

Red Flags:

Refusing to provide the required information when making an account • Identification presented cannot be verified • Producing seemingly false information or identification that appears to be inaccurate • Closing an account after an initial deposit is made without reasonable explanation • Avoiding contact with reporting employees • Individual(s) involved in the transaction is linked to criminal activities

Globally, the Financial Action Task Force (FATF) develops and promotes policies to protect the financial

Ram Kakkar, Goa-based lawyer and poker player

system against money laundering and terrorist financing (FATF Report). The recommendations by the FATF are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.

In accordance with the guidelines provided by FATF, the Government of India has also put in place rules and regulations to prevent money laundering in the country. The Prevention of Money Laundering Act, 2002 and the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 are the laws to prevent money laundering in the country.

Failure of a casino to follow AML regulations have strong repercussions. While there are regulatory fines for certain violations, the real risk that casinos face with non-compliance is the potential risk of getting debunked. This is where casinos lose their relationship with the bank, as the bank chooses not to take on board the casino as its client. Once a bank rejects a casino, it becomes difficult to build back that trust and could prove to be the end of the casino.

Casino security is paramount in India

In India, casinos already have a ‘taboo’ reputation, and the threat of money laundering should not be taken lightly. Security thus plays a vital role in casinos with so many transactions and the involvement of large sums of money.

“It is vital for casinos and gaming industry in general, online and offline, to exercise the highest standards of vigilance, simply because the level of scrutiny and social stigma is higher. Any untoward incident could attract a disproportionately severe response from the judiciary, authorities, or the public. Since there is not much by way of casino or gaming regulations, the importance of due self-regulation by the industry leaders cannot be overstressed. They should be the torch bearers leading to legalisation and government regulation in the years to come. It should also be noted that criminal acts cannot be settled in India as they can be in some foreign jurisdictions. Any long drawn criminal trial would presumably be in feeble light,” said Ram Kakkar, Goa-based lawyer and poker player.

With the hard repercussions that casinos face when caught, they can’t ignore the need for proper security measures to prevent illegal activities like money laundering. The bar is set even higher for Indian casinos, and vigilance in security is the key.