You need to know your customers - remote casinos
Customer due diligence in remote casinos
You can better identify suspicious transactions if you know your customer and understand the reasoning behind the instructions they give you.
Customer due diligence is identifying the client and verifying their identity on the basis of documents, data or information obtained from a reliable and independent source.
Remote operators need to carry out enhanced customer due diligence and ongoing monitoring on all customers. They must manage, on a risk-sensitive basis, the higher risks presented by customers not being physically present for identification purposes.
Requirements for customer due diligence
Regulation 10 of the Money Laundering Regulations 2007 (the Regulations) requires remote casinos to establish and verify the identity of all customers:
- before access is given to the remote casino’s gaming facilities
- who, in the course of any period of 24 hours, pay to, or stake with, the casino €2,000 or more in connection with remote gaming facilities (known as the threshold approach) - in which case, the identity of each customer must be verified before or immediately after such payment or stake takes place.
Where remote casino operators use the threshold approach, they should include turnover to determine when customer due diligence is needed under regulation 10. However, under the Regulations, withdrawals from a remote gambling account are not included for threshold purposes.
The meaning of turnover
In this context, ‘turnover’ means the recycling of earlier stakes and winnings (partially or in their entirety), with or without additional or new stakes being laid or merged into the overall set of transactions. This includes amounts that are staked on more than one occasion, for example a customer’s winnings in game A which are then placed on game B.
The meaning of stake
The threshold test in relation to remote casinos refers to money being ‘paid’ or ‘staked’. Regulation 10(3) states that ‘stake’ has the meaning given by section 353(1) of the Gambling Act 2005 (the Act):
‘stake’ means an amount paid or risked in connection with gambling and which either:
- is used in calculating the amount of the winnings or the value of the prize that the person making the stake receives if successful, or
- is used in calculating the total amount of winnings or value of prizes in respect of the gambling in which the person making the stake participates.
The Act draws a distinction between amounts paid and amounts risked, however, both are a ‘stake’.
‘Amounts paid’ is interpreted as including (but not limited to) the payment of new funding.
‘Amounts risked’ is a wider concept and is interpreted as including recycled winnings.
Thus ‘stake’ includes the recycling of previous winnings, as well as newly introduced sums of money (turnover).
This interpretation is made equally clear in the Regulations, where a similar distinction is drawn (in relation to the threshold test for remote casinos), namely pay to or stake with €2000 or more. Here, ‘stake’ has the same meaning as described above. ‘Pay to’ is a phrase which has been deliberately included in the test and is interpreted as meaning the payment of new funding.
Requirements for enhanced customer due diligence
Under regulation 14, situations where a customer is not physically present for identification purposes are higher risk for money laundering, and require operators to take measures to compensate for the higher risk. This is referred to as enhanced customer due diligence and ongoing monitoring.
Examples are given in Regulation 14 of the measures which might be applied:
- ensuring that the customer’s identity is established by additional documents, data or information
- supplementary measures to verify or certify the documents supplied, or confirmatory certification by a credit or financial institution which is subject to the money laundering directive
- ensuring that the first payment is carried out through an account opened in the customer’s name with a credit institution.
The measures taken should be tailored to the risk posed.
Impact of the EU 4th Money Laundering Directive
The EU 4th Money Laundering Directive changes the requirements for enhanced customer due diligence. Under the Directive, enhanced customer due diligence is required for non-face-to-face business relationships or transactions where there are no safeguards (such as electronic signatures). However, until the provisions of the Directive are transposed into UK legislation, you should continue to apply the requirements under the Regulations.
Transposition into UK legislation is likely to happen in 2017, at the earliest.