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GAMBLING: Anti-Money Laundering Inspections

 



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With the introduction of The Financial Intelligence Centre Amendment Act, accountable institutions impacted by this legislation should expect visits from their regulators and oversight bodies. These inspections are to ensure they are compliant with this anti-money laundering statute and the extensive obligations it imposes on them regarding detection and reporting. Those affected include banks and other financial institutions, attorneys, casinos, and real estate agents. They must have effective frameworks in place to ensure they are not being used for money laundering purposes and are able to report cash transactions above certain thresholds and suspicious activities to the relevant authorities.

Roy Melnick, PWC associate director, Regulatory Risk Services, and a Certified Anti-Money Laundering Specialist, highlights that the cash-intensive casino industry is particularly affected by money laundering. “Globally, the gaming sector is highly susceptible to misuse due to the nature of operations and high cash volumes associated with it. There is often the movement of funds between accounts in multiple countries, making casinos especially vulnerable to money laundering activities.  They also offer various financial services such as accounts, remittances, foreign exchange, transfers and cheque-cashing, but may not govern these activities as tightly as financial institutions such as banks. And a further risk is that casino employee turnover tends to be high, which can lead to weaknesses in staff competencies and training, resulting in suspicious activities going undetected.” 

Criminals use various techniques which are constantly evolving, in order to exploit casinos and launder money. One approach is the redemption of chips with minimal gaming activity, or players may use casino accounts for bank-like transactions, with little or no gambling involved. Another technique is ‘structuring’ or ‘smurfing’ and involves the distribution of a large amount of cash via a series of smaller transactions, in order to avoid threshold reporting requirements (currently R25 000 or more) and to minimise suspicion. A further tactic is that of ‘refining’, in which a high volume of low denomination bank notes are exchanged into higher denomination notes.

Potential money launderers may also approach casino customers, offering them cash for chips or credits at a premium, and then cash these out as though they are legitimate winnings. Players may also attempt to add cash to their winnings and exchange the total amount for a single casino cheque. Conspiring with casino employees also enables money laundering activities to go undetected. And the concept of casino junkets, being organised casino-based gaming tours for high-net worth individuals, can bring their own problems in jurisdictions where they can be found, such as the pooling of players’ funds. Also, the involvement of various parties such as junket operators and other casinos can obscure the source and ownership of money and the identity of the players.

In order to effectively meet their regulatory obligations, Melnick says that accountable institutions in South Africa must have effective anti-money laundering programs in place. “These must include procedures for detecting and reporting suspicious activities and transactions to the Financial Intelligence Centre.”

Melnick notes the specific obligations of the gaming industry. “As casinos are indentified as being high risk regarding money laundering, they must implement effective customer identification and record-keeping procedures. Additionally, there should be a qualified individual responsible for the overall compliance function. Client-facing staff should receive adequate training on applicable laws, policies and procedures. They should also be trained on how to recognise transactions that appear to have no legitimate purpose or are inconsistent with usual gaming activity.”

Melnick advises accountable institutions such as casinos to ensure they are compliant and ready for inspections. “Failure to deal effectively with their anti-money laundering obligations can result in large financial penalties, loss of license, or administrative sanctions such as the restriction or suspension of business activities. It can also lead to unfavourable media exposure that will adversely affect the reputation of a business, with consequential legal and financial risk. There is also personal liability for those responsible for implementing measures to ensure compliance, and who do not take the necessary action.”

He cautions organisations to fully understand this legislation, effective since 1 December 2010.”They must assess how it impacts their business, particularly regarding their anti-money laundering responsibilities, and should take appropriate action in order to meet these mandatory obligations.”


 
 
 
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