By: Dan Frechtling, SVP of Marketing and Chief Product Officer
In recent days, casinos have been the key link in two significant money laundering scams. The first involved a $81 million theft from the Bank of Bangladesh. The second involved an illicit use of Amazon gift cards to hide gambling money flows. In both cases, the speed of cash flying through gambling operations has exposed how effectively casinos can fast-track laundering of illicit proceeds.
The Financial Crimes Enforcement Network (FinCEN) of the US Treasury has fined numerous casinos and gambling establishments for violations over the past year. Firms such as Taj Mahal, Caesar’s Palace and Tinian Dynasty have been assessed almost $100 million as a result of FinCEN’s new policies.
The Bangladesh-US-Philippines plot
Mysterious cyber thieves tried to steal $951 million from the Bangladesh Bank via its accounts at the Federal Reserve Bank of New York in February. They made off with $81 million. As reported in the New York Times, $30 million of the money was delivered in cash to a betting junket operator in Manila, while the rest went to two casinos. A bank official claimed two high-rollers from Beijing and Macau brought the money into the Philipphttp://www.nytimes.com/reuters/2016/03/27/business/27reuters-usa-fed-bangladesh.htmlines.
The Philippines is vulnerable to laundering-through-gambling because local casinos are not under the purview of anti-money laundering (AML) laws. Rizal Commercial Banking Corp (RCBC) received the stolen money from the New York Fed. It was asked about the involved accounts. But even though the accounts were opened using fake identification, Philippine law allowed the bank to plead the equivalent of the fifth amendment. “The law does not allow us to speak about these deposits,” said Maria Celia Estavillo, a lawyer for the bank, as reported by Reuters.
The Costa Rica-US-Amazon plot
Marisol Carvajal Cordero, the head of 5Dimes Casino and Sportsbook, was implicated in the suspicious transfer of $1.5 billion to Banco de Costa Rica (BCR). The bank was unable to verify the source of the funds, according to Nacion.com, a Costa Rican news publication. A portion of the funds were laundered using Amazon.com gift cards, according to Re/code. 5Dimes encouraged US bettors to place bets using the gift cards. The casino also paid out winnings using the gift cards. The use of the gift cards created an alternate vessel of currency that is harder to track. Gift cards, phone cards and other reloadable cards are usually outside the jurisdiction of US law enforcement.
While these forms of payment are pervasive, the prospect of a connection to gambling gives financial institutions heartburn. The Unlawful Internet Gambling Enforcement Act (UIGEA) prohibits banks from facilitating online gambling transactions. Somewhat surprisingly, 5Dimes is being investigated by Homeland Security rather than the FBI or DOJ, the groups that normally investigate online gambling. This could suggest a connection to terrorism, which has yet to be disclosed.
How to avoid gambling dangers in your portfolio
G2 Know-Your-Customer (KYC) services help commercial banks and their processors detect customers that are acting as gambling operations, even when such activities have not been disclosed. G2 has helped global financial institutions find casinos that were masquerading as a dining establishments, entertainment venues, and other covers. Find out more about G2 KYC here.
G2 boarding and monitoring services help acquiring banks find hidden business risk. This starts from the point of initial application all the way through the customer lifecycle. Business may look legitimate before they morph into prohibited activity. Acquiring banks, PSPs, ISOs and Payment Facilitators can learn more here.
The risk isn’t limited to gambling. Other commonly concealed businesses include escort services, rogue pharmacies, gun dealers, MSBs, adult entertainment and recreational drugs. Please let us know how we can help you.