Gaming the system

The evolution.

I would encourage you to make sure that the business side of your casinos takes AML controls just as seriously as it treats its high-rollers.

– Jennifer Shasky Calvery, FinCEN Director, making comments at the BSA Conference in Las Vegas on June 12, 2014

The modern casino has emerged to be a popular entertainment venue with an eclectic combination of gaming, dining and live performances. Although the vast majority of patrons visit casinos for entertainment and fun, some may attempt to use the casino’s financial services to conceal or transfer illicit wealth.

Willie Sutton, who stole a reported $2 million, when asked why he robbed banks, famously replied, “Because that’s where the money is.” The sheer size and volume of the financial transactions make the Gaming and Casino Industry an easy target for money laundering activities. With the US ranking 97th in Money Laundering Risk, preventing criminal abuse of the system has become an indispensable focus area for the industry.

In the early days, money could enter the casino with burn marks, like someone had just blown up a safe in the bank, and nobody would ask any questions. Today, when a patron requests a lot of credit or transacts large sums of cash, he’ll face a background check to see if the money he earns can support the kind of play he’s engaging in.

Challenges today.

Let’s look at a few statistics to understand how effective AML programs are today:

  1. 2 out of 3 companies have increased their organization’s AML budget in the last 5 years.
  2. Money Laundering is still an estimated $300 billion per year enterprise (in the U.S.) that can potentially fund terrorism.
  3. Filing of SAR (Suspicious Activity Reporting) increased by 164% in the last three years.
  4. FinCEN levied fines of about $16 million against three casinos within a period of 6 months.

These conflicting numbers point out that there is an increasing number of AML programs in the financial industry, but a clear lack of access to the right technologies. These statistics hold true for the Gaming and Casino Industry as well. While many AML programs do exist, in reality,  if someone wants to launder money, they can simply go from one casino to the other or employ ‘smurfing’ in which groups of people exchange illicit funds in small amounts for legitimate, liquid currencies.

The way forward.

The massive inflow and rapid outflow of patrons and one-off gamblers makes it hard to effectively implement traditional AML programs. However, here are some things that can be done.

  1. ‘Player Card Data’ with a complete KYC of the patron. Casinos will be able to profile their customers and proactively eliminate possible cases of money laundering.
  2. KYC data should include not just a window of 24 hours but cover multiple-day period, making it possible for the casinos to analyze behavior patterns over time. This level of intuitive KYC can also help with answering the fundamental question – “Is the patron’s play consistent with his financial capacity?” This is where Technology and Machine Learning can come in advantageous. Machine Learning combined with Analytics can provide powerful and valuable data on the patrons and their behavior patterns.
  3. It is also vital for this KYC to be made available at an enterprise-wide level as opposed to being used as nuclear, stand-alone data which can only be of limited help.
  4. Casino companies must develop risk-based programs that promote compliance with the right technology.

In an environment where AML compliance is of paramount importance to the gaming industry, stakeholders should focus on detecting and preventing illicit behavior through custom programs and technology. And right now, relevant Technology, Process and Compliance, are essential in addition to AML expertise. They are not just worthy investments but also the need of the hour.

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