How to combat money laundering through pokies in Australia

Electronic gaming machines (EGMs), colloquially known as ‘pokies,’ are hugely profitable for the Australian gambling industry. Although the country is home to less than one percent of the global population, research estimates it has around 18 percent of the world’s poker machines. Pokies routinely account for the most significant part of Australia’s gambling turnover, reaching $191.2 billion in 2023. 

However, this never-ending flow of cash has also made pokies attractive to criminals. Australian gambling operators must, therefore, be aware of the risks of pokies and their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations. 

How are pokies used to launder money? 

Criminals seeking to launder money through pokies often insert large amounts into an EGM (or get a money mule to do it for them) to seem like a genuine player before withdrawing it after little or no actual gameplay. Alternatively, they offer to buy the winnings of legitimate players by exchanging illegal cash for winning credits, typically at a favorable price for the other player. In either case, illegal money is made to look like the legitimate proceeds of gambling, giving criminals an explanation for their source of funds (SoF) if questioned. 

Money laundering through pokies is one sub-type of money laundering through gambling and conforms to the three-stage structure found in other typologies. 

Money mules and pokies 

Money mules are people recruited by criminals to launder money for them by proxy, sometimes knowingly and sometimes not. Money muling is a significant issue in gambling-related money laundering in Australia, with criminals giving mules commissions to layer money through pokies or casinos and using mule bank accounts to obscure the source of their funds further. In November 2024, news stories emerged concerning criminals paying individuals for identity documents so they could set up betting and bank accounts in their name. 

Acknowledging the scale of the problem, in 2024, the Australian Transaction Reports and Analysis Center (AUSTRAC) issued a guide to help firms recognize red flags. Indicators of money laundering in customer behavior applicable to pokies include: 

• Access to more cash than expected for their customer profile profile. 
• Depositing higher values and larger amounts of cash. 
• Transferring cash or gaming tokens to patrons. 
• Obtaining casino disbursement checks for winnings or non-winnings. 
• Occupations such as students or secretaries and directors of recently incorporated companies.

Pokie regulations in Australia

Pokies are found across casinos, pubs, and sports or social clubs across Australia, where their extreme popularity has created serious financial crime risks. In 2022, the New South Wales (NSW) Crime Commission published the Islington Report, an inquiry into money laundering via EGMs in the state. Finding that a “significant amount” of the $95 billion gambled through pokies from 2020 to 2021 was likely the proceeds of crime, the report recommended making all NSW pokies cashless by the end of 2028. 2022 also saw an amendment to the Casino Control Act 1992 allowing NSW casino operators to be fined up to $100 million for compliance failures, a recognition of how serious a problem money laundering had become for the sector. 

Across Australia, many business operating pokies must meet AML/CFT requirements by law, although these differ depending on the number they operate. According to AUSTRAC guidance, businesses licensed to operate up to 15 pokies do not have to have AML/CFT programs in place. However, they must still: 

• Register with AUSTRAC using an AUSTRAC Business Profile Form (ABPF), and keep enrolment details updated. 
• Keep records relating to customer identification procedures and transactions. 
• Submit suspicious matter reports whenever they have reason to believe that a customer’s activity may be linked to money laundering or terrorist financing. 

Businesses operating more than 15 pokies have significantly more obligations. In addition to the above requirements, they must: 

• Appoint a compliance officer. 
• Complete a risk assessment, taking into account their services, customers, and location. 
• Implement an AML/CFT program. 
• Conduct customer due diligence (CDD). 
• Submit reports on transactions above $10,000 in physical cash, including the customer’s identifying information and the transaction date. 
• Regularly review their AML/CFT program and submit annual compliance reports detailing how they meet their compliance obligations. 

Consequences for non-compliance

According to AUSTRAC guidance, non-compliant businesses can face a range of regulatory measures, such as remedial directions or infringement notices. These detail firms’ specific compliance failings and specify the actions they must take to address gaps in their AML/CFT programs, which may include undertaking additional risk assessments or appointing an external auditor. Remedial directions can be made public and, therefore, carry the additional threat of reputational damage for businesses. AUSTRAC can also apply to the Federal Court of Australia for civil fines to be imposed for compliance failures. 

