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Guidance

The money laundering and terrorist financing risks within the British gambling industry

Our money laundering and terrorist financing risk assessment: 2020

  1. Contents
  2. 13 - Arcades

13 - Arcades

Sector rating

Sector Previous overall risk rating Current overall risk rating
Adult Gaming Centres Medium Medium
Family Entertainment Centres (FECs) Low Low

Existing inherent risks

There has been some change in the risk levels for the inherent risks for the arcade sector. For further information relating to the inherent risks (including vulnerabilities, consequences and controls), see our previous risk assessments:

Vulnerability Risk Previous likelihood of event occurring Previous impact of event occurring Current likelihood of event occurring Current impact of event occurring Change in risk
Operator Control Operators failing to comply with prevention of money laundering and terrorist financing legislation and guidance Medium Medium Low Medium Decrease
Licensing & Integrity Arcade businesses being acquired by organised crime to launder criminal proceeds (AGCs only) Low Medium Low Medium No change
Licensing & Integrity Arcade businesses being acquired by organised crime to launder criminal proceeds (FECs only) Low Medium Low Low Decrease
Operator Control Lack of competency of key personnel and licence holders which can then be exploited by criminals seeking to launder the proceeds of crime (AGCs only) Low Medium Low Medium No change
Operator Control Lack of competency of key personnel and licence holders which can then be exploited by criminals seeking to launder the proceeds of crime (FECs only) Low Medium Low Medium No change
Customer Anonymous customers laundering proceeds of crime through gaming machines (AGCs only) Medium Medium Medium Medium no change
Customer Anonymous customers laundering proceeds of crime through gaming machines (FECs only) Medium Medium Low Low Decrease
Product Automated ticket redemption (ATR) machines used to facilitate the laundering of criminally derived funds (AGCs only) Medium Low Low Medium Decrease
Product Gaming machines, category B3 being used to launder criminally derived funds (AGCs only) Medium Medium Medium Medium No change
Product Privacy booths (AGCs only) Medium Medium Medium Medium No change
Product Privacy booths (FECs only) Medium Medium Medium Low Decrease
Means of Payment Cash transactions Medium Medium Low Medium Decrease
Means of Payment Cashless payments N/A (no rating provided in previous Risk Assessment) N/A (no rating provided in previous Risk Assessment) Medium Medium N/A
Means of Payment Ticket-in-ticket-out (TITO) facilities used to launder funds when used in conjunction with ATR machines (AGCs only) Medium Medium Low Medium Decrease

Additional inherent risks

Dyed notes

As previously mentioned, there have been reported instances where AGCs have noticed dyed bank notes in gaming machines. As well as the importance of reporting any dyed notes found on premises to the relevant local police force, it is also a mandatory requirement to submit Suspicious Activity Reports (SARs) to the UKFIU in all cases where there is knowledge or suspicion of Money Laundering (ML) and Terrorist Financing (TF) in relation to any dyed bank notes detected. This has been given a medium risk rating.

New emerging risks

‘Bring your own devices’ (BYODs)

Recent product innovations in the gambling industry include cashless apps that can be used on analogue and digital machines. The advantages for customers include ease of play and convenience, however there are associated risks. These include:

  1. operators failing to undertake Know Your Customer (KYC) checks on customers
  2. transactions not being monitored in real time
  3. anonymity: customers could gamble without needing an account or interacting with employees of the operator
  4. ‘smurfing’: a common money laundering method where a customer will make numerous low level transactions with illicit monies to avoid suspicion.

The risks associated with cashless apps further increase where a customer uses multiple premises and there is a lack of customer interaction. The Commission sees cashless payments (along with digital payment methods) increasing in popularity due to continuing innovation in the industry, as well as the drive towards cashless payment due to COVID-19. This has been given a medium risk rating in relation to the arcade sector.

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