01Aug

National Risk Assessment of Money Laundering and Terrorist Financing 2025

1st August 2025 Ting Fung 32

HM Treasury and the Home Office jointly published the National Risk Assessment of Money Laundering and Terrorist Financing 2025 (“NRA 2025”) on 17 July 2025, with the Ministerial Foreword stating that since the NRA’s last publication in 2020,

“The threat from money laundering and terrorist financing continues to evolve, shaped by new technologies, geopolitical tensions, and the increasing sophistication of criminal and terrorist networks.”

In addition, the UK, with “one of the largest and most open economies, ranking 6th by GDP globally and 2nd in Europe” continues to be exposed to a high level of money laundering (“ML”) risk.

Purpose of the NRA

The NRA 2025 identifies itself as “a central part of the UK’s “risk-based approach” to countering ML and terrorist financing (“TF”). The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (the “MLRs”), stipulate that HM Treasury and Home Office must undertake an NRA and ensure it is used to consider the appropriate allocation and prioritisation of resources to counter ML and TF. Supervisors and regulated firms must conduct their own risk assessments which must take into account the NRA. Their risk assessments should be used to put in place effective controls, policies and procedures to mitigate the risks identified. The NRA provides for regulated sectors “essential insight into how their services may be exploited for illicit purposes, and guidance on how these threats can be identified and mitigated.”

Regulated sector – Casino (remote and non-remote)

Gambling operators holding a casino licence from the Gambling Commission are expressly included within the regulated sector by the MLRs. In the NRA 2025, the casino industry is highlighted as one of the sectors with the highest risks of exposure in relation to ML through cryptoassets. For further information on how cryptoassets is used as a ML typology, see pages 39 – 42.

Section 5 – Sector Specific Risks , sets out further information on the risks of casino as a regulated activity.

Importantly, the risk for ML has increased to “Medium”, with the following being the main drivers of increased risk:

changes in customer, geographical and transaction risks, particularly the increase in funds moving through remote casinos;
new ways to play casino games; and
the updated assessment of money service business (MSB) activities offered by some casinos in the UK.

In relation to the casino sector, the NRA 2025 also notes:

Casino sector vulnerabilities: The use of peer-to-peer poker by remote casino platforms carries a higher ML and TF risk, owing to the growing use of methods to achieve anonymity (there is an increase in the reported use of false identities in an attempt to gain access to casinos). Other vulnerabilities include exposure to higher risk payment methods (including those linked to MSBs), and the use of white-label partnerships.,

Remote slot gaming: The combination of the increased scale and volume of slot gaming with the risks of non-face-to-face business relationships alongside noncompliance with customer due diligence (“CDD”) requirements by some casinos, also increases the risk of ML and TF. Owing to limited data, it is not yet possible to assess the likely impact of the UK government’s new slot stake limits (£5 limit for all adults from 9 April 2025, and £2 limit for adults aged 18 to 24 from 21 May 2025) in mitigating UK ML and TF risks.

Emerging risks: These include (i) increasingly sophisticated attempts to bypass CDD checks using false documentation and by deploying artificial intelligence – albeit this risk is not limited to casinos and (ii) crash games, which pose an opportunity to launder criminal funds through regulated casino operators, as “criminals could conceal the high risk behaviour of cashing out quickly with limited gameplay within the context of the crash game (where these behaviours are inherently more common)”.

Unregulated sectors

In terms of sectors unregulated by the MLRs that offer gambling legally, remote bingo, remote betting, and non-remote off-course betting are also considered to pose a high risk of ML and TF. In addition, for remote gambling activities, the use of e-wallets can result in the co-mingling of funds from regulated and unregulated sectors which could make investigation by law enforcement agencies more difficult. In respect of off-course retail betting, there are risks associated with the ability to deposit cash which can then be used for remote betting accounts, which makes transaction chains complex. In terms of wider betting-related criminality, there are concerns regarding illegal betting groups manipulating or creating false markets and “the widening availability of betting markets” poses threats such as the emergence of political and novel betting markets.

Illegal casinos which fall outside of regulation by the MLRs or supervision by the Gambling Commission have also been considered, with the use of cryptoassets in illegal casinos also increasing. The Gambling Commission took joint action with the police and search providers in 2024/2025 to address the respective risk from both remote and non-remote illegal casinos.

Next steps

Licensees should take the increased ML risk rating for casinos in the NRA 2025 into account when conducting their own ML and TF risk assessments. Following publication of the NRA 2025, the Gambling Commission has confirmed that it will review and update its risk assessment of the British gambling industry.

If you have any questions regarding the NRA 2025 or your own risk assessment, please do not hesitate to get in touch.

09Apr

Gambling Commission publishes update on emerging money laundering and terrorist financing risks

9th April 2025 Harris Hagan 102

On 8 April 2025, the Gambling Commission released a publication on the emerging money laundering and terrorist financing (“ML/TF”) risks. Under licence condition 12.1.1 of the Licence Conditions and Codes of Practice (the “LCCP”), licensees must keep up-to-date with emerging risks information published by the Gambling Commission, and ensure their ML/TF risk assessments and related policies, procedures and controls are reviewed and revised appropriately to ensure that they remain effective.

The publication identifies the following 13 emerging risks and what licensees need to do.

Money service business activity in remote and non-remote casinos

Some remote and non-remote casinos offer money service business (“MSB”) facilities, which include foreign currency exchange, third-party cheque cashing and third-party money transfer (into and out of the casino).

The Gambling Commission is aware of casino customers attempting to deposit large denomination notes of foreign currencies (including €500 notes) into casinos. It is noted that the HMRC guidance on Understanding risks and taking action for money service businesses states the sale of high value notes, in any currency, entails a significant money laundering risk and any request to buy or sell €500 notes or quantities of other high denomination notes should be treated as high risk. Similarly, HM Treasury’s UK national risk assessment of money laundering and terrorist financing report states that criminals have been known to use currency exchange services to convert criminal cash into high denomination foreign currency notes.

The Gambling Commission surveyed the MSB activity offered by casinos and noted a reduction in the number of casinos offering MSB activity, as well as a reduction in the number and value of MSB transactions. However, numerous high-value transactions are still completed via MSB facilities in casinos, and the Gambling Commission’s ML/TF risk assessment (“Risk Assessment”) still rates MSB activity within casinos as high risk.

The Risk Assessment also identifies other risks linked to MSB activity, such as (i) payments received from politically exposed persons (“PEPs”) or persons appearing on financial sanction lists, (ii) customers buying in using a number of different payment methods, (iii) high reliance on due diligence information from third party due diligence providers, (iv) funds transferred into accounts from unknown sources, and (v) funds transferred from unlicensed MSBs.

What licensees need to do:

Casino licensees must conduct an appropriate ML/TF risk assessment and, where MSB activity is offered, an assessment of the ML/TF risks associated with the MSB activity offered must be included. Licensees must implement appropriate controls to prevent ML/TF and review these regularly to ensure they remain effective.
Where foreign currency exchange services are offered, licensees must have appropriate controls to address the risks associated with large denomination notes.
Due to the risks associated with MSB activity, customers using MSB facilities offered by casino licensees are expected to be treated as high risk, and are subject to appropriate enhanced customer due diligence measures, as outlined in the Gambling Commission’s guidance on the prevention of money laundering and combating the financing of terrorism.
Licensees offering MSB facilities must also review and consider HMRC’s MSB guidance.

