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Money Laundering Through Online Gambling McAfee Labs 2 About McAfee LAbs McAfee Labs is the world’s leading source for threat research, threat intelligence. Chapter 3: Description of Possible Money Laundering Schemes A.1) Methods of Money Laundering through the Use of Casino Value Instruments 6. Casinos utilize various value carriers or instruments to facilitate the gambling process, and the type and use of these instruments differ depending on both local. Attorney-General David Eby gestures while showing a video of bundles of cash brought to a casino by a person, after releasing an independent review of anti-money laundering practices during a.
Betfred has been slapped with a hefty fine of £322,000 by the UK Gambling Commission. An investigation by the industry watchdog revealed that a customer was able to deposit a large sum of stolen money and lose it, all within 12 days.
As a result, the bookmaker was found guilty of money laundering failures.
What Did Betfred Do Wrong?
Betfred has agreed to pay the fine of £322,000 in a settlement with the Gambling Commission, after failing to comply with anti-money laundering rules. It has been revealed that the bookmaker’s failure to carry out adequate customer checks became apparent when a customer deposited stolen money on the Betfred site. In November 2017, the anonymous fraudster was able to deposit £210,000 with Betfred, before going on to lose £140,000 over the course of just 12 days.
According to the Gambling Commission, ‘a customer being able to deposit and lose such significant amounts in such a short period of time indicated failings in the effectiveness of Petfre’s anti-money laundering policies and procedures’. Betfred is the name that Petfre Limited trades under. Betfred had asked the customer for an SOF (source of funds) twice during the 12 days. However, even though the customer did not supply the SOF, Betfred allowed the customer to gamble anyway.
Betfred have fallen foul of UKGC anti-money laundering rules. ©www.theguardian.com
The £322,000 settlement to be paid by Betfred will be split in two ways. £140,000 will go to the victim whose money was stolen. £182,000 will act as a financial penalty, contributing to the ‘National Strategy to Reduce Gambling Harms’. This strategy aims to unite charities, businesses, regulators and health bodies in tackling harmful issues in gambling. The two main targets consist of prevention and education, and treatment and support. Another payment of £15,168.42 is to be paid by Betfred to cover the costs of the Gambling Commission’s investigation.
In its statement, the Gambling Commission acknowledges that Betfred has made some changes in response to the allegations. ‘Petfre has made changes to its policies, procedures, and controls as a result of the identified issues’.
Who Is The Mystery Fraudster?
The Gambling Commission did not reveal any names behind who was responsible for the large fraud. However, some have suggested that there is enough evidence to attach Joyce Baker, an ex financial manager, to the case. She worked for Light Corporation in Berkhamstead in Hertfordshire, before being found guilty of fraud. She was discovered to have embezzled £2,011,983 from her former employer over the course of six years, most of which was spent on a gambling addiction. Light Corporation struggled financially as a result of her actions, causing about 30 employees to be laid off. Baker received a jail sentence of 5 years and ten months.
Surprisingly, Baker did not lose her job as a result of the fraud she committed. She left her job before being discovered, because some of her colleagues had started to get suspicious. Baker then presented her employer with an unfair dismissal lawsuit of £30,000. Once she’d left the company, a new financial controller was hired, who unearthed the fraud. In the trial that followed, her gambling habits were revealed. Online gambling, vacations, and VIP casino visits had all been paid for with the cash that she had stolen. Unfortunately, not all of the money can be accounted for, and Baker has refused to reveal where it is.
There is another interesting piece of the puzzle that further supports the theory that Baker is behind the Betfred fraud. According to the UK newspaper The Daily Mail, Baker forged her boss’s signature and stated that she earned £750 a day when asked by online gambling sites to give proof of her income.
“The Investigation into Petfre was the result of information passed to the Commission regarding a customer who had been convicted of a £2million fraud and had been spending stolen money through several gambling operators including Petfre. This customer opened multiple gambling accounts in a very short period of time, making large deposits and experiencing significant losses.”
The Gambling Commission described the fraudster in the Betfred case as having spent ‘stolen money through several gambling operators’. If it is true that Betfred’s anti-money laundering procedures are not as thorough as those of other gambling operators, it is possible that Baker might not have bothered with forging her details for Betfred. This could explain why only Betfred was met with sanctions by the Gambling Commission.
It all makes for a compelling case, but it cannot be proved that Joyce Baker is the mystery fraudster behind the Betfred case. Nevertheless, out of the criminal cases that fit the time frame and details of the fraud, she does seem to be a fitting contender.
This is not the only controversy that Betfred has become entangled in recent months. Last month a whistleblower revealed that the company was underpaying its staff for overtime. In a complaint to UK paper The Guardian, the unhappy member of staff talked about the low morale of workers at the company. In all, it is a difficult time for gambling operators in the UK as Government pressures mount over player protections and the financial climate grows increasingly difficult for the industry. Betfred and other UK operators will need to remain particularly vigilant of the rules to keep their businesses thriving.
