Peer-to-peer casino games such as Texas Hold’em Poker offer a unique gambling experience where players wager against each other instead of the house. With this uniqueness comes distinct money laundering risks.  

Casino games that operate on a peer-to-peer basis, like Texas Hold’em Poker, are known to offer high-stakes tournaments, whether online or in-person, alongside live action cash games. Such high-stakes tournaments frequently require entry fees ranging from tens to hundreds of thousands of dollars. Additionally, buy-ins for specific high-stakes cash games may match or surpass these amounts.

In the Poker community, it is widely recognized that Poker players may not use their own funds to enter these high-stakes tournaments or live action cash games. Instead, players may be staked or “backed" by one or more third parties. These backers cover a portion of the player's tournament entry fee or live action buy-in in exchange for a share of the player's potential winnings. These backers are particularly interested in successful players, as they hope to profit from their victories.  

To this end, backers contribute to a player's tournament entry fees or live action table games buy-in, anticipating a lucrative return if the player achieves a high tournament placement or live action payout. As part of this arrangement, the backer(s), who are frequently undisclosed and anonymous, gain a percentage of the player's tournament and/or live action winnings.  

ANTI-MONEY LAUNDERING (AML) CONCERNS

Gaming organizations that ignore or overlook such third-party transactions expose themselves to significant money laundering risks. A primary concern is the introduction of illegally obtained or criminally derived funds provided by the unidentified backer. Such backers often remain undisclosed during Poker transactions and therefore pose considerable risks to casinos. The casino assumes that the funds a player utilizes for Poker play originates from their own resources. However, if a backer is utilized, players rarely disclose this fact to the casino. Casinos are vulnerable to money laundering if third party involvement in a transaction goes undetected, and the third-party provides funds that are derived from criminal or illicit activity.  

In respect to high-stakes Poker transactions, criminals may introduce illegally obtained funds into the casino by acting as the backer and by providing their illicitly obtained funds to a Poker player so that the player can participate in live action cash games or tournament Poker play.  

These criminals might further involve poker players by tempting them with cash, effectively drawing the player into a money laundering scheme. The Poker player, with their extensive Poker knowledge, can be incentivized to help criminals wash funds through Poker specific money laundering techniques, such as peer-to-peer collusion and intentional losing to another player in a Poker game.

Although peer to peer collusion may not always involve a third-party, it remains a money laundering risk that is distinct to Poker. In live action Poker, one player may intentionally lose to another through a process commonly referred to as chip dumping. By intentionally losing their chips to another player, the losing player has transferred their funds to another under the guise of legitimate gaming activity. This type of activity may also occur in online Poker games, where two or more players collude by intentionally losing to one another in the same Poker room.    

DETECTIVE AND PREVENTIVE CONTROLS

To address this issue, casinos should establish comprehensive policies and procedures aimed at detecting and preventing third party transactions. Beginning with detection, it's imperative to provide anti-money laundering (AML) training to customer-facing staff. This training should emphasize situational awareness on the casino floor. Staff dealing directly with players should remain vigilant, watching for warning signs that may be indicative of third-party transactions, such as players exchanging funds or casino instruments during tournament entry or payout processes, or such exchanges happening near live action Poker table games.  

Additionally, surveillance teams can take a proactive approach by promptly reporting to their property compliance department any suspected third-party transactions that they witness through their surveillance reviews. Such actions could indicate that a player has been financed by an external party or owes a portion of their winnings to a backer, in exchange for a stake in the tournament entry or live action buy-in.

Preventive measures can also be enacted at the player-interaction level. As a best practice, policies can be formulated that require players to provide a documented response regarding their source of funds. Such determination can be made based on volume specific thresholds a player exceeds. For example, if a player conducts a cash buy-in of $10,000 or more, the casino may institute a policy that requires a documented response from a player that determines whether or not a third party was involved in the transaction.  

In conclusion, third-party transactions in poker tournaments and live action cash games present a substantial risk of money laundering. Casinos can counter this risk by implementing comprehensive AML training, enhancing detection and reporting efforts on the casino floor, and enacting policies that help combat and detect third-party transactions and peer-to-peer collusion. This multi-pronged approach will help maintain the integrity of peer-to-peer casino games and safeguard the casino industry against potential illicit activities.

ABOUT KINECTIFY

Kinectify is an AML risk management technology company serving gaming operators both in the US and Canada. Our modern AML platform seamlessly integrates all of the organization's data into a single view and workflow empowering gaming companies to efficiently manage risk across their enterprise. In addition, Kinectify's advisory services enhance gaming operators' capacity with industry experts who can design and test programs, meet compliance deadlines, and even provide outsource services for the day-to-day administration of compliance programs.

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