Artificial intelligence used to bypass customer due diligence

The Gambling Commission notes the increase in the scale and sophistication of attempts to bypass customer due diligence checks using false documentation, deepfake videos and face swaps generated by artificial intelligence. As noted by the National Crime Agency (“NCA”) in issue 30 of their SARs in Action publication, accounts successfully created using AI are more likely to be used for criminality, such as money laundering or terrorist financing.

What licensees need to do:

Consider all information they hold on a customer and, where documents are received from a customer, ensure that these documents are appropriately scrutinised.
Ensure staff are appropriately trained to assess customer documentation, including how to identify false and AI generated documents.
If a customer has submitted a false document, licensees should consider the Gambling Commission’s guidance about what licensees must do in that situation.
When submitting a SAR in relation to AI generated documents, the NCA has requested that the reference 0752-NECC is included in the relevant field. Please see the SARs in Action publication for more information.

Money in exchange for personal details and gambling accounts

The Gambling Commission has been made aware of consumers being targeted by companies who offer money in exchange for personal details to open multiple gambling accounts in the customer’s name. Consumers are directed to upload their documentation which is then used by the third-party to open large numbers of gambling accounts. Customers are promised a financial reward in exchange for their personal details and documents, but there are reports of customers not receiving the money promised to them. Customers are also told that the documents will be treated securely, however, there is a concern that the documents may be used for other purposes or sold on.

The Gambling Commission identified the risk that those gaining access to other people’s information and using it to gamble may be acting as unlicensed betting intermediaries. The Gambling Commission is also concerned about the risk of illicit mule account activity with accounts opened in this way.

What licensees need to do:

Proactively review their processes for ID verification on a regular basis to ensure they remain effective.
Take immediate action when any gaps are identified or when learnings suggest improvements are required to tighten processes.
Have robust customer due diligence and onboarding checks in place.
Consider whether checks on ID documents are sufficient to identify false, stolen or ‘mule’ (third party) IDs, in accordance with LC 17.1.1.(1) and (4) of the LCCP which states that:

(1) Licensees must obtain and verify information in order to establish the identity of a customer before that customer is permitted to gamble. Information must include, but is not restricted to, the customer’s name, address and date of birth.

…

(4) Licensees must take reasonable steps to ensure that the information they hold on a customer’s identity remains accurate.

Third-party business relationships, including white-label partnerships and investments

The Gambling Commission is aware of licensees failing to apply sufficient due diligence measures in relation to their third-party business relationships, including white-label partnerships and monies coming into the business in the form of loans or other investments. White-label partnerships and business investments have both been noted as high risk within the Gambling Commission’s latest Risk Assessment.

What licensees need to do:

Ensure that they have appropriately risk-assessed their dealings with third-parties, including white-label partners and any entities providing loans and/or investments.
The assessment of these risks should include consideration of the risks posed by the jurisdictional location of their third-party, transactions and arrangements with business associates, and third-party suppliers such as payment providers and processors, including their beneficial ownership and source of funds. Effective management of third-party relationships should assure licensees that the relationship is a legitimate one, and that they can evidence why their confidence is justified.
Consider risks to the licensing objectives in their due diligence on white-label partners. This would include giving consideration to any activity the third-party is involved in outside of GB that the Gambling Commission considers medium or high risk, as defined by the Gambling Commission’s Risk Assessment, as well as activity that is illegal in either Great Britain (“GB”) or the territory in which it is conducted.
When accepting loans into their business, licensees are reminded of LC 15.2.1(3) of the LCCP (Reporting key events) and the licensing objective to prevent gambling from being a source of crime or disorder, being associated with crime and disorder or being used to support crime. The Gambling Commission is also able to request additional information about any loans or other money coming into the business, as per the Licensing, compliance and enforcement policy statement.

Open-loop payment processes

In the Gambling Commission’s latest Risk Assessment, it noted that a ‘lack of closed loop’ payment system is high risk. The Gambling Commission is aware of some licensees (particularly non-remote betting operators) still operating open-loop payment processes.

Open-loop payment systems are a known money laundering risk as they allow the transfer of funds from one payment method to another, which can be used to disguise the origin and/or destination of funds. There is also a risk that criminals use open-loop systems to gamble with fraudulent or stolen cards.

What licensees need to do:

Closed-loop systems are strongly recommended and considered best practice for licensees. Closed-loop systems mean licensees process customer withdrawals and winnings to the same payment method that was used for the deposit.
Where licensees continue to operate an open-loop payment system, they must include this risk within their ML/TF risk assessment and implement appropriate and effective controls to prevent ML/TF.

Licensed software providers’ games available on websites not licensed by the Gambling Commission

The Gambling Commission is aware of casino games that have been developed by software licensees becoming available on unlicensed websites, and accessible to British consumers illegally. As such, licensees conducting business (either directly, or indirectly through third-party resellers) with websites that are operating illegally are at risk of accepting funds derived from criminal activity.

What licensees need to do:

Gambling software licensees must consider their obligations to uphold the licensing objectives, including preventing gambling from being a source of crime or disorder, being associated with crime and disorder or being used to support crime.
Casino host licensees are additionally required to comply with LC 12.1.1. of the LCCP (including the requirement to conduct a ML/TF risk assessment and implement appropriate controls), as well as the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and the Gambling Commission’s guidance for casino operators.
Licensees are advised to actively monitor their business relationships to ensure that partners are not offering illegal gambling facilities to the GB market. Where such non-compliance is identified, licensees must terminate these relationships immediately.
It is crucial to also engage proactively with the Gambling Commission when such activity is detected, providing details of the preventative measures taken to ensure the activity ceases without delay. Actively notifying the Gambling Commission and presenting a clear and prompt plan to mitigate the issue is a minimum requirement. Licensees should also note the Gambling Commission’s Industry warning notice: licensed software appearing on illegal market.

Cryptoassets

The Gambling Commission is aware of an increasing interest in cryptoassets (also known as crypto currencies) within the licensed gambling industry, and rates cryptoassets as a high-risk payment method. As noted by HM Treasury in the UK national risk assessment of money laundering and terrorist financing report (chapter 8), cryptoassets present several vulnerabilities from a ML/TF perspective.

The Gambling Commission is also aware of a large theft of cryptoassets from the ByBit exchange which took place in February 2025. The group alleged to be responsible for the theft are suspected of using complex online money laundering systems which, in the past, have been thought to include remote gambling licensees around the world.

As cryptoassets potentially become more prevalent, the Gambling Commission expects that more payment providers will offer crypto payment facilities.

What licensees need to do:

Have a full understanding of the services provided by their payment providers, as the use and/or acceptance of cryptoassets presents challenges.
Pursuant to LC 12.1.1(1), ensure ML/TF risk assessments consider the risks their businesses face upon the introduction of new products or technology or new methods of customer payment.
Submit a ‘Key Event’ to the Gambling Commission under LC 15.2.1(8) wherever there are changes in payment methods.
When customers indicate their funds to gamble have come from cryptoasset trading or other means linked to cryptocurrencies, it is the Gambling Commission’s expectation that this feeds into a customer’s risk profile as a high-risk indicator, with completion of sufficient due diligence.
Be mindful of the recent theft of cryptoassets (as mentioned above) and consider their vulnerabilities and controls in this area. Please see further information on the Gambling Commission’s position on crypto-assets here.

