Understanding money laundering in casinos

Cash-intensive facilities that utilize complex transaction chains often attract criminals looking to launder illicitly obtained funds. Casinos fall into this category, offering gamblers anonymity and the ability to transact large amounts of money at a rapid scale. 

While the market size of the casino and online gambling industry was forecast to reach $261.8 billion in 2022 – representing a $54.5 billion increase from 2021 – more and more casinos are being held responsible for their insufficient anti-money laundering (AML) controls. In 2022 alone, reports show casino regulators in the US, the UK, Austria, Sweden, and the Netherlands issued over $264 million in fines to casinos – representing a 444 percent increase over 2021.

How does casino money laundering work?

In many cases, criminals exploit the anonymity provided by the casino environment. Gamblers can give the casino incorrect, incomplete, and/or vague identifying information, meaning red flags may not be raised around their identity. When playing in an online casino, they can also create and use multiple accounts, which means suspicious transactions are not noticed quickly.

A common technique in casino money laundering involves converting “dirty” money into physical casino chips, which are then played with in various games before being cashed out as “clean” money in the form of a check. Fixed-odds betting terminals are often used in this laundering method, as they allow the gambler to only lose a small amount before cashing out. 

Legal and illegal casinos

Casino money laundering can take place in both legal and illegal gambling establishments:

• Legal casinos – these casinos need to be licensed and are required to pay taxes. 
• Illegal casinos – these undercover casinos are not licensed and do not pay taxes.

According to the US Department of Justice (DOJ), illegal casinos are one of the five major types of illegal gambling – the other types being sports betting with bookmakers, horse betting with bookmakers, sports parlay cards, and numbers (also known as “the Mafia lottery” or “the numbers racket”). 

In a joint operation carried out in September 2021, INTERPOL commented on the common convergence of illegal gambling with organized crime networks and money laundering efforts. The city of Los Angeles, California, has experienced this on an unprecedented scale since the COVID-19 pandemic, with illegal casinos (known as “casitas”) emerging “everywhere” under the control of the Mexican Mafia. According to authorities, the illegal casinos can generate tens of thousands of dollars per week, with the proceeds primarily benefiting incarcerated members of the gang. In addition to contributing to elevated levels of crime – such as drug use, shootings, and kidnappings – illegal casinos present a higher risk of money laundering as gamblers and organized crime members look for ways to make their winnings appear legitimate in the financial system. 

Casino money laundering examples

Incidents of money laundering through casinos have repeatedly made headlines over the past few years, with some jurisdictions facing a great deal of scrutiny for insufficient anti-money laundering (AML) measures and slow enforcement proceedings. 

Macao, China

While gambling is strictly prohibited in China, it is permitted in the special administrative region of Macao. However, Thomson Reuters found that Macao “has not scrutinized money laundering risks in the gaming industry with as much rigor as casino regulators in other jurisdictions.” Following this report, an amendment to gambling laws now means that Macao’s Chief Executive can revoke a casino’s license if it fails to pay its taxes on time, or on national security grounds. 

Australia

Additional examples of money laundering in casinos can be found throughout Australia. In March 2022, the Australian Transaction Reports and Analysis Centre (AUSTRAC) started federal proceedings against’s the country’s largest casino operator, Crown Resorts. Crown’s alleged failings include not undertaking appropriate ongoing customer due diligence (CDD) on high-risk customers and not having a risk-based transaction monitoring program to identify suspicious activity. As of March 2023, Crown’s proceedings are still underway.

Following the investigation into Crown Resorts, AUSTRAC fined casino operator Star Entertainment a record $100 million in November 2022, after discovering the company allowed gamblers to move money through non-transparent channels. Among the failings that led to the operator’s penalty included making misleading representations about its processes and systems for compliance with AML and counter-terrorism financing (CTF) obligations. 

In the following month, AUSTRAC also commenced civil penalty proceedings against major Australian casino operator SkyCity Adelaide for alleged “serious and systemic non-compliance”. Similar to Star Entertainment, it is alleged that SkyCity failed to include appropriate risk-based systems and controls in its AML/CTF program.

To combat the rising threat of money laundering in the gambling sector, AUSTRAC launched a second specialist AML unit in March 2023. 

Canada

Additionally, in June 2022, a report by the Cullen Commission found “staggering” amounts of “lavish” money laundering schemes and serious compliance failings throughout Canada’s province of British Columbia, particularly in the gambling/gaming industry. The report found that drug traffickers and organized crime gangs often used casinos to “snow wash” money gained via illegal activities. 

As a result, the commission encouraged British Columbia to instate an AML commissioner, begin a dedicated money laundering investigation, and implement an intelligence police unit to address the “corrosive form of criminality”.

Measures to prevent money laundering in casinos

Global regulators and the Financial Action Task Force (FATF) are keen to enforce AML and counter-terrorist financing (CTF) regulations around the gambling industry. The FATF flagged the vulnerability of casinos for money laundering and terrorist financing when it revised its 40 recommendations.

Casinos can proactively mitigate the risk of money laundering by implementing the following measures:

• Train staff on AML: Employees should be coached and well-trained so they can confidently recognize red flag indicators of money laundering and fully understand the process of reporting suspicious activity to the relevant authorities.  
• Participate in industry forums: Forums, like those run by the UK Gambling Commission, often share best practices and support AML/CTF policy development.
• Comply with AML regulations: In some countries, gambling is completely illegal. In others, such as Japan, it is heavily controlled and regulated. Many jurisdictions have strict AML rules that apply to casinos as well. In the US, for example, casinos must comply with the Bank Secrecy Act. AML regulations will often require casinos to undertake customer due diligence (CDD), maintain comprehensive records, and commit to reporting obligations.
• Employ a risk-based approach: Not all risk is created equal. Casinos should adopt a risk-based approach to AML to assign the appropriate level of resources to high-risk areas — such as “VIP customers” —  who are more likely to spend larger amounts of money.

Risk indicators for money laundering in casinos

What are some of the red flags for money laundering in casinos?

Of the suspicious activity reports (SARs) that US enforcement body the Financial Crimes Enforcement Network (FinCEN) received from casinos, common issues reported included: :

• Suspicious behavior and/or more than one gambler seeming to be working together
• Large amounts of cash or chips spread over only a few bets
• Betting amounts just below the reporting threshold
• Customers abandoning their jackpot winnings
• Customers having a large quantity of chips
• Customers making changes to bets to avoid reaching the threshold

Other things that casino AML and KYC teams may notice include:

• A discrepancy between the amount cashed in and the amount cashed out – in one case examined by the FATF an individual was named as winning $1m but not recorded as bringing any cash in
• Customers closing their casino account after the initial deposit
• Clients transacting across different locations
• Clients having access to multiple bank accounts registered abroad
• Clients asking questions about thresholds or having in-depth knowledge of thresholds
• Rapid or large transactions
• Customers trying to make friends with casino employees 

Casinos also need to keep a close eye on individuals from sanctioned countries and avoid breaking sanctions laws.

AML solutions for casinos

Casino AML compliance teams are seeing a perfect storm as the cost-of-living crisis fuels financial crime while firms’ profits – and therefore capital available to invest – is under pressure. To balance these pressures and mitigate the risk of money laundering, casinos should ensure their customer screening software is set up in accordance with geographic regulatory differences and is able to update in real-time. 

Each facility’s transaction monitoring solution must also be able to handle large transactions, especially those that are cash-based. Therefore, a solution with easily adjustable thresholds and a high level of configurability should be prioritized. Casinos must also be prepared to report any suspicious activity to the relevant authorities.