The rush to get sports betting up and running across the country has caused some hiccups in the rollout to date. In the opening weekend at The Meadowlands, FanDuel posted laughable lines. The book quickly corrected those lines.
Similarly, in Mississippi, the first weekend of legalized sports betting passed without a single casino obtaining a license. While the product roll outs have been somewhat bumpy, it is likely that operators will fix the kinks in the coming weeks.
One area we have seen a lag is the launch of mobile / online sports betting. This is likely due to regulatory issues, but this may also be a risk management strategy.
Lawmakers have historically disliked gaming. However, their dislike for online gaming seems exponentially greater. There has been an extensive history of Congress connecting online gaming to illegal activities. While chances of Congress seeking to stop brick and mortar sports betting expansion remain very low, online gambling may face a greater threat.
The post 9/11 era
In the wake of September 11, 2001, Congress went after funding mechanisms that had been used by terrorists. A Washington Postarticle from 2007 noted a joint investigation between U.S. and British authorities. In the case, three men were accused of using “computer viruses and stolen credit card accounts to set up a network of communication forums and Web sites that hosted such things as tutorials on computer hacking and bomb-making….”
The men were using the money to:
“buy items that fellow jihadists might need in the field. Authorities also say the men laundered money from stolen credit card accounts through more than a dozen online gambling sites.”
One of the group members “allegedly laundered money through online gambling sites, using accounts set up with stolen credit card numbers and victims’ identities, and ran up thousand-dollar tabs at such sites as AbsolutePoker.com, BetFair.com, BetonBet.com, Canbet.com, Eurobet.com, NoblePoker.com, and ParadisePoker.com.”
The group completed hundreds of transactions at more than 40 different sites. When successful, the group would withdraw the money from the gambling site. Then they would transfer it online to their bank accounts.
Congressional concerns about online gambling
After the Washington Post article, there was a recurring theme in congressional hearings related to online wagering. They nearly universally contained some reference connecting online wagering to money laundering. In 2009, Congressman Spencer Bachus wrote to FBI Director Robert S. Mueller requesting answers to a variety of questions regarding online poker.
Amongst the questions Bachus posed to Mueller was whether “technology could be used to illicitly transfer or launder money in the guise of ‘innocent’ participation in an online poker game…?”
FBI responds to online casino worries
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In the response from Assistant FBI Director Shawn Henry, the FBI took this position:
“Yes, online poker could be used to transfer ill-gotten gains from one person to another, or several other people. Private tournaments exist on several online poker programs which would allow a subject to create a private game with his/her money mules. Once the game is created, the subject could raise the pot, to whatever maximum amount is allowed, and then fold before the hand is finished. This would allow the subject to transfer the money from his account to the mule account. This activity could repeat itself several times, virtually ‘washing the money.’ Once again, this activity could be detected by the vendors, but at what cost…?”
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Several years later, Congressman Bill Young wrote to the FBI requesting information about money laundering via online gambling.
Deputy Assistant FBI Director J. Britt Johnson responded to Young, stating:
“Online casinos are vulnerable to a wide array of criminal schemes. For example, criminals may participate in games with exclusively criminal players, exchanging money to launder criminal proceeds; or a criminal might intentionally lose a game to a public official in order to effect a bribe payment. Transnational organized crime (TOC) groups might exploit legal online gambling to generate revenue, steal personally identifiable information (PII), and engage in public corruption. TOC groups could hire hackers to rig games in favor of TOC members playing in a particular game—depriving the game operators of revenue. TOC groups could also use intrusions to steal PII from players, which the groups could employ in future financial fraud schemes.”
FBI always emphasized difficulty detecting money laundering
The letter goes on to take a subtle jab noting that many of these methods could be “detected and thwarted by a prudent online casino, for example, by blocking software designed to enable online anonymity.” But, Johnson stated the other, more sophisticated methods may be difficult to “identify or deter.”
What to make of the slow online roll out?
Mobile betting is coming. However, given the recent history of Congress being hyper-vigilant regarding online gaming, it appears prudent for operators to play it safe. Cybercrime is our new reality. In many ways, the bookmaker model of online wagering is likely a greater obstacle to money laundering than certain other wagering formats such as some types of exchange wagering.
Anti-money laundering protocols are an important step for all operators. Given the attention at the federal level, it is also not one where operators cannot afford to take shortcuts and bungle the launch.
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Indeed, anti-money laundering concerns arose in the daily fantasy industry as well. Even so, the industry has appeared to weather the storm.
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While there has been historical opposition to expanded online wagering in Congress, the move from brick and mortar to online is unavoidable. It is likely best for the industry to ensure that the online rollout happens glitch-free. After all, the stakes may be substantially higher with a highly public failure.
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Such a failure could give Congress ammunition to roll out new regulations for online betting.