Terminals used to facilitate payments in non-remote casinos

The Gambling Commission is aware of several types of terminals used to facilitate customer deposits into non-remote casinos and has seen cases where funds received via this method are not scrutinised as closely as deposits via other methods.

What licensees need to do:

Assess the risks of their businesses being used for ML/TF, including considerations of the different types of payment methods accepted by the business, including any payment terminals within the casino.
Following this risk assessment, licensees must implement effective policies, procedures and controls to prevent ML/TF. In the case of payment terminals in the casino, licensees must ensure they are appropriately scrutinising funds received via this method, and not relying on the third-party terminal provider and/or payment processor to conduct checks on the funds being transferred.
Where terminal providers provide the receiving casino with the details of the bank account where the money has been sent from, licensees should consider whether the account belongs to the customer, and whether it matches with other information known about the customer, including other bank accounts they have used.
When money is received via terminals within the casinos, licensees must consider how the use of this payment method feeds into the rest of the customer’s risk profile and complete an appropriate level of customer due diligence, including enhanced customer due diligence for high-risk customers.

Changing customer demographics in the non-remote casino sector

The Gambling Commission recognises that some non-remote casinos have experienced changes in the demographics of their customer base, which has not been reflected in their risk assessment or policies, procedures and controls.

Prior to 2020, high-end non-remote casinos had many international ultra-high-net-worth individuals as customers. During the pandemic, casino premises in GB were closed, and many of the customers who previously came to GB to gamble in high-end casinos shifted their preference to other global gambling centres. This shift in behaviour was also thought to be consolidated by changes to VAT regulations in the UK.

It is believed that this caused some non-remote casinos to change their entry and membership criteria to attract a wider range of customers from within GB. However, the Gambling Commission has seen cases where licensees have not updated their risk assessment and policies to account for the changed customer base, which has meant the procedures in operation are insufficient in mitigating the risks present within the business.

What licensees need to do:

As per LC 12.1.1 of the LCCP, licensees must ensure their ML/TF risk assessments are appropriate and reviewed in light of any changes of circumstances, including changes in the customer demographic. They must also have appropriate policies, procedures and controls to prevent ML/TF.

Adult gaming centre premises converting to licensed bingo premises

The Gambling Commission is aware of some adult gaming centre (“AGC”) premises licensees converting to bingo premises, and there is a concern that when preparing their ML/TF risk assessment, and reviewing the Gambling Commission’s risk assessment (as per LC 12.1.1(1) and (3) of the LCCP), they may not consider all relevant risks if they only consult the bingo section, and not the AGC section, of the Gambling Commission’s Risk Assessment. The Gambling Commission intends to update its Risk Assessment to reflect this industry trend.

What licensees need to do:

Bingo licensees who operate AGC-style premises are urged to consider all relevant ML/TF risks to the premises, including those noted in the bingo and arcade sections of the Gambling Commission’s Risk Assessment.
In addition the LC 12.1.1 of the LCCP, please note the following useful links:

Crash games

Crash games have been offered within crypto casinos (which are not licensed by the Gambling Commission and are illegal if accessible via GB) for a number of years.

Crash games may have differing graphics and premises, but typically the mechanics of the games mean that, once the initial bet is made, the round begins with a starting multiplier, which grows as the game progresses. Customers have the option to cash out at any point, but if the game crashes before a customer has cashed out, they will lose the money from the multiplier as well as their stake. Rounds can last anywhere from a few seconds to a couple of minutes before either the game crashes or the customer cashes out. Crash games are highly volatile and can lead to significant losses for players.

The Gambling Commission is aware of an increased interest in crash games within the legal, licensed casino sector. There are concerns that products of this nature can allow criminals to camouflage the high-risk behaviour of cashing out quickly with limited gameplay within the context of the crash game (where these behaviours are inherently more common), and that transactional monitoring controls may not be effective in detecting suspicious activity.

What licensees need to do:

When introducing any new products (including crash games) licensees must assess the risks of that product being used to launder money and ensure they have appropriate procedures and controls in place to prevent money laundering. In this case, this would include controls to identify and prevent suspicious wagering patterns, and processes to feed the use of crash games into a customer’s overall risk profile and commence appropriate due diligence.
Where licensees know or suspect money laundering has occurred, they must submit a suspicious activity report (“SAR”).
More information about appropriate policies, procedures and controls can be found in the Gambling Commissions guidance on the prevention of money laundering and combating the financing of terrorism.

Application Registration Cards (“ARCs”)

ARCs are issued by the Home Office to individuals who claim asylum. ARCs contain information about the holder but are not evidence of identity and must not be accepted as a form of identity documentation. Those presenting ARCs when attempting to open a gambling account, or access gambling premises, may also be at a higher risk of exploitation and mule account activity.

What licensees need to do:

Have appropriate policies, procedures and controls in place to ensure the requirements for customer identification and verification are met. This includes detailing acceptable forms of identification documentation, which is not an ARC, in line with the Gambling Commission’s guidance for casinos (particularly, paragraphs 6.49 to 6.75) and the Government’s guidance (Application registration card (ARC) and How to prove and verify someone’s identity).
Train their staff members and implement measures to ensure that policies and procedures in relation to customer identification and verification are followed.
If a licensee believes that someone is being exploited, they can report it to the Modern Slavery and Exploitation Helpline on 08000 121 700 or via the online form but, if they think someone is in immediate danger, they should contact the police.
For more information please see: LC 17.1.1 of the LCCP and How to report at Migrant Help.

Jurisdictions subject to increased monitoring by the Financial Action Task Force (“FATF”)

In February 2025, FATF updated its list of high-risk jurisdictions (the FATF “black list”) and the list of jurisdictions subject to increased monitoring (the FATF “grey list”). More information can be found on the FATF’s website about the following lists:

What licensees need to do:

Review the lists above and ensure they have effective policies, procedures and controls in place to identify customers and relationships with links to high-risk jurisdictions, including those subject to calls for action and enhanced monitoring.
Conduct robust enhanced customer due diligence checks in relation to any customer relationships which are associated with high-risk jurisdictions, including those subject to enhanced monitoring by FATF in order to mitigate the risk of ML/TF, including proliferation financing.
More information about managing geographical risk can be found in the Gambling Commission’s guidance: Anti-money laundering responsibilities for casino businesses.

In light of these 13 emerging risks identified by the Gambling Commission, we remind licensees to review their ML/TF risk assessments as soon as possible to take into account these emerging risks.

Please get in touch with us if you have any questions about these risks or require our assistance in reviewing ML/TF risk assessments.

02Jul

Financial Action Task Force: June 2024 update to Grey List jurisdictions

2nd July 2024 Chris Biggs 147

The Financial Action Task Force’s (“FATF”) June Plenary concluded on 28 June 2024, with the announcement of changes to its list of Jurisdictions under Increased Monitoring (“Grey List”).

The changes to the Grey List are as follows:

Jamaica and Turkey are no longer subject to increased monitoring by FATF, due to “significant progress” in addressing the strategic anti-money laundering (“AML”) and counter-terrorism financing (“CTF”) deficiencies previously identified during their mutual evaluations. Even though these countries have been removed from the Grey List, they will continue to work with FATF and their local FATF-style regional bodies to continue improving their AML/CTF regimes.

