Casino Money Laundering – How It Really Works in the Casinos
6 minutes
Last Updated: January 14, 2023
Since they deal with money and operate as a primarily cash-only business, casinos have been a fertile ground for criminal activities since their invention.
With that said, along with cheating, theft, and robbery, money laundering is one of the criminal activities most often associated with casinos.
In this article, we explain what is money laundering, how it is done, and why casino money laundering is still very much a problem.
What Is Money Laundering?
Money laundering is a term used to describe the illegal process of making money earned through illegal activities appear as if it were earned through legal activities.
One of the reasons why this process is called money laundering is because the money from illegal activities is referred to as “dirty money: and in this process, it is “cleaned”.
Criminal organizations and individuals clean their money through all kinds of businesses. They use these businesses as front covers to hide the origin of the money in an effort to put it back into the financial system as legitimately earned funds.
The main reason why they do this is that dealing with large amounts of illegally acquired money can raise red flags. This, in turn, can trigger a government investigation, which is the last thing you want if you earned money through illegal activities.
In addition to this, illegally earned or acquired money is limited in terms of its usefulness. You can’t spend it in large amounts without having proof of where it came from.
How does Money Laundering work?
There are 3 main steps in the process of money laundering:
- Placement
- Layering
- Integration
We’ll take a quick look at all three of these aspects and explain each one of them to give you a better idea of how money laundering works.
Placement
Placement is where illegally obtained money is converted into assets that seem legitimate. In other words, when criminals have a lot of money that needs to be cleaned, they first want to find a way to put it back into the financial system without raising suspicion.
This can be done in a few ways, from depositing small amounts of money to corporate bank accounts to using a professional middleman.
Although this step seems like a simple one, it is also the most dangerous for criminal organizations. A fair number of money laundering activities is discovered during this step.
The main reason is that criminals often try to place too much money in a small number of transactions. This makes it easily discoverable by the Anti-Money Laundering measures that all banks have in place.
Layering
The process of layering implies making multiple transactions to further hide the origins of the money. There are several ways in which criminal organizations conduct the process of layering.
This includes transactions between multiple accounts under different names or from different jurisdictions, converting funds into other currencies, and buying tradable property such as expensive vehicles, artwork, or real estate.
Integration
The final step of the money laundering process is integration. The integration allows clean money to re-enter the financial system. It is often done by investing the money into legal businesses, claiming payments with fake invoices, or even founding charity organizations.
After this, the perpetrators can choose to get back legal clean money in a form of a salary or other legal financial transactions.
Casino Money Laundering
Casinos are one of the top choices for criminal organizations that look to launder their dirty money. In these establishments, money changes hands every second, making them perfect to cover the tracks.
The process of money laundering in brick-and-mortar casinos consists of 3 major steps:
- Buying casino chips with dirty money
- Gambling with the chips for a period of time (either losing small or winning)
- Cashing out the casino chips in the form of a check
As you can see, the nature of the casino business allows criminals to clean their money in a pretty straightforward way without complications. This is another reason why casinos are fertile ground for money laundering.
Money laundering via online real money casinos and betting sites is a bit different, but not too much:
- Depositing dirty money through e-wallets, prepaid cards, or crypto
- Placing a few bets
- Cashing out the remaining balance to a bank account
Depending on the jurisdiction of the casino, laundering money on online casinos is quite simple, especially with the rise in popularity of crypto gambling platforms.
The nature of financial transactions in the casinos is such that the more patience the money launderer has, the more difficult is to detect these kinds of transactions.
This, paired with the fact that the online gambling industry is worth almost $100 billion, makes it even more difficult for the authorities to prevent casino money laundering.
To be fair, many casinos have certain rules and measures to prevent criminals from laundering their illegally earned money through their establishments. However, these measures are not nearly as effective as one would hope.
The Impact of Cryptocurrencies on Money Laundering
The number of crypto gambling platforms, which represent an even better option than casinos operating exclusively in fiat currencies, is growing each day.
There are 2 main reasons why cryptocurrencies are the perfect choice for those who want to launder money:
- Cryptocurrencies are anonymous, so no personal information needs to be disclosed when making transactions
- Cryptocurrencies allow criminals to move huge amounts of money in a matter of seconds
It is believed that in 2021 alone, criminals have managed to launder over $8.6 billion in cryptocurrency. According to some predictions, this amount will only keep growing in the following years.
In an effort to prevent this from happening, authorities have appealed to crypto exchanges to verify crypto wallet ownership and implement measures to verify who is making the transactions. This way, the origins of the funds could be tracked more easily.
The likelihood of this happening is very low, though. It would make crypto lose one of the things that makes it so appealing to people worldwide – anonymity.
Anti-Money Laundering (AML) Measures in Casinos
Anti-money laundering or AML is a set of laws, regulations, and procedures used by financial institutions to prevent cleaning dirty money and presenting it as legally obtained funds.
In addition to this, AML is used by banks to detect potential tax evasion, corruption, and financing of criminal activities.
Each year, the AML becomes stricter for financial providers and casinos. The main reason why casinos use AML is because they work with huge numbers of individuals and companies from different jurisdictions.
Apart from having AML measures themselves, many jurisdictions prevent casinos from working with companies that don’t have these same measures in place themselves.
With this said, it is still debatable if AML should be used by casinos since they have a direct impact on their business.
A majority of gamblers who have obtained their gambling funds in a legal way do not want to disclose how much money they spend gambling. This can make them avoid playing at casinos that have AML protocols in place.
Apart from the measures implemented by casinos, these gambling establishments also must comply with the rules of the governing body that issued their license to provide online gambling services.
Regulatory bodies have the right to do all kinds of inspections to make sure that the casino is operating in compliance with the rules, such as:
- Questionnaires
- Information request
- Review of case files
- Thematic work
- Visits
- Test purchasing
- Information from other sources
Final Thoughts
When it comes to the casino industry, money laundering is a serious problem that keeps on growing thanks to the increase in the popularity of cryptocurrencies.
There are many measures that both the authorities and the casinos themselves have in place to prevent these kinds of activities. However, thanks to the nature of the business, these only prevent a small portion of money launderers.
We can only hope that the authorities will work together with casinos and crypto platforms in an effort to reduce the amount of these activities in traditional casinos and online gambling platforms.
