AntiMoney Laundering and Keeping Online Gaming Crime Free

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Anti-Money Laundering and Keeping Online Gaming Crime Free 26 th February 2008 Gambling Compliance:

Anti-Money Laundering and Keeping Online Gaming Crime Free 26 th February 2008 Gambling Compliance: Executive Forum Leon Thomas Head of Regulatory Compliance and MLRO

Background: Fraud and AML in context 12/3/2020 2

Background: Fraud and AML in context 12/3/2020 2

What constitutes online fraud and abuse? Nuisance • Chat Room Abuse 12/3/2020 Suspicious •

What constitutes online fraud and abuse? Nuisance • Chat Room Abuse 12/3/2020 Suspicious • Bots • Collusion • Money Dumping • Bonus Abuser • Multiple Accounts Fraud/Crime • Money Laundering/Fraud Rings • Credit Card Fraud • Hacking • Phishing • Insider Betting 3

Financial Risks • Cost of Investigations & Inefficiencies – Staff costs – Revolving door

Financial Risks • Cost of Investigations & Inefficiencies – Staff costs – Revolving door of new accounts • Reputation & Cost Impact – Player trust & attrition – Shrinking deposits and deposit amounts – Lower share price/valuation • Higher Payment Processing Costs – Chargeback losses 12/3/2020 4

Legal Risks Regulation: Comply or Die • Regulated by the Third Money Laundering Directive

Legal Risks Regulation: Comply or Die • Regulated by the Third Money Laundering Directive • Licence Conditions from UK, Alderney Gibraltar & Malta operators • Industry Association Best Practice Codes Definition and Practicality • “Dirty money” being used to obviscate the source of funds • Money must already have been “laundered” • No cash is taken, only bank/credit card deposits Fraud 12/3/2020 Identity Theft Cheating Chip Dumping Sanctions List Tax evasion Credit Card Fraud Money Laundering 5

Anti-Fraud Tool. Box Internal Tools & Settings Verification Solutions Analysis/Engaging with Stakeholders Trained &

Anti-Fraud Tool. Box Internal Tools & Settings Verification Solutions Analysis/Engaging with Stakeholders Trained & Dedicated Staff 12/3/2020 6

Internal Tools and Settings 12/3/2020 7

Internal Tools and Settings 12/3/2020 7

e. Gaming AML Policy Systems and Controls • Appoint a trained MLRO independent from

e. Gaming AML Policy Systems and Controls • Appoint a trained MLRO independent from revenue generating departments • Senior Management take responsibility • Regular Reports of AML Compliance • Customer facing departments are trained in AML detection • Over 400 staff have mandatory online annual training • Risk based internal fraud/AML systems are implemented • Suspicious Activity Reporting procedures • Sanctions matching checks 12/3/2020 8

The Framework of Prevention Processes/Policies • Identity Verification Tools • In-House and Third Party

The Framework of Prevention Processes/Policies • Identity Verification Tools • In-House and Third Party Identity Tools • Velocity Analysis (deposit/redemption) • Cashout Restrictions • Geographic Risk Analysis • Blocklists/Geolocation/IP • Player Behaviour Anomaly • Automated Alerts • Exposing Player Associations • Automated Fraud Scrubbing • Cyber. Crime Arrest Policy • Shared Fraud Network 12/3/2020 9

Trained and Dedicated Staff 12/3/2020 10

Trained and Dedicated Staff 12/3/2020 10

Adds Value 12/3/2020 11

Adds Value 12/3/2020 11

Adds No Value 12/3/2020 12

Adds No Value 12/3/2020 12

Adds No Value 12/3/2020 13

Adds No Value 12/3/2020 13

Adds Value 12/3/2020 14

Adds Value 12/3/2020 14

Compliance Culture Fraud Department Customer Department Service Risk/Fraud Marketing Payments Investigations MLRO Compliance Legal

Compliance Culture Fraud Department Customer Department Service Risk/Fraud Marketing Payments Investigations MLRO Compliance Legal Executive 12/3/2020 15

Verification Solutions 12/3/2020 16

Verification Solutions 12/3/2020 16

Identity verification UK Player Submits Name Address, date of Birth, Telephone number No Level

Identity verification UK Player Submits Name Address, date of Birth, Telephone number No Level 1 URU Cross Checks a number of data sources to find a match Directory Enquiries (Over 18) Electoral Roll (Over 18) Mortality Data Credit Data (Over 18) Yes Level 3 Manual Customer is not registered and is requested To submit copy of Govt issued ID Customer is Registered in Party Cashier Level 2 URU Player Submits Driving Licence or Passport Number 12/3/2020 17

