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The prevention of money laundering and combating the financing of terrorism

Gambling Commission guidance for remote and non-remote casinos: Fifth edition (Revision 3).

1 - Introduction

The law concerning money laundering is based on the general and wide-ranging prevention and detection of the use of any proceeds of crime, and the prevention and detection of terrorist financing and proliferation financing. For some businesses (including casinos) this includes the more specific requirements of the business and its employees to have policies, procedures and controls in place covering the risks they face from money laundering and terrorist financing.

Using money in casinos, regardless of the amount, that is the proceeds of any crime can amount to money laundering if the person using or taking the money knows or suspects that it is the proceeds of crime. Money laundering offences can be committed by both the customer and casino employees, depending on their respective levels of knowledge or suspicion.

What is meant by the proceeds of crime and money laundering?

Broadly, the terms 'proceeds of crime' or 'criminal proceeds' refer to all property which a person benefits from by being party to criminal conduct, either directly or indirectly.

For example, proceeds of crime could include money gained from drug dealing or stolen during a burglary or robbery. This is often referred to as criminal property.

It also includes property that a person gains by spending the proceeds of criminal conduct. For example, if a person uses money earned from drug dealing to buy a car or a house, or spends money gained in a bank robbery to gamble.

The term money laundering is often misunderstood

It is defined in section 340 of the Proceeds of Crime Act 2002 (POCA) (opens in new tab). It covers a wide range of circumstances, involving any activity concerning the proceeds of any crime.

For example, this may include:

  • trying to turn money raised through criminal activity into 'clean' money (classic money laundering)
  • possessing or transferring the benefit of acquisitive crimes such as theft and fraud, and funds generated from crimes like tax evasion (this includes the possession by an offender of the proceeds of their own criminal activity)
  • possessing or transferring stolen goods
  • being directly involved with any criminal or terrorist property, or entering into arrangements to facilitate the laundering of criminal or terrorist property
  • criminals investing the proceeds of their crimes in the whole range of financial products.

Classic money laundering usually consists of the following stages:

  1. Stage one: placement

    The laundering of criminal proceeds is often required because of the cash-intensive nature of the underlying crime. For example, drug dealing where payments are in cash, often in small denominations. Money is placed into the financial system or retail market, or smuggled to another country.

    The aim of the money launderer is to avoid detection by the authorities and to then transform the criminal proceeds into other assets.

  2. Stage two: layering

    Layering is an attempt to conceal or disguise the source and ownership of the criminal proceeds by creating complex layers of financial transactions. These layers obscure the audit trail and provide anonymity. The purpose is to disassociate the criminal proceeds from the criminal activity which generated them.

    Layers are usually created by moving monies in and out of accounts and by using electronic fund transfers.

  3. Stage three: integration

    Integration involves integrating the criminal proceeds into the legitimate economic and financial system. Therefore, assimilating it with other assets in the system.

    Integration of 'clean money' into the economy is achieved by the the money launderer making it appear legally earned or obtained.

There is potential for the money launderer to use gambling at every stage of the process

The land-based gambling industry is particularly vulnerable during the placement stage, as cash is widely used. The remote gambling industry may seem less vulnerable as electronic transfers are required for placements. However, identity theft and identity fraud can enable the money launderer to move criminal proceeds anonymously. The use of multiple internet transactions can also facilitate the layering stage of money laundering.

Casino operators should be mindful that the offence of money laundering also includes simple criminal spend (the use of criminal proceeds to fund gambling as a leisure activity). It may not include all the typical stages of the laundering process, if any at all.

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