Working together will reduce money laundering risk

Thanks to its ease of use and accessibility for consumers, the egaming industry has experienced rapid growth in the past few years with the market set to reach nearly US$464 billion globally by the end of this year.

This growth has shifted industry regulation into the spotlight, especially in Europe where new legislation has been put in place with specific focus on online gaming providers.

The introduction of the 4th EU Directive on Money Laundering means that online gaming companies have to carry out more due diligence on their customers and closely observe customers for any suspicious actions which could be linked to money laundering activities.

The new directive specifically requires the monitoring of gaming activity to prevent the proceeds of crime getting into the financial system through gaming organisations and an example of this comes from a recent report from Great Britain’s Gambling Commission.

The report found that the named company’s anti-money laundering controls were not meeting the needs of the Commission, the company or their customers, according to current regulations. In the end, the organisation had to pay fine to the Commission and address its AML strategy.

The dimensions of AML risk

Carrying out the appropriate initial due diligence checks on customers and understanding the sources of their funds brings a measure of risk governance to the gaming industry.

There are a number of benefits for companies, both financial and reputational, who comply with legislation. Therefore understanding each customer profile and analysing data patterns for suspicious activities is vital.

While observing legislation is the main driving force behind online gaming companies looking to adopt AML procedures, they also need to consider reputational risk and the moral imperative if they don’t comply.

If a company is found to be a vehicle for money laundering activities for criminals, such as drug traffickers, then the reputational damage to that organisation is substantial. Customers will feel exposed and look to take their gaming elsewhere.

In addition, gaming companies have the social responsibility to do the right thing when it comes to money laundering. By working with regulators and other companies in the industry to stop the proceeds of crime being used, they are ultimately helping to end organised crime activities.

The role of technology

With these elements to consider, egaming companies must implement successful programmes that are effective, appropriate and cost effective. Organisations need to determine what information to capture on customers to define the AML risk associated with each person.

For example, is someone politically exposed or do they reside in a high risk jurisdiction? By automatically collecting and analysing data, technology enables companies to gather this type of information and evaluate it through a scorecard system to quantify the AML risk associated with each customer.

These checks typically happen as companies are on-boarding customers to identify straight away if they should continue to on-board or if they are flagged as high risk. However, they also need to continue to carry out due diligence on customers and look for any unusual activity throughout their time as a customer.

Activities are detected by looking for standard AML scenarios and red flags, however, the use of big data and analytics is important too.

Technology can compare customer behaviour relative to other customers and leverage best practices to accurately detect money laundering activities, while also providing gaming companies with operational efficiencies.

Taking a risk-based approach to knowing each customer means an organisation’s compliance lens can focus on genuine suspicious activity and allow legitimate customers to game without disruption.

It is essential egaming companies know which customers are suspicious and which are carrying out behaviours as normal to give their customers the best experience of gaming with them.

Industry alliance

With new legislation driving these changes and organisations looking to use data to know customers better, there is willingness from companies across the industry to explore the opportunities of collaboration.

Collating and analysing data across the industry means a broader picture of customers can be seen and regulators can work with everyone to tackle money laundering behaviours.

This is very much consistent with other industries, like financial services, who view the sharing of information as something that is mutually beneficial to the industry as a whole.

Gaming companies must keep pace with the demand of regulatory changes and social responsibilities. They must take a comprehensive look at how to best adhere to AML regulations or be faced with regulatory fines and loss of customer trust.

Data enables organisations to create a clear view of customers and automatically analyse for suspicious activities, in real-time, that need to be investigated.

By knowing customers better and working with the regulators and competitors alike, companies can adhere to these new regulations promptly whilst also providing legitimate customers with a valued gaming experience.

Andrew Davies is the VP of global market strategy, financial crime risk management at Fiserv