Conversely, FATF have added Monaco and Venezuela to the Grey List, meaning these jurisdictions have committed to implement an action plan to resolve strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing within agreed timeframes.

FATF made no changes to its list of High-Risk Jurisdictions subject to a Call for Action (“Black List”), which at the time of writing includes the Democratic People’s Republic of Korea, Iran and Myanmar.

A full list of high-risk third counties on FATF’s Grey and Black Lists can be found on its website.

As discussed in our previous blog, the Gambling Commission recently reminded licensees in its Emerging money laundering and terrorist financing risks from February 2024 to conduct robust customer due diligence checks in relation to any customer relationships associated with the jurisdictions on the Grey List.

Additionally, holders of casino operating licences issued by the Gambling Commission are required by regulation 33(3)(a) of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to conduct enhanced customer due diligence and enhanced ongoing monitoring in any business relationship with a person established in a jurisdiction named on the Grey or Black Lists (a ‘high-risk third country’).

Next steps

We recommend that all licensees review their AML/CTF policies, procedures and controls, including business risk assessments, to ensure appropriate measures are applied in relation to high-risk third counties including, from July 2024, Monaco and Venezuela. In addition, licensees should diarise the date of the next FATF Plenary meeting, so they can check if there are further updates. FATF’s next meeting will take place in October 2024.

Please get in contact with us if you require assistance reviewing your AML/CTF policies, procedures or risk assessments or with any other AML/CTF compliance matters.

13Jun

Gambling Commission AML updates: Changes to legislation

13th June 2024 Chris Biggs 141

On 24 May 2024, the Gambling Commission published four notices on its AML Hub, relating to recent changes to legislation and the Licence Conditions and Codes of Practice (“LCCP”) impacting the anti-money laundering (“AML”) and counter-terrorist financing (“CTF”) obligations of licensees.

These notices cover: (1) Scheduled LCCP update: new PML requirements; (2) High-risk third countries; (3) DAML exemption provisions for the regulated sector; and (4) Politically exposed persons.

We summarise each of the notices below.

Scheduled LCCP update: new PML requirements

On 1 May 2024, the Gambling Commission published its Summer 2023 consultation response, announcing it will introduce the changes to personal management licence (“PML”) requirements in the LCCP as proposed in the Summer 2023 consultation. For detailed analysis and insight into this announcement, as well as guides and tools for PMLs, please see our recent article White Paper Series: Changes to Personal Management Licences.

Specifically, the Gambling Commission will, from 29 November 2024, require the person responsible for a licensee’s AML and CTF function, as head of that function, to hold a PML. The Gambling Commission points out that this will include:

for holders of casino operating licences issued by the Gambling Commission (“Casino Licensees”):

the person responsible for compliance with The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations (“MLRs”) (and appointed in accordance with the MLRs). Where appropriate, with regard to the size and nature of the business, this individual “will be a member of the casino’s board of directors (or equivalent management body if there is no board) or of its senior management…”; and
the person responsible for submission of reports of known or suspected money laundering or terrorist financing activity under the relevant legislation (and appointed in accordance with the MLRs), which will be the Casino Licensee’s nominated officer;

for holders of licences other than casino licences, where an individual has been appointed to submit reports of known or suspected money laundering or terrorist financing activity under the relevant legislation, that individual.

The above requirements apply to all licensees, except ancillary remote licensees. Small scale operators will also remain exempt from these requirements in accordance with licence condition 1.2.1 (6).

Key point

The Gambling Commission is now accepting PML applications for these roles and recommends that applications “should be submitted in good time so that the PMLs are in place on 29 November 2024.” Therefore, licensees must ensure PML applications for these roles (if they are currently occupied by individuals who are not PML holders) have been submitted and granted before the extended requirements come into force on 29 November 2024.

High-risk third countries

Casino Licensees are required by the MLRs to conduct enhanced customer due diligence and enhanced ongoing monitoring in any business relationship with a person established in a high-risk third country or in relation to any relevant transaction where either of the parties to the transaction are established in a high-risk third country.

With effect from 23 January 2024, the MLRs were amended by The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024 to update the meaning of a ‘high-risk third country’.

Instead of referring to a separate schedule that contained the list of high-risk third countries, regulation 33(3)(a) of the MLRs now defines a “high-risk third country” as “a country named on either of the following lists published by the Financial Action Task Force as they have effect from time to time—

High-Risk Jurisdictions subject to a Call for Action;
Jurisdictions under Increased Monitoring;”.

The Gambling Commission has confirmed that it will update its The prevention of money laundering and combating the financing of terrorism guidance “in due course” to reference these changes.

Key point

In order to keep abreast of which countries are high-risk countries, Casino Licensees must refer directly to the lists published by the FATF of ‘Jurisdictions under Increased Monitoring’ and ‘High-Risk Jurisdictions subject to a Call for Action’. The Gambling Commission points out that these lists are updated 3 times a year on the final day of each FATF Plenary meeting, which is held every February, June and October. The dates of these meetings – which we recommend licensees diarise – are published several months in advance, in the FATF’s events calendar and the FATF list of countries are updated and published in full on the FATF website.

Defence against money laundering (“DAML”) exemption provisions

On 26 October 2023, The Economic Crime and Corporate Transparency Act 2023 (“ECCT”), updated the Proceeds of Crime Act 2002 (“POCA”) and introduced two new exemptions to money laundering offences that apply to casinos (and other businesses in the regulated sectors).

Exemption from authorised disclosure requirement

Section 182 of the ECCT enacted an exemption under sections 327, 328 and 329 of POCA which affects paying away funds under £1,000 when exiting a relationship with a customer, where there is knowledge or suspicion of money laundering or criminal property.

This means that if a Casino Licensee has knowledge or suspicion of criminal property, it can transfer money or other property owing or belonging to a customer for the purposes of exiting that customer relationship, without needing to submit an authorised disclosure to the National Crime Agency (“NCA”), provided the value is less than £1,000 and any customer due diligence measures required under the MLRs have been completed before transferring or handing over the money or other property.

Exemption for mixed property transactions

Section 183 of the ECCT, enacted an exemption under sections 327, 328 and 329 of POCA for mixed property transactions which allows Casino Licensees to “ring-fence funds they believe are criminal property and transact with funds outside of those ring-fenced funds” where they know or suspect that part – but not all – of funds held on behalf of a customer are criminal property.

This exemption will apply provided:

it is not possible, at the time the act (i.e., the Casino Licensee’s transfer of funds) takes place, to identify the part of the funds or property that is the relevant criminal property; and
the value of the funds in the account or accounts, or of the property so held, is not, as a direct or indirect result of the act, less than the value of the relevant criminal property at the time of the act.

Key point

In both of the above circumstances, Casino Licensees will still need to report their suspicions of money laundering to the NCA, but are not required to submit an authorised disclosure and obtain consent from the NCA to avoid committing money laundering offences under sections 327, 328 and 329 of POCA. Importantly, these exemptions do not apply to non-Casino Licensees, so those businesses continue to be subject to authorised disclosure requirements in the above scenarios.

Politically exposed persons

With effect from 10 January 2024, the MLRs were amended by The Money Laundering and Terrorist Financing (Amendment) Regulations 2023 (“2023 Amendments”) to address the treatment of Politically Exposed Persons (“PEPs”) who are entrusted with prominent public functions by the UK, their family members and known close associates (collectively, “Domestic PEPs”).

