Money laundering and Online Casinos: IGC’s View
By Paul
The Interactive Gaming Council (IGC) has refuted claims that Internet casinos are susceptible to money laundering. In a submission to the Financial Action Task Force (FATF), the IGC asserts that Internet casinos are in a better position to address issues of money laundering than their land-based counterparts.

The IGC, a Canadian-based association of Internet casino companies, said in a press release yesterday: 'Online gambling does not lend itself to any form of cash movement because of the online nature of the business, specifically, there is no face-to-face contact in the business'. The IGC claims that whatever exposure the interactive gaming industry does have to money laundering can be dealt with through rigorous regulation.

The FATF, based in Paris, is an international organization devoted to combating money laundering. Its recommendations have been endorsed by more than 130 countries.

The FATF sought comment from industries that may be targeted by money launderers. It will consider the comments in turning the consultation paper into a formal report, probably by the first quarter of next year.

The IGC told the FATF that stringent player registration and ongoing verification processes for online gambling, in conjunction with the appropriate regulatory oversight and banking regulations, satisfy the 'know your customer' requirement that is basic to any fight against money laundering.

'Using software technology tools, online gambling operations can scrutinize 'inconsistent' behaviour, capture and report the transaction, and freeze the funds pending investigation. When performed in conjunction with a licensing authority this is a potent weapon,' the IGC says in its FATF submission.

The IGC claims there is no evidence of money laundering from online gambling sites, and also claims that online auctions are more likely to be channels for money launderers.

The real problem with money laundering, according to Rick Smith, executive director of IGC, is tracking money going out, rather than coming in: “That money must go only to the player who registered at the site and did the betting. It's also best if the money goes back the same way it came in. In other words, if a player starts playing on a credit card deposit, it's best if any winnings are credited to the same credit card. Unfortunately, most US credit card issuers won't permit that,' Smith said.

IGC members have policies that prevent transfers of funds (winnings or return of deposits) to parties other than the individual who originated the transaction.

The solution to the money laundering, the IGC believes, is government regulation of the online gaming industry, which 'should be subject to the same regulatory requirements as regulated land-based gambling organizations.'

Although the US General Accounting Office would probably take issue with the IGC’s contention that online casinos are less susceptible to money laundering, the same two conclusions are reached: To eliminate the possibility of money laundering, online casinos must be regulated and credit card companies need to start taking the transactions. However, neither of these options looks likely in online gambling’s biggest market - the US - at the moment.

The complete text of the IGC submission to the FATF is posted on the IGC Web site,

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