Continuing our series on the Department of the Treasury’s National Money Laundering Risk Assessment (NMLRA), in this blog we will examine the need for better coordination between federal and state regulatory agencies, as well as collaboration amongst gaming operators, industry associations, technology companies, law enforcement and regulators.

In the NMLRA’s special section on online gaming, Treasury flags the “lack of uniform requirements or regulations … across state, territorial, and tribal jurisdictions” as factors that contribute to “significant and increasing money laundering risks.”  This statement is somewhat unfair for two reasons.

First, it is important to recognize that state and tribal governments often legalize gambling and implement regulatory regimes based on market conditions, revenue needs, and even public attitudes toward gaming that are unique to the jurisdiction.  What works for one state or territory may not necessarily work for another.  (For the purposes of this blog, we will be focusing on anti-money laundering measures and not the long-standing discussion about harmonization of licensing and registration requirements between jurisdictions.)

Second, as discussed in Sean Topchi’s latest blog post, The Bank Secrecy Act (BSA) definition of “casino” is long overdue for an update and needs to better reflect the current realities of the gaming industry.  In this regard, Treasury and the Financial Crimes Enforcement Network (FinCEN) can play a crucial role in creating a level playing field when it comes to BSA compliance and regulated gambling.

Federal and State Regulators

Regulatory agencies at both the federal and state levels can collaborate more closely to develop harmonized approaches that effectively address money laundering risks in gaming.  For example, Internal Revenue Service (IRS) examiners who conduct BSA reviews on casinos could work with state gaming regulators to better understand a gaming operator’s compliance structure and internal controls.  This could facilitate a more streamlined, efficient, and effective compliance review process since state gaming regulators typically have a good understanding of, and line of sight into, their registrants.

Both FinCEN and state gaming regulators would be well-served to seek regular dialogue, whether through the establishment of a Memorandum of Understanding (MOU) or other formal or informal means.  For example, Canada’s financial intelligent unit (FINTRAC) has several MOUs with gaming regulators and holds regular “casino forums” with provincial gaming agencies to discuss anti-money laundering (AML) issues.

By aligning efforts, federal and state regulators can ensure some form of consistency and coherence in AML compliance standards across jurisdictions. This collaborative approach can help mitigate regulatory arbitrage and enhance the overall effectiveness of the industry’s anti-money laundering measures.

Law Enforcement

Law enforcement agencies obviously play a critical role in combating money laundering in the gaming industry.  Collaborative efforts between regulators, industry stakeholders, and law enforcement can help to identify emerging issues, trends, and typologies.  It is also important that law enforcement agencies be transparent with stakeholders about how BSA data is being used since the information can improve the detection and reporting of illicit activity.  This feedback loop only serves to benefit all parties.

A good example of a law enforcement sharing agency sharing its use of BSA data is IRS Criminal Investigations, which recently released some high-level statistics.

Operators and Industry Associations

One aspect of collaboration involves the sharing information and best practices among stakeholders. Through its various efforts, including the publication of a best practices guide, the American Gaming Association (AGA) can continue to serve as a platform for facilitating dialogue and knowledge exchange between different players in the industry.  There are also a number of financial crime prevention associations that can contribute to information sharing and education initiatives, but they must not lose sight of the important role that Designated Non-Financial Businesses and Professions (DNFBPs) such as casinos play in the fight against financial crime.

Operators should also not be shy about talking directly to each other about trends they are seeing that may impact the industry at large.  These interactions can happen informally, or formally through mechanisms such as 314(b) requests under the USA PATRIOT Act.  By sharing insights on emerging trends, typologies of money laundering, and effective compliance measures, operators and industry associations can collectively enhance their understanding of the risks and improve their ability to detect and prevent illicit activities.

Technology Companies and Industry Service Providers

Furthermore, technology companies and industry service providers play a pivotal role in developing innovative solutions to mitigate money laundering risks in online and land-based gaming platforms. Working with these organizations can allow operators and regulatory agencies to leverage advanced technologies such as artificial intelligence, analytics, and machine learning to enhance the effectiveness of their AML measures. By integrating robust technology solutions into their AML programs, gaming operators can strengthen their compliance capabilities, increase efficiencies, reduce regulatory risk, and minimize the vulnerabilities exploited by money launderers.

Industry service providers like Gaming Laboratories International (GLI) frequently work with, and provide training to, gaming regulatory agencies across North America and the rest of the world.  There is currently a lack of AML training geared toward gaming – and especially toward gaming regulators – whether from trade groups like the Association of Certified Anti-Money Laundering Specialists (ACAMS) or other more gaming-specific associations. Organizations like GLI and other industry service providers have a unique opportunity to collaborate with federal and state regulators to create a streamlined training regime for state-level regulators to better understand how gaming institutions are applying AML regulations within their operations.  These efforts can help close the perceived risk across jurisdictions noted by the Treasury in the NMLRA.

In summary, collaboration among federal and state regulatory agencies, industry stakeholders, technology companies, law enforcement, and regulators is essential for addressing the money laundering risks associated with gaming. By working together, stakeholders can leverage their collective expertise, resources, and capabilities to develop robust compliance frameworks, deploy innovative technologies, and enhance efforts to safeguard the integrity of the gaming industry.

‍

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.

To learn more about Kinectify and book a demo, click here.