The 2023 Amendments introduce a proportionate and risk-based scale for regulated firms in their assessment of a Domestic PEP vs non-Domestic PEP. Specifically, this means that Domestic PEPs must still be subject to enhanced customer due diligence measures, but should, as a starting point, be treated as lower relative risk than non-Domestic (or foreign) PEPs.

We have previously discussed the 2023 Amendments in our article Treatment of Domestic Politically Exposed Persons under the Money Laundering Regulations.

Key point

Casino Licensees must bear in mind that it remains critical that the individual risks posed by PEPs are still assessed on a case-by-case basis: any risk factors identified that do not concern the customer’s position as a Domestic PEP, may still give rise to the obligation to conduct enhanced customer due diligence.

Casino Licensees should also note that the Financial Conduct Authority (“FCA”) is due to review and update its own PEP guidance by June 2024. Accordingly, the Gambling Commission’s guidance on the treatment of PEPs may be further updated, if there are amendments to the FCA’s guidance that the Gambling Commission considers should also apply in relation to Casino Licensees.

Next steps and Recommendations

Licensees should consider whether their money laundering and terrorist financing risk assessments, as well as their policies, procedures and controls, should be amended as a result of these changes and if so, ensure such amendments are prioritised.

Please get in touch with us if you would like assistance with PML applications, reviewing AML policies, procedures and risk assessments in the light of these updates, or with any other AML/CTF compliance matters.

01May

HM Treasury consultation: Improving the effectiveness of the Money Laundering Regulations

1st May 2024 Chris Biggs 163

On 11 March 2024, HM Treasury launched a consultation on Improving the effectiveness of the Money Laundering Regulations (the “MLRs Consultation”).

Background

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the “MLRs”) place requirements on a range of businesses in the regulated sector (which includes casinos) to identify and prevent money laundering and terrorist financing.

In the MLRs Consultation, HM Treasury seeks views on proposed changes to improve the effectiveness of the MLRs as part of the Government’s wider programme of work set out in its Economic Crime Plan 2023-2026.

In the foreword to the MLRs Consultation, Baroness Vere, the Treasury Lords Minister, makes clear that “a key principle in the MLRs is proportionality” and that the Government is seeking to address areas of the MLRs where there is room to find a better balance between what is required of regulated firms (i.e. relevant persons within scope the MLRs, including casinos) and customers, and the risk of money laundering and terrorist financing.

Consultation Themes

The MLRs Consultation focuses on four core themes which we summarise below.

Making customer due diligence more proportionate and effective

Chapter 1 considers customer due diligence requirements, including enhanced and simplified checks, and explores key stakeholder concerns about the proportionality of the due diligence requirements. It further considers the various options to use the MLRs to achieve a “better balance” and support efforts to prioritise resource where it will have the greatest impact. The topics covered include:

whether the triggers for due diligence are sufficiently appropriate and clear, particularly for regulated firms that are not in the financial sector, such as casinos;
whether clarity can be provided to regulated firms on when to carry out ‘source of funds’ checks;
how best to support the use of digital identity when verifying customer identity;
when enhanced due diligence checks (“EDD”) should be required; and
if changes could be made to improve the proportionality and effectiveness of EDD in relation to High Risk Third Countries.

Strengthening system coordination

Chapter 2 considers a number of issues intended to strengthen the system coordination across the UK’s anti-money laundering and counter-terrorism funding (“AML/CTF”) regime. The changes proposed reflect in part the need to update the MLRs, to ensure effective cooperation as the system evolves to take account of new and emerging threats, technological change and changes to the legislative landscape. The topics covered are:

ways to ensure that key information sharing and collaboration gateways are open and useful;
whether Companies House should be added to the list of bodies with whom AML supervisors must cooperate; and
how regulated firms should use the National Risk Assessment of Money Laundering and Terrorist Financing to help target their compliance work.

Providing clarity on scope of the MLRs

Chapter 3 considers issues at the boundary of the AML/CTF regulation regime, and recognises that the regime, and the guidance that supports firms and supervisors to comply with it, needs to be kept updated to keep pace with wider regulatory and market changes following the UK’s exit from the EU. The topics covered are:

how the thresholds in the MLRs which are currently in Euros could be changed to Pound Sterling;
potential gaps in the regulation of trust company and service providers; and
how best to align registration and change in control measures for custodial wallet providers and cryptoasset exchange providers between the Financial Services and Markets Act 2000 and the MLRs.

Reforming registration requirements for the Trust Registration Service

Finally, Chapter 4 proposes a number of changes to the registration requirements for the Trust Registration Service, which are intended to increase transparency in relation to certain higher risk trusts, whilst reducing the administrative burdens on low-risk trusts.

Relevance to other open consultations

A. Reforms to the AML/CTF supervisory regime

The MLRs Consultation has been launched whilst the Government considers the responses to its June 2023 consultation on reforms to the AML/CTF supervision regime that was launched last year (see our previous article) (the “Supervisory Consultation”).

At the time of writing, no response to the Supervisory Consultation has been published. However, Baroness Vere confirms in the MLRs Consultation that the Government expects to determine the new model for the UK’s AML/CTF supervisory regime “in the coming months”. It is Baroness Vere’s intention that any amendments to the provisions in the MLRs pursuant to the MLRs Consultation will be supported by an improved supervision regime “further strengthening the UK’s overall regime for reducing economic crime”.

B. Cost of compliance survey

In parallel with the MLRs Consultation, HM Treasury is running a survey (the “Cost of Compliance Survey”) on the cost of compliance with the MLRs, in order:

to better understand how regulated businesses comply with the MLRs; and
to assess the impact of future changes to the MLRs.

You can view and respond to the Cost of Compliance Survey here.

Next steps

On 12 April 2024, HM Treasury announced it would be hosting a series of virtual, open roundtables to discuss the MLRs Consultation with interested stakeholders, including regulated businesses and their customers, supervisory bodies, law enforcement agencies, civil society organisations and members of the public. The first session for relevant persons regulated by HMRC and the Gambling Commission (i.e. casino licensees) was held on 18 April 2024. However, an additional session for all sectors and stakeholders will be held at 11am on Tuesday 7 May. Details for this session, including how to register, can be found here, and we encourage all casino operating licence holders (and other interested parties, including stakeholders) to participate in these roundtables.

We also recommend that casino operating licence holders (and other interested parties, including stakeholders) review and respond to the MLRs Consultation and the Cost of Compliance Survey.

Both the MLRs Consultation and the Cost of Compliance Survey are open until 11:59pm on 9 June 2024.

Please get in touch with us if you would like assistance preparing a response to the MLRs Consultation, or legal advice on any AML/CTF compliance matters relevant to gambling licensees in Great Britain.

11Mar

The Gambling Commission’s emerging money laundering and terrorist financing risks: February 2024 update

11th March 2024 Chris Biggs 194

The Gambling Commission released its most recent update on emerging money laundering and terrorist financing risks on 9 February 2024. This update covers five emerging risks that we set out in detail below.

Multiple cards and innovative payment methods

The Gambling Commission indicates that there are an increasing number of instances of “multiple stolen debit cards” being used to fund online gambling activities. Alongside virtual debit card products that allow multiple virtual debit cards to be linked to one bank account, these instances pose a significant money laundering and terrorist financing (“ML/TF”) risk.

