Canada’s Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) unveiled a bulletin in January warning of potential money laundering via unlicensed and unregulated online gaming operators.
FINTRAC outlined some concerns involving operators, especially unregulated sites that face less scrutiny from regulators. The report noted that iGaming is expected to grow to a $100 billion industry by 2026 and that offers an opportunity for money laundering by criminal enterprises.
“Although online gambling site operators can and should take actions to mitigate such risks, transactions involving sites operating outside legal and regulatory authorities – particularly if situated in jurisdictions with weak anti-money laundering or anti-terrorist financing regimes – may present a higher risk of facilitating money laundering or terrorist financing activity,” FINTRAC noted.
Unlicensed sites do not have the permission from a regulatory body such as the Kahnawake Gaming Commission to offer casino games online.
“Law enforcement agencies have found that organized crime groups can operate or more easily exploit these sites both in Canada and in foreign jurisdictions accessible from Canadian locations.”
Potential Risks of Financial Transactions
FINTRAC is Canada’s financial intelligence unit and anti-money laundering and anti-terrorist financing entity. The organization is mandated with detection, prevention, and deterrence of money laundering and the financing of terrorist activities.
In March 2023, concerns about money laundering led FINTRAC to update the threat posed by criminal groups via unlicensed online gambling from “high” to “very high.”
As part of that, the group analyzed suspicious transaction reports related to online gambling from 2016 to 2023. FINTRAC also looked at other financial intelligence units, assessments from domestic and international government and non-government organizations, and information from open sources to determine suspicious trends and patterns.
The report pointed to some banking methods that benefit money launderers. For example, some bank deposits were found to include excessive email money transfers suspected to be linked to: drug and human trafficking; suspected automated banking machine smurfing, splitting large sums of money into smaller, more easily concealable deposits to avoid detection by authorities; and cash deposits inconsistent with a client’s financial standing.
“These bank accounts were then depleted using rapid and frequent credit card online gambling purchases, transfers to virtual currency exchanges, and/or transfers to payment service providers known for facilitating transactions at gambling sites,” FINTRAC notes.
Some accounts appeared to exist solely to enable money laundering through online gaming, the study adds. These funds often were received and sent back through the same gambling sites numerous times.
FINTRAC also reported that funds from Canadian bank accounts may also actually help operate unlicensed gambling sites or allow for gambling on behalf of others. Prepaid credit cards, vouchers, e-wallets, and virtual currencies are also viewed as high-risk funding methods by authorities, because they can more easily obscure illicit sources of the money to underground sites.
Red Flags for Crime
A regulated industry offers the chance to deter these illegal activities, FINTRAC notes, but some launderers have even attempted to circumvent regulatory processes put in place to prevent these types of crimes.
“Suspicious behavior was detected by online gambling sites when reviewing clients’ identity and source of wealth, deposit and withdrawal methods, and account/gambling activity,” the report notes.
“In many cases, money launderers attempt to subvert or mislead online gambling sites’ ‘know your client’ process, in order to conceal their identity and/or the source of their funds. In some cases, this involved the provision of false, stolen, and misleading information to gambling operators—including forged identity and/or income verification documents. In other cases, money launderers would provide information that is mismatched.”
FINTRAC offered some financial scenarios for reporting entities, such as banks and online operators, to watch out for when considering if their platform may be seeing suspicious transactions or attempts at laundering money. Some of those include:
- Transactions that appear inconsistent with what is expected or considered normal.
- Transactions inconsistent with clients’ apparent financial standing, usual pattern of activities, or occupational information (such as being a student, unemployed, or on social assistance.).
- Excessive transactions with gambling sites not provincially or federally authorized.
- Excessive transactions with gambling sites that do not require any “know-your-client” information from users.
- Excessive transactions with gambling with vague information about ownership or jurisdiction of registration, or that don’t impose limits on volumes and values of bets.
- Client’s wallet has direct and/or indirect exposure to virtual currency mixers/tumblers and online gambling sites.
- Deposits that are followed quickly by transfers or credit card payments to gambling sites, virtual currency exchanges, or payment service providers known for facilitating transactions with gambling sites.
“Several indicators may reveal otherwise unknown links that, taken together, could lead to reasonable grounds to suspect that the transaction or attempted transaction is related to the laundering of proceeds of crime through online gambling sites,” FINTRAC advises. “It is a constellation of factors that strengthen the determination of suspicion. These indicators aim to help reporting entities in their analysis and assessment of suspicious financial transactions.”
