Anti–Money Laundering and Combating Funding of Terrorism

The Prevention of Money Laundering Law and subsidiary regulations are also commonly referred to as AML/CFT measures.

What is money laundering?

In a nutshell, it’s the process of turning the proceeds obtained by a criminal act (dirty money and normally cash), into clean money so that the owners can use this illicitly acquired wealth and live unperturbed with no connection to the crimes.

Does AML/CFT relate to the remote gaming industry?

Maltese licensed operators are required to implement anti-money laundering procedures. This is stipulated in regulation 8 (g) of the Remote Gaming Regulations (LN176 of 2004)

Is there a real risk of AML/CFT in the remote gaming industry?

In short, if the operator is himself clean and takes prudential measures such as only allowing deposits through credit cards, bank transfers and reputable ewallets, then there is no real risk, as banks and other financial institutions are required to carry out CDD procedures of their customers and to monitor their activity.

However, having said this, there are a few operators (not necessarily licensed in Malta) with a mixture of land based shops and online remote gaming operations that allow customers to deposit cash into their online account. Disposable debit cards and rechargeable debit cards that can be bought from retail outlets have recently been introduced and can be used online like normal credit cards whilst some ewallets allow for cash deposits through special terminals.

Peer-to-peer products such as poker, betting exchanges and skill games allow players to ‘exchange’ funds with each other. Using a combination of these opportunities, a money launderer could, in theory, be able to come up with a scheme to place money, layer it and finally integrate it.

However, genuine operators are fearful of fraudulent transactions in a card-not-present environment and make tremendous efforts to verify the identity of their players and keep audit trails of all transactions and games played. Collusion and chip dumping procedures would also help identify strange patterns of play that could indicate a money laundering or funding of terrorism operation.

Where peer-to-peer products are offered, operators need to identify players at the earliest possible stage of activity as it is quite useless to try and identify them at withdrawal stage since a withdrawal is not required to integrate the proceeds. Since a number of people register with gaming sites but never actually deposit any money, it would be quite an expensive and useless exercise to verify them at this stage. It makes more sense to verify them when an initial deposit is made or regular activity on the account is carried out.

Author: Alan Alden
Contact Advisory Services
Date: Oct 2008