Online Gambling And Extension To EU Anti-Money Laundering Rules
By Jana Sedlakova
Following the Action Plan communicated by the European Commission (EC) last year, changes in the money laundering rules impacting online gambling in the European Union (EU) have been widely anticipated. The EC published its adoption of anti-money laundering proposals on 5 February 2013. The new set of rules is a revision of the 2005 Directive and whilst aimed at the financial services it expressly affects online gambling via an extension of the Directive. This will be subject to a ‘risk based approach’. The anti-money laundering rules were previously applicable to casinos only. According to many the risks of money laundering in online gambling are ‘very limited’. This third anti-money laundering Directive puts a threshold on all online wagers above €2,000 to be monitored. The new rules were recommended by the Financial Action Task Force (‘FATF’).

In Article 10, the proposal [Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing] establishes an additional proviso to the threshold, specifically “when carrying out occasional transactions amounting to EUR 2 000 or more, whether the transaction is carried out in a single operation or in several operations which appear to be linked.” 

This Article 10 also lists cases in which the Member States shall warrant that the required entities deploy customer due diligence provisions.
The Creutzmann report from 2011 also emphasised the issue of money laundering with respect to identification in online gambling in its point 26. Point 26 understood that the wide variety of gaming verticals “– such as rapid interactive games of chance which have to be played at a frequency of seconds, betting, and lotteries involving a weekly draw – differ from one another and require different solutions insofar as some forms of gambling afford greater opportunities for abuse than others; notes in particular that the opportunity for money laundering depends on the strength of identification, the type of game and the methods of payment used, which makes it necessary, in respect of some forms of game, to monitor play in real time and exercise stricter control than is the case with other forms of game” 
The Creutzmann report in its point 7 stressed that where there is absence of proper regulation online gambling represents greater risks than brick and mortar casinos. It also stressed that “measures must be taken at the European level to clamp down on fraud, money laundering and other illicit operations linked to online gambling; calls for more effective cooperation between Member State authorities, the Commission and Europol, including regular exchanges of information; calls on the Commission to extend the scope of legislation designed to clamp down on organised crime and money laundering so that it includes the gambling and gaming sector; recommends establishing a blacklist of illegal undertakings; supports the introduction of a regulatory principle whereby a gambling company can operate (or bid for the requisite national licence) in one Member State only if it is not operating in breach of the law in any other EU Member State”. This point urged the EC ” to consider the possibility of introducing interoperable EU standards in relation to fraud detection and prevention with a view to improving global market monitoring;” 
In the press release announcing the adoption of the proposed new rules, Internal Market and Services Commissioner Michel Barnier said: “The Union is at the forefront of international efforts to combat the laundering of the proceeds of crime. Flows of dirty money can damage the stability and reputation of the financial sector, while terrorism shakes the very foundations of our society. In addition to the criminal law approach, a preventive effort via the financial system can help to stop money-laundering. Our aim is to propose clear rules that reinforce the vigilance by banks, lawyers, accountants and all other professional concerned.” 
Further in the press release, Home affairs Commissioner Cecilia Malmström said: “Dirty money has no place in our economy, whether it comes from drug deals, the illegal guns trade or trafficking in human beings. We must make sure that organised crime cannot launder its funds through the banking system or the gambling sector. To protect the legal economy, especially in times of crisis, there must be no legal loopholes for organised crime or terrorists to slip through. Our banks should never function as laundromats for mafia money, or enable the funding of terrorism.”
Anti-money laundering standards have been set in the EU already and most operators are compliant through general principles. 
The European Betting and Gaming Association (‘EGBA’) has set anti-money laundering standards within its third principle “Zero tolerance of fraudulent and criminal behaviour”.
The Creutzmann report has also recommended a consistent pan European set of minimum standards for digital identification.