The Gambling Commission points out the following (non-exhaustive) red flag indicators of which licensees should be mindful:

- the operator is unable to match the customer’s personal details with the card details;
- the operator does not have the ability to verify the card holder’s identity information; and
- there are multiple bank accounts being used to fund a customer’s gambling activity.

The Gambling Commission reminds licensees that they are required to have “robust customer due diligence and onboarding checks” in place. It points out that in accordance with Licence Condition (“LC”) 12 of the Licence Conditions and Codes of Practice (“LCCP”), licensees must review their ML/TF risk assessments as necessary in the light of “any changes of circumstances, including the introduction of new products or technology or new methods of payment by customers.” It also reminds licensees that they must consider whether checks on customer ID documents are sufficient to identify false, stolen or “mule” (third party) ID documents, in accordance with the identification and verification requirements set out in LC 17.1.1(1) and (4).

Risks associated with access to third party funds

The Gambling Commission states that customers who are in functions, roles or responsibilities that give them access to third party funds should be considered to present a higher inherent ML/TF risk. Such roles may include access to:

- the funds of vulnerable people;
- customer funds, in the case of banking, accounting or finance (for example);
- company funds; and
- charitable funds.

It points out that licensees should consider these risks at the start of the customer relationship and before any deposits are made, noting that in order to sufficiently identify these risks customer monitoring should be an ongoing process.

Updated FATF ‘grey list’

In stating that the Democratic Republic of the Congo, Mozambique and Tanzania have been added to the list of jurisdictions that are under an increased level of monitoring by the Financial Action Task Force (“FATF”), the Gambling Commission points out that these jurisdictions are placed on the FATF’s ‘grey list’ due to “strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing.”

It reminds licensees to conduct robust customer due diligence checks in relation to any customer relationships associated with the jurisdictions on the FATF’s grey list in order to mitigate the risk of ML/TF, including proliferation financing.

The above-listed countries were added to the FATF’s grey list on 27 October 2023. However, it is important licensees note that following the Gambling Commission’s February 2024 update, the FATF announced on 23 February 2024 that Barbados and Gibraltar have been removed from the grey list. The FATF’s recent announcement and full grey list can be found here.

Funds originating from crypto-assets

The Gambling Commission states that it is aware of cases of licensees “not sufficiently” considering the risks associated with customer funds where the funds have originated from crypto-assets. It reminds licensees that it considers crypto-assets to be high risk and it expects licensees to “appropriately scrutinise transactions throughout the course of customer and business relationships.”

Common operator failings

The Gambling Commission states that there continues to be numerous instances of customers being able to deposit large amounts of money before the first anti-money laundering (“AML”) review can be undertaken by the licensee against a customer, due to insufficient and/or ineffective source of funds (“SOF”) checks and enhanced customer due diligence or KYC triggers.

It states that licensees have been identified as “failing to critically review SOF documentation” instead relying on electronic checks, which includes relying solely on open-source information, such as Companies House records, to verify SOF information. Other issues include licensees failing to provide sufficient guidance to staff on how to review and verify SOF information and to determine what supporting documents should be requested.

To mitigate these risks, the Gambling Commission recommends:

- setting realistic and effective monetary and non-monetary thresholds/triggers for determining when customer interactions should take place;
- carrying out such interactions earlier on in the customer relationship;
- ongoing customer monitoring (including monitoring all transactions or activity). The monitoring of customer activity should be carried out using a risk-based approach. Higher risk customers should be subjected to a frequency and depth of scrutiny greater than may be appropriate for lower risk customers; and
- considering geographical, customer, transactional and product risk in all customer relationships.

Next steps

As a reminder to licensees, LC 12.1.1(3) of the LCCP requires that all operating licence holders (with the exception of gaming machine technical and gambling software licences) ensure that their policies, procedures and controls for the prevention of money laundering and terrorist financing are “implemented effectively, kept under review, revised appropriately to ensure that they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time”.

We recommend that all licensees review their ML/TF risk assessments as soon as possible in the light of the Gambling Commission’s update. In addition to any necessary updates to their risk assessments, licensees must update their policies, procedures and controls to take into account any changes made.

Please get in contact with us if you require assistance reviewing your ML/TF risk assessment and/or your AML policies, procedures and controls.

02Feb

Gambling Commission source of funding guidance: Two steps forward and one step back?

2nd February 2024 Jessica Wilson 193

In July 2023, we discussed the trials and tribulations of source of funding disclosure and the lack of clarity provided by the Gambling Commission as to what is expected from applicants, licensees and their investors. At that time, our understanding was that the Gambling Commission would publish guidance on its website by the end of July 2023, although no guidance was published until the end of November 2023. Now that we have the Gambling Commission’s guidance, do we have a clearer understanding of what the Gambling Commission requires?

What we were expecting

By way of recap, source of funding involves establishing the legitimacy of the source of the capital and revenue finance used in the licensee’s operation. It is a complex area and the lack of formal or detailed guidance from the Gambling Commission has resulted in applicants and licensees playing a guessing game as to what they should be disclosing to the Gambling Commission and when. Over the years, the Gambling Commission’s expectations have grown to be burdensome and novel, following an unpublished approach.

We were hopeful that the Gambling Commission’s guidance, once published, would provide that much needed clarity for the industry, along with an explanation of the basis for the Gambling Commission’s requirements.

Our understanding was that the guidance would be non-exhaustive and include example source of funding scenarios. We also expected the guidance to explain how the Gambling Commission divides investors into two groups when determining its source of funding requirements – unregulated and regulated – and that set thresholds would be put in place to trigger source of funding requirements.

What we were given

The Gambling Commission’s source of funding guidance has been included as sections within its Change of corporate control web page and What you need to send us when you apply for an operating licence web page.

The guidance is defined as a “general overview of when and what source of funds evidence is required”, caveated with confirmation that the Gambling Commission will “assess each application on a case-by-case basis according to risk”. Whilst the guidance is clear on when source of funding evidence is required, there are still murky waters on what source of funding evidence is required.

The Gambling Commission has indeed divided investor types into buckets, but instead of two, there are three different buckets; (1) unregulated, (2) regulated banks or investment companies investing their own money, and (3) regulated banks or investment companies acting as intermediary for an investor or pool of investors i.e. investment funds / financial institutions.

Each bucket has multiple sub-categories, resulting in 12 different categories of investor.

Two steps forward and one step back

We are pleased the Gambling Commission has recognised (and listened!) that clarity was needed and decided to publish its source of funding guidance, giving the industry a basis for its source of funding requests. It is also positive that the Gambling Commission appears to be applying a risk-based approach as evidenced by the thresholds that trigger detailed source of funding requirements.

However, whilst helpful in some ways, the Gambling Commission’s source of funding guidance now raises new question marks:

We had hoped the guidance would be separate formal guidance specific to source of funding. However, the guidance is buried within the Gambling Commission’s existing web pages that relate to change of corporate control and operating licence applications. Does the guidance and its investor categories apply in other source of funding situations such as capital raises and share issues that do not trigger a change of corporate control? We would expect the Gambling Commission to follow the same approach, but the position is unclear.