A Complete Guide to AML for Australian FinTechs

Our expert guide explains the key issues facing Australian firms and gives actionable tips on how to build an AML program. Download to learn how to turn compliance into a business advantage.

Download your copy

Compliance challenges for Australian gambling operators

Because of its ubiquity across Australia and its nature as a cash-intensive industry, the gambling sector is under significant pressure to improve its AML/CFT compliance. In doing this, it faces a number of sector-specific challenges: 

• Intensive compliance requirements: AUSTRAC specifies that EGM operators must have customer identification procedures, including determining whether a customer is a politically exposed person (PEP). As part of ongoing due diligence, businesses must also analyze all customer transactions and carry out enhanced due diligence (EDD) if a customer is a foreign PEP or appears to be carrying out suspicious transactions. To do this, firms must have effective solutions in place for customer identification, PEP screening, and transaction monitoring, which all require the use of specialist technology. 
• Potential AML expertise gaps: Despite their high-risk status, gambling operators often lack the dedicated and experienced compliance teams found in financial services firms. In addition to suitable AML software, firms need staff able to carry out practical compliance requirements, such as undertaking risk assessments, handling large cash volumes, making case decisions, filing suspicious matter reports (SMRs), and training other employees on detecting suspicious behavior. Gambling businesses – especially smaller ones not required by law to employ specialist compliance officers – may struggle with the human resources side of compliance. 
• Data quality: Essential compliance program features, such as CDD or transaction monitoring, depend on access to clean, accurate, up-to-date customer- and risk-related information. Firms without this will not be able to fulfill their core AML/KYC requirements in a way that satisfies regulators. 
• Heightened regulatory scrutiny: The gambling sector has come under the spotlight in recent years thanks to high-profile money laundering cases, resulting in new rules for the industry and significant fines for operators guilty of compliance failures. In 2023, the gambling sector suffered the third-highest total regulatory fines, reaching over $475 million. AUSTRAC sanctioned businesses for failures such as inadequate transaction monitoring or EDD measures. 

Best practices for efficient AML compliance

To meet these challenges, there are certain steps EGM operators can take to mitigate their financial crime risks, prepare for potential regulatory scrutiny, and maximize their ability to detect and prevent suspicious behavior. These best practices include: 

• Screening customers against up-to-date information: Gambling operators should empower their screening solutions with the latest data on PEPs, sanctions, and enforcement action. Since this information can change quickly, businesses should make sure they have access to the most recent and accurate data. 
• Implementing smart transaction monitoring: An effective transaction monitoring solution should trigger alerts for customer behavior that is unexpected or inconsistent with their risk profile, as well as more general red flags, such as withdrawing money shortly after gambling it. An automated monitoring solution based on known financial crime typologies and scenarios can help firms with this requirement. 
• Training employees in compliance processes: While technology can do a fair amount of the heavy lifting with certain parts of the compliance process, it must be partnered with a capable team to function effectively. One risk factor flagged by AUSTRAC, for example, involves customers becoming evasive when asked for identifying information or using their rapport with staff to bypass checks. Therefore, all customer-facing employees must be trained to spot red flags and adhere to compliance procedures.

Mitigate your businesses’ risks with advanced AML solutions

ComplyAdvantage’s AML software solutions help gambling operators streamline their compliance without compromising on risk. Firms can benefit from artificial intelligence (AI)-enhanced customer screening, which refreshes PEP and sanctions data in near-real time and allows businesses full visibility into the risks they face. ComplyAdvantage’s screening tools also use advanced matching algorithms to ensure the accuracy of alerts and minimize false positives that could cause unnecessary friction for customers. 

ComplyAdvantage’s transaction monitoring software, meanwhile, is built around a comprehensive rules library of industry typologies, with a no-code rules builder for firms to add their own. Machine learning capabilities fill in any gaps where existing rules cannot detect suspicious activity. With scalability to billions of transactions, our transaction monitoring software helps EGM operators of all sizes protect themselves from the risks of non-compliance.