In response to the announcement, Sigrid Ligné, Secretary General of the EGBA, said in a press release [5th February]: “Today’s changes will improve the legal certainty of the sector by being incorporated into another piece of EU-harmonised legislation. They will also improve market access for regulated operators as some Member States today still use the fight against money laundering as a justification to prohibit online gambling services.”
The term harmonisation has been in circulation for several years now and it may serve as a deterrent for some. 
It is a focal point, however, for the objectives of creating a level playing field when it comes to online gambling regulation in the EU. When asked whether the new anti-money laundering rules would help to harmonise online gambling laws in the EU Florian Cartoux, Senior Advisor at EGBA, replied “This is what we hope for. The directive is expected to bring a greater level of consistency between national rules when it comes to online gambling. It confirms that online gambling is a clear cross-border economic activity covered by a growing number of EU-harmonised legislation. We hope that the Commission will be vigilant in the way the directive is implemented at national level as some Member States may decide to subject online gambling activities to very different degrees of customer due diligence. “ 
Clive Hawskwood, CEO at the Remote Gaming Association, said that the new rules “will certainly do no harm with regard to harmonisation, but it is probably unrealistic to expect that they will move the wider debate forward in any real way.”
Member States are permitted to restrict the provision of online gambling on the grounds of public interests of which the money laundering is an important one. 
Florian Cartoux addressed this and also whether the rules would ‘incentivise’ Member States who base their restrictions on money laundering grounds: “The extension of the directive to online gambling confirms that our sector is a cross border activity. We hope therefore it will improve market access for regulated operators as some Member States today still use the fight against money laundering as a justification to prohibit online gambling services.” 
By contrast, Clive Hawkswood does not believe there is scope for Member States to be incentivised in this regard, and that “if those were real concerns then Member States were already free to introduce their own domestic laws to address the issue.”
Addressing the effectiveness of the new rules Florian Cartoux said that “The directive on paper will continue to apply on a risk based approach, so this is welcomed approach, which should make the fight against money laundering effective even though the risks associated with money laundering in regulated online gambling are very limited. The effectiveness of these rules will, however, very much depend on how Member States will decide to implement them. And this will only be known in 2-3 years’ time, once the directive will have been incorporated into national law.” 
Article 45 of the proposal clearly emphasises the importance of strengthening the supervision of gambling services by saying “In the case of credit and financial institutions and providers of gambling services, competent authorities shall have enhanced supervisory powers, notably the possibility to conduct on-site inspections.”
The proposal addresses customer due diligence, performance by third parties, beneficial ownership, reporting obligations, record keeping and statistical data; Furthermore it covers policies, supervision, procedures, cooperation with the EC and sanctions in the event of non compliance.
The impact assessment of the proposal suggested a range of options to improve upon the current status quo. Some of these would be broadening the scope to cover gambling beyond casinos; reducing thresholds to 7,500 for cash transactions and more. 
Concerning the positive and negative aspects of the new rules Florian Cartoux expressed that “Today’s changes will improve 1) the legal certainty of the sector by being incorporated into another piece of EU-harmonised legislation as well as 2) market access for regulated operators. On the down side, we are concerned that the new rules on anti-money laundering are not associated with harmonizing certain aspects of e-verification. Multi–licensed online gambling operators are often subject to very inconsistent national regulations in terms of e-verification, ranging from e-verification via third party services such as GB-Group (UK), e-tools like NemID (Denmark), to manual checks (France).” 
Clive Hawskwood said: “For online gambling there will be almost no obvious changes. The AMLD already applied in full to online casinos and the vast majority of companies who offer online betting have procedures that are almost identical anyway. In some cases (the UK, for example, there is the Proceeds of Crime Act) they had to do this to comply with pre-existing regulations, but in most cases it was just good business sense to run all parts of the online business to the same standards. This is especially true given the widespread use of single wallets which are designed to make it easy for consumers to move funds between online betting and online casino products. There might be a slight positive in terms of making it very obvious to the uninitiated that all online gambling is subject to high standards of AML, but overall it’s just business as usual.”