We now have clarity on when the Gambling Commission expects detailed source of funding evidence, but what the Gambling Commission expects to be disclosed is still vague. For example, for unregulated entities the guidance states: “Typically for established entities the latest set of filed financial statements can be sufficient evidence…For recently established entities, evidence of how the entity has been funded is required”. In respect of unregulated individuals, the guidance states: “Evidence of the individual’s source of funds will depend on what the source of funds is but examples include bank statements, investment portfolio statements and P60s”. Importantly, the guidance lacks example source of funding scenarios, which we had expected. Unfortunately, the position of what must be disclosed is no clearer than it was before, and we can only rely upon our previous experience with the Gambling Commission.

The Gambling Commission has used a combination of fixed figure and percentage thresholds to trigger source of funding disclosure. We understand the Gambling Commission’s intention is to take a risk-based approach, but it is questionable how this can be achieved if fixed figure thresholds are used, as there is the possibility that it could capture all investors, or none. For example, if a licensee received a £40,000 investment from 25 investors, totalling £1m, those individuals would not trip the £50,000 threshold and no detailed source of funding information would need to be disclosed. Conversely, if a licensee received a £1m investment from 20 individuals amounting to £50,000 each, detailed source of funding evidence is required for 100% of the investment. Testing every £ would be a risk-free approach, and not a risk-based approach.

It is a step in the right direction that investment funds are considered by the Gambling Commission separately from other investors, with investment funds being placed in their own investor group. This is an acknowledgement from the Gambling Commission of the complexities of investments made through an intermediary. However, the Gambling Commission requires a “schedule of underlying investors” from the intermediaries but gives no detail as to what such schedule should include. In our view, it would be unnecessary to provide full details of underlying investors that do not meet the source of funding thresholds set out by the Gambling Commission, and that an anonymised schedule would be sufficient (and this has been sufficient in the past based on our experience). However, if the Gambling Commission does require personal details of all underlying investors, this will continue to be problematic for investment funds who often have complex confidentiality agreements in place with their underlying investors.

FCA regulated entities that are underlying investors behind an investment fund are not treated the same as regulated entities that have made a direct investment. FCA regulated entities that have made a direct investment only need to disclose source of funding evidence if their investment is 10% or more of the total investment amount. However, if the FCA regulated entity is investing through an investment fund, that threshold percentage is reduced to 5%. It is not clear to us why there is a difference, particularly as FCA regulated entities should carry a lower risk, and our view is that there should be consistency.

On 15 December 2023 the Commission launched a consultation in respect of proposed changes related to financial penalties and financial key event reporting. One of the proposals is to introduce a new requirement for gambling licensees to submit a key event to report details of (a) individuals who acquire the equivalent of £50,000 or more worth of new shares in a rolling 12-month period, or (b) entities that acquire the equivalent of £1m or more worth of new shares in a rolling 12-month period. This proposal intersects with the source of funding guidance as it follows the thresholds for unregulated individuals and entities. The consultation states that if the financial key event creates a new controller, no key event notification is required as long as all of the information that would be included in the key event is included in the CoCC application. However, should a CoCC take place whereby the licensee issued £11m of new shares, with £1m of which being acquired by an FCA-regulated entity (equating to 9% of the investment, so they are not a controller), that entity would not be required to disclose its funds under the guidance (as it is less than 10% of the investment), but would be required to disclose under the proposed key event, as it is £1m or more. The proposal is subject to consultation, but we believe it is important that the Commission takes a consistent approach to the thresholds at which source of funding evidence must be disclosed.

We are pleased that the Gambling Commission has finally published some source of funding guidance and it is certainly a step in the right direction. However, there are still areas of uncertainty and new questions that have been raised. We wait to see how the Gambling Commission puts the guidance into practice.

How we can help

Harris Hagan can navigate you through your engagement with the Gambling Commission on source of funding, minimising disclosure for you and your investors wherever possible, as well as offer source of funding training, tailored to the specific needs of your business. If you would like to discuss further, please do get in touch.

21Dec

Treatment of Domestic Politically Exposed Persons under the Money Laundering Regulations

21st December 2023 Chris Biggs 196

On 14 December 2023, the UK Government laid The Money Laundering and Terrorist Financing (Amendment) Regulations 2023 (SI 2023/1371) (“Amendment Regulations”) before Parliament. The Amendment Regulations will amend The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLRs”), to address the treatment of Politically Exposed Persons (“PEPs”) who are entrusted with prominent public functions by the UK (“Domestic PEPs”).

Amendments to the MLRs

The Amendment Regulations will introduce a requirement in the new paragraph 3A of Regulation 35 of the MLRs, stating:

“For the purpose of the relevant person’s assessment under paragraph (3), where a customer or potential customer is a domestic PEP, or a family member or a known close associate of a domestic PEP—

a) the starting point for the assessment is that the customer or potential customer presents a lower level of risk than a non-domestic PEP, and

b) if no enhanced risk factors are present, the extent of enhanced customer due diligence measures to be applied in relation to that customer or potential customer is less than the extent to be applied in the case of a non-domestic PEP.”

Regulation 35 will also be amended to include definitions for ‘domestic PEP’, ‘non-domestic PEP’ and ‘enhanced risk factors’, the latter of which means “risk factors other than the customer’s or potential customer’s position as a domestic PEP or as a family member or a known close associate of that domestic PEP.”

In a statement to the House of Lords, Baroness Vere of Norbiton, the Treasury Lords Minister, reiterated that domestic PEPs, or a family member or known close associate of a domestic PEP, must be treated as “inherently lower risk” than non-domestic PEPs by banks and other regulated firms. Baroness Vere further specified that the Government is making this change “to ensure that banks and other regulated firms take a proportionate and risk-based approach to the treatment of domestic PEPs”, which aligns with the Government’s approach to combating money laundering (“ML”) and terrorist financing (“TF”).

The Amendment Regulations will come into force on 10 January 2024.

Takeaway points for Casino Licensees

As a class of ‘relevant person’ listed under the MLRs, holders of a casino operating licence issued by the Gambling Commission (“Casino Licensees”) must comply with the MLRs.

Casino Licensees must therefore review and update their policies, procedures and ML/TF risk assessments to ensure they take into account the Amendment Regulations.

Please get in contact with us if you require assistance with reviewing your ML/TF risk assessment and/or your AML policies, procedures and controls.

12Dec

Gambling Commission releases its updated risk assessment of money laundering and terrorist financing in the British gambling market

12th December 2023 Chris Biggs 207

On 30 November 2023, the Gambling Commission published its updated money laundering and terrorist financing risk assessment for the British gambling industry in 2023 (the “ML/TF Risk Assessment”). The release of the updated ML/TF Risk Assessment has been a long time coming: the Gambling Commission had not updated its ML/TF Risk Assessment since December 2020.

The Gambling Commission sets out that the purpose of the ML/TF Risk Assessment:

“…is to:

provide a resource for the industry in informing their own ML and TF risk assessments
provide the Commission’s support to HM Treasury’s National Risk Assessment
inform and prioritise licensing, compliance, and enforcement activity to raise standards in the industry and meet duties under …”

Key points of note are:

The Gambling Commission reminds casino licensees to consider their obligations in the light of the update to the Regulations in September 2022 which requires those businesses to identify, assess, understand and mitigate the risk of proliferation financing.

The overall risk rating for each gambling sector has not changed since the Gambling Commission’s previous risk assessment from 2020 (the “2020 ML/TF Risk Assessment”).

