Money laundering and casinos

There are several ways to make large amounts of money that aren’t legal – drugs, insider trading, prostitution, illegal gambling, extortion, underground arms deals – that attract such massive returns, they always have plenty of takers. The problem for criminals, is getting all that money into the legitimate financial system, where it can be used to fund lavish lifestyles, without anyone asking awkward questions about where the cash came from, or having to produce receipts.

A number of ingenious schemes have been devised, but one of the perennial methods is to wash the cash via business that has stable fixed costs, but a highly variable income. Most retail outlets are no good, because sudden increases in income should be matched by corresponding increases in stock movement, and reflected in increased outlay on stock at cost price.

Bars, parking lots, strip clubs, car washes and tanning salons, however, are among a group of businesses that have fairly fixed overheads, a large cash clientele, and completely variable daily income; which makes them ideal as fronts to bank ill-gotten gains. The other major industry that fits that description, of course, is casino gaming; both online and at land-based operations.

The Biggest Money Laundering Bust

Perhaps the riskiest method of money laundry is bulk cash smuggling, in which large amounts of cash are secretly carried out of one jurisdiction and into another offshore, with laxer regulations but greater secrecy, where it can be deposited no-questions-asked. The biggest scheme of this type ever uncovered was the Wachovia bank scandal in 2005; involving around $400-billion.

Cash made from sales by Mexican drug cartels in the US was smuggled across the border and deposited in varying amounts in Mexican banks without strict oversight. These “legitimate” accounts then transferred the money back to Wachovia’s US accounts, giving the drug cartels access to clean funds in America. When the scheme was bust, Wachovia was hit with a massive fine for its ‘carelessness’.

A “legitimate” business front with variable income but fixed overheads remains just as popular, if not more so, as bulk smuggling, but money launderers use several other methods, including fraudulent life insurance businesses, real estate developments, structuring large cash deposits through myriad smaller transactions, or even buying their own crooked bank in a region with poor regulatory control.

How Casinos Get Used as Laundries

Casinos can be used as money laundries by organised crime in two ways. The bigger operation will simply open its own licensed, regulated casino. Again, the low variable in fixed costs versus high variable in income factor is an advantage, and the proceeds of crime are simply included with the casino’s cash takings in the daily banking.

A method that requires less outlay, however, is simply to “gamble” regularly. Gambling, whether land-based or at an online casino, can result in regular large deposits of varying sizes, so amounts moved from casino accounts into bank accounts – or deposited in cash after a visit to a casino – are hard to check for illegal origin, as there’s no way to prove they aren’t actual gambling winnings.

So for many years, an easy way for small-timers to launder dodgy cash was to walk into a casino, buy chips for a large amount of cash, play a few games conservatively for minimal losses, then cash in their remaining chips, to walk out with “legitimate” casino earnings.

What’s Being Done to Keep Casinos Clean

With millions of law-abiding gamblers the world over enjoying licensed, regulated, reputable casinos online and in bricks-and-mortar establishments, the last thing the industry needs is to allow their clients to be enmeshed with organised crime. That’s why it’s important to play only in casinos licensed by strict authorities that enforce the same compliance standards, as those banks are required to demonstrate, when determining the legitimacy of transactions.

In 2017, the UK’s Gambling Commission, which regulates British casinos, tightened up its compliance regulations, to ensure that UK establishments were in compliance with international anti-money-laundering efforts.

In January this year, it was reported in the Guardian that five British casinos were in danger of losing their licences, because they were not doing enough to secure their operations against money laundering. Reportedly, these casinos had hired money laundering reporting officers who were unable to define ‘money laundering’ to the commission, so it’s obvious that some sectors of the industry have yet to realise how serious the threat is.

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Research links:

https://www.theguardian.com/society/2018/jan/05/five-of-uk-online-casinos-may-lose-licence-over-money-laundering-fears

https://www.burges-salmon.com/news-and-insight/legal-updates/casinos-and-money-laundering-five-things-you-need-to-know/

https://www.int-comp.com/ict-views/posts/2016/07/22/top-5-money-laundering-cases-of-the-last-30-years/

https://www.globalradar.com/the-top-10-anti-money-laundering-stories-in-2017-year-end-review/