Telephone Verification Establishing the customer exists by verifying telephone number and other non-biographical information

Telephone Verification Establishing the customer exists by verifying telephone number and other non-biographical information magnifies the identity footprint of a customer 12/3/2020 18

E-Verification Pros • Verification footprint is more accurate than a documentary snapshot • Triangulation

E-Verification Pros • Verification footprint is more accurate than a documentary snapshot • Triangulation of different methods can produce an identity risk score • Real time verification is consumer friendly • Financial Services industry trusts this methodology Current Limitations • Restrictive/Anti-competitive data protection practices • Banks & other Internet companies do not share data outside of their industry • Control of personal information • Parents must monitor their children’s access through ISP parental controls devices such as Cyberpatrol (http: //www. cyberpatrol. com) • Documentary proof has a higher intelligence value 12/3/2020 19

Analysis and Engaging with Stakeholders 12/3/2020 20

Analysis and Engaging with Stakeholders 12/3/2020 20

Risk Analysis • Ongoing Risk Assessment of Product Risk – Peer to Peer Games

Risk Analysis • Ongoing Risk Assessment of Product Risk – Peer to Peer Games • Poker/Backgammon (high) • Betting Exchange (high) – House Games • Sports Betting (low) • Casino (low) • Review of Transactions – Payment Options – Chargebacks/Fraud • Audit – Compliance audits – Quarterly Payment Security Standards Compliance 12/3/2020 21

External Sources 12/3/2020 22

External Sources 12/3/2020 22

Is e-gaming a real risk? • Lessons from instances where e-gaming firms have been

Is e-gaming a real risk? • Lessons from instances where e-gaming firms have been victims – Cybercriminals are patient, persistent, intelligent and IT literate – A perfect audit trail is good intelligence value for the police – Trained staff are able to assist investigations – Other industries affected: Bank, IT and Credit Card companies – Anti-fraud systems make e-gaming sites unprofitable • No definitive quantum of the extent of laundering in our sector • Average bet size tend to be small • Perfect audit trail of all transactions • Enrolment occurs at financially regulated institutions e. Gaming is low risk and is already going further than most. How do we know? 12/3/2020 23

Working to improve things further • Proactively engaging a leading criminologist to produce: •

Working to improve things further • Proactively engaging a leading criminologist to produce: • Typologies of online gaming fraudsters • Quantify approximate sums of criminal fraud • Produce industry analysis of reports made to authorities • Industry and Cross-Industry Forums • European Gaming Betting Association Compliance, RGA Anti-Crime • Anti-Money Laundering Europe • Financial Action Task Force Casino Working Group • European Sports Security Association • Cyber. Crime Arrest Policy • Close liaison with police to secure arrests • Fraud Database managed by regulators/authorities • Closed forum share ideas/SARS experiences with police, regulators 12/3/2020 24

The Third Money Laundering Directive 12/3/2020 25

The Third Money Laundering Directive 12/3/2020 25

rd MLD Questions: 3 FATF recommendations • No mention of e-Gaming within the 3

rd MLD Questions: 3 FATF recommendations • No mention of e-Gaming within the 3 rd MLD directive • Licensed e-Casinos are covered. Unlicensed? • What about e-poker? e-sports? • Definition of CDD for an e-gaming company • Entry: or • Deposit threshold of EUR 2000 • No mention of withdrawal • UK: when a customer hits the threshold in 24 hrs • Alderney: 48 hours 12/3/2020 26

Questions: 3 rd MLD • Why can’t we reasonably rely on the fact a

Questions: 3 rd MLD • Why can’t we reasonably rely on the fact a customer has entered using a payment method from an institution which is regulated? (Article 14) • Will the 3 rd MLD be uniformly adopted? • UK Guidance – Differs to Alderney guidance • Gibraltar Guidance – In the pipeline • Malta – Progress? • Italy – Different Suspicious Activity Reporting • FATF Casino working group guidance the last hope? 12/3/2020 27

What more can be done? 12/3/2020 28

What more can be done? 12/3/2020 28

Governments need to engage with the industry • The industry is already leading the

Governments need to engage with the industry • The industry is already leading the charge on fighting Cyber-crime • Governments can do more; – Use regulations as a stick to beat criminals – Urge ALL e-commerce firms to adopt to good standards and work with the authorities – Make third-party databases available to improve KYC procedures • Cyber-fraud is not an egaming issue: it is an e-commerce one • Regulations should be extended to cover all e-commerce transactions (ebay, amazon etc). • Third MLD formalises our position of compliance • e. Gaming has taken the lead in e-commerce and we continue to work with the right stakeholders to KEEP CRIME OUT! 12/3/2020 29