The methodology applied by the Gambling Commission to assess the risks in the British gambling industry has been developed from its 2020 ML/TF Risk Assessment and it therefore recommends that the ML/TF Risk Assessment is read in conjunction with the 2020 ML/TF Risk Assessment.

Licensee requirements

Licence Condition (“LC”) 12.1.1 of the Licence Conditions and Codes of Practice requires that all operating licence holders (with the exception of gaming machine technical and gambling software licences):

conduct a risk assessment addressing “the risks of their business being used for money laundering and terrorist financing”;

following the completion of that risk assessment, ensure they have “appropriate policies, procedures and controls to prevent money laundering and terrorist financing”; and

ensure that their policies, procedures and controls for the prevention of money laundering and terrorist financing are “implemented effectively, kept under review, revised appropriately to ensure that they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time”.

Licensees must therefore ensure that they review the ML/TF Risk Assessment in detail, with a view to:

reviewing and refining (as applicable) their own money laundering and terrorist financing risk assessment in the light of the ML/TF Risk Assessment; and

updating their policies, procedures and controls to take into account any changes made to their risk assessment.

Please get in contact with us if you require assistance with reviewing your money laundering and terrorist financing risk assessment and/or your AML policies, procedures and controls.

11Jul

HM Treasury consultation: Reform of the anti-money laundering and counter-terrorism financing supervisory regime

11th July 2023 Chris Biggs 222

On 30 June 2023, HM Treasury published its consultation on reform of the anti-money laundering and counter-terrorism financing supervisory system (the “Consultation”). Released as part of the Government’s commitments within its Economic Crime Plan 2023-2026, the Consultation offers stakeholders the opportunity to provide their views on four possible models for improving the UK’s anti-money laundering and counter-terrorism financing (“AML/CTF”) supervisory regime. The Consultation also seeks responses in order to determine whether there is a need for a more formalised system of sanctions supervision, noting that most AML/CTF supervisors do not have explicit powers to supervise sanctions compliance and controls.

In the Consultation’s preamble, the Treasury Lords Minister Baroness Penn emphasised the Government’s motivations for its proposals:

“Money laundering is the lifeblood of organised crime… Terrorism financing threatens national security and facilitates atrocities we have suffered here in the UK and across the rest of the world. To protect the integrity of the UK’s financial and professional services sectors, we must also do more to address illicit finance linked to corrupt elites…”

The current situation

Presently AML/CTF is regulated by various supervising authorities which oversee businesses that conduct activities classified under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the “MLRs”). Three statutory supervisors regulate various sectors under the MLRs, specifically: the Gambling Commission for the casino industry; the Financial Conduct Authority for financial institutions; and HMRC for a number of business sectors, including real estate agency businesses and accountancy, trust or company service providers not supervised by another authority or professional body. In addition, Professional Body Supervisors (“PBSs”) are responsible for supervising legal and accountancy firms.

However, in HM Treasury’s 2022 Review of the UK’s AML/CTF Regulatory and Supervisory Regime the Government concluded that, whilst there had been continued improvement to the regime, some weaknesses in supervision may need to be addressed through structural reform. The 2022 review set out four possible models for a future AML/CTF supervisory system and the Consultation further develops these four models, assessing them against three consultation objectives: (a) supervisory effectiveness; (b) improved system coordination; and (c) feasibility.

The proposed models

1. OPBAS+

In 2017, the Government created the Office for Professional Body Anti-Money Laundering Supervision (“OPBAS”). OPBAS was designed to ensure robust and consistent supervision of AML/CTF across the nation’s 22 PBSs. The Consultation proposes that OPBAS be given enhanced powers to increase the effectiveness of supervision by the PBSs.

The Consultation states this proposal would be most immediately feasible, as no structural changes would be required to the current regime. Evidently, this proposal would have little to no impact on the Gambling Commission’s regulation of AML/CTF, however it is possible that the Gambling Commission may seek to mirror any additional accountability mechanisms that this model would introduce.

2. PBS Consolidation

The Consultation proposes that instead of enhancing OPBAS, the number of PBSs be reduced. Specifically, either two or six PBSs would retain responsibility for AML/CTF supervision, whereby two oversee the legal and accountancy sectors respectively across the UK, or two PBSs oversee the legal and accountancy sectors respectively in England and Wales, Scotland and Northern Ireland. Two further variants proposed under this model relate to HMRC’s supervisory role for accountancy and trust or company service providers being removed or reduced.

Again, this model would retain the current system of supervision by PBSs but would reduce the inconsistency and complexity of the current system due to the number of PBSs. It is unlikely that this model would significantly impact the Gambling Commission’s regulation of AML/CTF.

3. Single Professional Services Supervisor

The Single Professional Services Supervisor (“SPSS”) model, as the name suggests, proposes that one single public body (existing or new) supervise all legal and accountancy sector firms for AML/CTF, and possibly some or all of the wider sectors currently supervised by HMRC. The Consultation suggests that the SPSS would be independent of any ministerial department, but accountable to HM Treasury. Its nature as a public body, accountable to Parliament, may be considered more appropriate: (a) because of the broad set of intervention powers it will hold; (b) because its policy remit can be set out in legislation; (c) to facilitate better information sharing; and (d) because it will be more flexible.

Again, it is unlikely that this model would significantly impact the Gambling Commission’s regulation of AML/CTF.

4. Single Anti-Money Laundering Supervisor

The Consultation’s proposal for a Single Anti-Money Laundering Supervisor (“SAS”) represents the most significant proposed change to the AML/CTF supervisory regime in the UK, and one that would change how Licensees are regulated in respect of AML/CTF.

The SAS, which would be a public body, would undertake all AML/CTF supervision in the UK, with the Gambling Commission and the other existing statutory supervisors and PBSs relinquishing their AML/CTF supervisory duties entirely. Similar to the SPSS model above, the SAS would benefit from being an operationally independent public body ultimately accountable to Parliament and HM Treasury.

The Consultation acknowledges that supervisors should take a risk-based and data-led approach to their AML/CTF supervision and it goes without saying that unless seamless communication and data-sharing between supervisors exists, there will be inconsistencies. One overarching supervisory body, such as the SAS, may therefore be best placed to consider data from all sectors and apply a consistent standard of AML/CTF regulation.

From Licensees’ perspective, there has been confusion about the Gambling Commission’s approach to AML/CTF for some time, particularly in relation to the inevitable cross over between AML/CTF and safer gambling, affordability and vulnerability. Licensees may therefore consider that the SAS model will introduce consistency to the AML/CTF supervision of casinos that operate in the UK and introduce a more proportionate and coherent regime. However, Licensees should note that were the SAS model to be introduced, they would be faced with: (a) dual regulation which will inevitably introduce an additional burden; and (b) supervision by the SAS, a newly created regulatory body that will almost certainly have less industry expertise than the Gambling Commission.

Responding to the Consultation

Whether or not the SAS is the favoured model will be influenced by the responses and evidence submitted to the Consultation. The Consultation is open until 30 September 2023. HM Treasury encourages responses to be submitted through its secure online survey, but responses can also be emailed to [email protected]. We recommend that all Licensees review and respond to the Consultation.

Please get in touch with us if you would like assistance with preparing a response or with any AML/CTF compliance or enforcement matters.

With credit and sincere thanks to David Whyte for his invaluable co-authorship.