How to meet your anti-money laundering responsibilities
The role of gambling operators
As a gambling business you have a responsibility to uphold the three licensing objectives set out in the Gambling Act 2005 (the Act). The first of those licensing objectives is to prevent gambling being a source of crime or disorder, being associated with crime and disorder, or being used to support crime.
Money laundering in the gambling sector takes two main forms:
- Exchanging money acquired criminally for money that appears to be legitimate or ‘clean’ by gambling on low risk outcomes.
- The use of criminal proceeds to fund gambling as a leisure activity (so called criminal or ‘lifestyle’ spend).
You should report money laundering to the National Crime Agency (the NCA) and, where appropriate consent is requested, wait for such consent to deal with a transaction or wait until a set period has elapsed before proceeding.
POCA creates several principal offences that apply to everyone and criminalise any involvement in the proceeds of any crime if the person knows or suspects that the property is criminal property.
These offences relate to the concealing, disguising, converting, transferring, acquisition, use and possession of criminal property, as well as an arrangement which facilitates the acquisition, retention, use or control of criminal property.
For example, in the gambling industry, this may involve taking cash, cheque, or card payments, based on funds which are the proceeds of crime, in the form of a bet or wager, or holding money on account for a customer.
Duties and responsibilities under the Proceeds of Crime Act 2002
You should be mindful that some risk indicators (for example, a pattern of increasing spend, spend inconsistent with apparent source of income or unusual patterns of play) could be indicative of money laundering, but also equally of problem gambling, or both (or, possibly, neither).
Given that you have the responsibility to prevent gambling from being associated with crime and disorder and protecting vulnerable people from being harmed by gambling, you should carry out appropriate enquiries and assessments. It is important that you are able to continually access and understand information relating to gambling activity by the same customer in different parts of the business so that you have a fuller picture of the risks to which you are exposed.
Customer relationships consist of the following three aspects:
- establishment of the business relationship with the customer
- monitoring customer activity, including account deposits and withdrawals
- termination of the business relationship with the customer.
In all instances of the relationship it is necessary to consider whether the customer is engaging in money laundering, including criminal spend, and to report suspicious activity and seek appropriate consent with the NCA, as well as considering any risk to the licensing objectives.
POCA imposes duties on all operators to:
- disclose instances where you know or suspect that a person is engaged in money laundering
- make disclosures in the prescribed form and manner
- obtain appropriate consent to carry out a prohibited transaction.
In all instances where customer funds are known or suspected of having criminal origins, a report must be made to the NCA at the earliest opportunity.
Your employees are at risk of committing principal money laundering offences, unless a report is made to the NCA and, where appropriate, consent is obtained.
Whilst only those in the regulated sector (non-remote and remote casinos) need to appoint nominated officers, it is recommended that operators in the non-regulated sector should also consider appointing a nominated officer, as this will help you meet your obligations under POCA more effectively.
Where a nominated officer is appointed, they will normally be responsible for ensuring that information is properly disclosed to the NCA. The decision to report or not to report suspicious activity is the responsibility of the nominated officer.
The nominated officer will:
- receive internal disclosures under Part 7 of POCA
- decide whether these disclosures should be reported to the NCA
- make reports to the NCA
- ensure that appropriate consent is applied for, as necessary.
The nominated officer should record all decisions made.
All operators are required to report where they know, or suspect, that a person is engaged in money laundering, including criminal spend.
In order to provide a framework within which suspicious activity reports (SARs) may be raised and considered:
- you should ensure that your employees make reports to the nominated officer, or an employee in a managerial capacity
- the nominated officer, or manager, should consider each report, and determine whether it warrants the submission of a SAR
- you should ensure that your employees are appropriately trained.
Knowledge means actual knowledge. Having knowledge means actually knowing something to be true. In a criminal court, it must be proved that the individual in fact knew that a person was engaged in money laundering.
Whether you hold suspicion or not is a subjective test. Being suspicious of a transaction does not require knowledge of the exact nature of the criminal offence or that the funds are definitely those arising from a crime.
In order for a report to the NCA to be made, it is not necessary to know or to establish the exact nature of any underlying criminal offence, or that the funds were definitely those arising from a crime.
Handling any proceeds of crime, is committing a principal money laundering offence. However, if you submit a SAR to the NCA, this may provide a defence. The NCA can either grant or refuse the ‘prohibited act’ going ahead. This is called ‘appropriate consent’.
Appropriate consent is granted by the NCA UKFIU Consent Desk. It carries out the necessary internal enquiries, and may contact the appropriate law enforcement agency for a recommendation. Once the NCA has reached a decision you will be given a consent reference number, which should be recorded, along with your record of decisions made.
POCA creates an offence of failing to report suspicious activity. Where a person nominated by the operator to receive disclosures fails to comply with the obligation to make a report to the NCA as soon as practicable after the information is received, that person is open to criminal prosecution. The criminal sanction under POCA is a prison term of up to five years and/or a fine.
When an enquiry is under investigation, the investigating officer may contact you to ensure that he has all the relevant information which supports the original disclosure. The investigating officer will work closely with you and will normally provide direct feedback on progress of the investigation.
Where a confiscation investigation, a civil recovery investigation or a money laundering investigation is being, or is about to be, conducted, it is a criminal offence for anyone to release information which is likely to prejudice the investigation. It is also a criminal offence to falsify, conceal, destroy or otherwise dispose of documents which are relevant to the investigation (or to cause or permit these offences).
Reasonable enquiries regarding activity that is inconsistent with normal patterns of activity for a customer may be driven by social responsibility concerns. This should not result in the offence of prejudicing an investigation, unless you know or suspect that an investigation is current or impending and, importantly, make the enquiries in a way that it discloses those facts.
Under POCA, your employees face criminal penalties if they are involved in money laundering, unless they make a report of known or suspected money laundering activity. It is important, therefore, that you make them aware of their legal obligations and how to correctly discharge them.
You should also take reasonable steps to ensure that your employees are aware of:
- money laundering risks
- procedures for managing those risks
- identity and responsibilities of the person responsible for making reports to the NCA
- potential effect of a breach of POCA on your gambling business and your employees.