Growing US Online Gambling Industry Needs More Oversight as Financial Crime Risks Increase

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As the US iGaming market continues to grow, so does the risk of financial crime. That’s the warning from a former US Treasury senior enforcer. A risk and compliance journalist also notes that online casinos become a good place to launder money as it faces less regulatory oversight.

Online Gambling Industry Needs More Oversight

Growing US iGaming Industry, Growing Financial Crime Risks

The United States iGaming industry is growing rapidly as more gambling activities are occurring online. This increase in online gambling is due to the convenience and accessibility of the internet, as well as the evolving technology that has made it possible to gamble online.

Michigan, Delaware, New Jersey, Connecticut, Pennsylvania, and West Virginia already legalized Interactive slots and Live dealer casino games. Sports betting had also evolved as more than 20 states have legalized mobile wagering and more states are in the process.

As the US iGaming industry continues to grow, compliance experts are being alarmed about the increasing risks associated with online casinos and sportsbooks.

Former Senior Officer of Financial Crimes Enforcement Network (FinCEN) of US Treasury and now a consulting firm partner at Guidehouse Inc. said to wall street journal:

“The more activity you have, the greater risk that you have.”

Casino gambling has always been on the list of great avenues to turn dirty money into clean earnings. Online Casinos provide patrons with more anonymity than banks and allow them access only when they’re betting on casino games like poker or blackjack where there’s no chance at all that anyone could identify you by sight which makes this form even harder to trace.

Billions of Wagering Transactions

The American Gaming Association (AGA) says that 55,000 suspicious activity reports (SARs) were filed in 2021 alone by casinos in America. These documents require financial institutions and businesses to report any suspicion of money laundering or other fraud when they handle large transactions accordingly.

In addition, regulated US sportsbooks report a total of $42.5 billion amount wagered during the 1st half of 2022.

Strict Regulatory Oversight Needed

Richard Vanderford, risk and compliance journalist from WSJ believes that the US online gambling industry is mature enough for potential money laundering activities due to fewer responsibilities compared to banks.

“The sophistication of the compliance regimes to make sure money is being wagered for fun, and not for crime, lags behind those at banks, making online casinos attractive targets for criminals,” Vanderford said.

“An online gambling site can be used to launder money in a variety of ways,” he added. “Two confederates can play at being adversaries in a game, for example, with whatever money emerges treated as legitimate gambling winnings.”

AGA also acknowledged the increasing financial crime risks associated with US online casinos and sportsbooks and released an updated version of anti-money laundering best practices. The updates focused on addressing technological developments and gaming formats, especially for online casinos.

While the iGaming industry is dominated by a limited number of operators such as FanDuel, DraftKings, and BetMGM, which are all complying with strict regulations, smaller online casino operations also need tighter monitoring. These smaller casinos are far more attractive to criminal organizations looking to launder funds, as they are less likely to be investigated. This is a serious problem that needs to be addressed, as it could lead to the funding of criminal activity.

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