How can British gambling operators protect themselves from money laundering breaches?

Regulators and supervisors of those who are supposed to prevent money laundering are visibly becoming more active. Last month, it was announced that British companies were fined nearly £300m by the Financial Conduct Authority (FCA) for breaching anti-money laundering (AML) rules last year.

Last year one of the leading gambling operators was fined by the UK Gambling Commission (UKGC) failings in its controls both against money laundering and to prevent harm to customers through excessive betting. One example of this was a customer who lost £98,000 and had asked the company to stop sending promotions. The commission also highlighted a customer who spent £1.5m over nearly three years, during which time they logged onto their account an average 10 times a day for one month and lost £64,000 in one four-week period.

The fines handed out by the UKGC are a clear indication that the gaming sector has not avoided penalties for AML breaches and is under pressure to improve. Given that the gaming sector has embraced digital technologies in their customer-facing operations, this begs the question why have they not adopted the latest technology in their compliance processes?

The money laundering problem

It is essential that these companies strive to do more to eradicate the scourge of money laundering and fraud. It remains a huge issue and is the end stage for criminal activity and helps to fuel it. Therefore, preventing financial crime is vital for the good of both the company and society as a whole.

Fraudsters always look to exploit the weakest links in any system, for example, by taking advantage of gaps in customer due diligence. Criminals use all methods at their disposal including innovative technologies to remain undetected. They use increasingly complicated methods to legitimise criminal proceeds and these methods are very difficult to detect unless the right technology is deployed to defeat them.

There are numerous examples of criminals utilising the very latest technologies to further their criminal activities and enterprises. Therefore, companies on the front line, such as those in financial services, often bear the brunt of both the financial and reputational damage from such crimes.

How to overcome it

Firstly, compliance must be a priority for all businesses. Additionally, at the heart of the prevention of criminal infiltration of a regulated entity is that organisations know their customer (KYC).

Once they have this mindset, they can look at the market to assess the best precautions and technology they can utilise. Any choices in this regard must first be properly tested, then adopted and embraced to help in this ongoing fight.

Regulatory technology (RegTech), for example, covers a huge range of technologies which can enable better due diligence of customers, safer onboarding, as well as better transaction monitoring. Many providers now offer real-time services as opposed to the out of date and incomplete data provision of the past.

Software enables continuous refinement and improvement. Compliance breaches, such as those fines handed out in 2019, mean that regulated entities need to keep progressing their financial crime programmes to make better use of their compliance budgets and resources – working smarter not just harder.

With that said, operators must find the right technology for their business by looking across the market at the types of technology available to prevent fraud and money laundering and they should ask questions of suppliers and the regulators to get the best-in-class solutions.

This is the only way to keep on top of criminal activity and minimise the risk of fines and, ultimately, reduce fraud losses and damaging publicity.

Jane Jee is CEO at Kompli-Global. After qualifying as a barrister, Jee worked in commercial and legal roles in compliance, credit and payments. She was managing director at Access credit cards and a director at Worldpay Plc. In 2014 she obtained a Post Graduate Diploma in Governance, Risk and Compliance from the International Compliance Association (ICA). She is a fellow of the ICA and teaches a Masterclass on “The Future of Payments” on the ICA post-graduate course. Jee passionately believes that good compliance makes good business sense. A thorough knowledge of your customer enables you to retain their business and potentially better target your offerings.