The Financial Action Task Force (FATF) has been in existence since 1989 as a policy-making body aimed at bringing international legislative and regulatory reforms to combat money laundering and terrorist financing. There are currently 34 members of the FATF; 32 jurisdictions and 2 regional organisations (the Gulf Cooperation Council and the European Commission). There are also 27 international and regional organisations which are Associate Members or Observers of the FATF and participate in its work.

The Asia Pacific Group (APG) on Money Laundering was established in Bangkok in 1997 as an autonomous and collaborative international organisation. There are 39 member jurisdictions and a number of international and regional observers. At the end of March this year FATF and APG published a report ‘Vulnerabilities of Casinos and Gaming Sector’, seeking to redress the shortcomings of previous FATF recommendations.

The joint study was led by Rachael Horton of New Zealand’s Department of Internal Affairs. The FATF 40 Recommendations were revised in 2003 in recognition of the fact that casinos, in their broadest definition, represent the greatest risk for money laundering activities. Obligations on casinos were significantly enhanced in relation to Customer Due Diligence (CDD), record keeping, reporting of suspicion, and comprehensive regulation and supervision.

Online gambling and illegal gambling were beyond the scope of the study but it is recognised that a significant number of jurisdictions with legalised gambling do not require their casino sector to submit to money laundering controls. Since 2007 there are over 150 countries that have some form of legal gambling, with revenues that already reached over US$70 billion in 2006. The study points out that casinos frequently offer financial services such as foreign exchange and accounts but often are regulated only as entertainment venues.

One area of concern for FATF is the casino junkets widely used in Asia, the Americas and Caribbean, and to a lesser extent in Europe. A vulnerability of junket programmes is that they involve the movement of large amounts of money across borders and through multiple casinos by third parties, which creates layers of obscurity around the source and ownership of the money and the identities of the players. Few jurisdictions regulate junket operations. VIP customers, so beloved by casinos and often associated with junkets, are potentially a money laundering risk. VIP rooms reduce the transparency of high roller transactions.

Also of concern are gambling cruises that operate in international waters with little or no regulatory oversight. Self-regulation guidelines were published in 1999 by the International Council of Cruise Lines but it is unknown what record-keeping, due diligence processes or reporting of suspicious activity is undertaken by casino cruise operators. However, regulatory control of these gambling cruises would raise complex questions of international law.

The study concludes that it is encouraging that 77 jurisdictions with legalised casino sectors are members of FATF and that the casino sector shows a relatively higher level of compliance with FATF standards than other DNFPBs (Designated Non-Financial Business and Professions). However, a key issue remains that casinos do insufficient to establish source of funds and fail to recognise suspicious activity by their clients. It is not the casino’s responsibility to determine whether money laundering is taking place but to report and identify suspicious activity, leaving the matter to the financial authorities. (E-04.22.09)

‘Vulnerabilities of Casinos and Gaming Sector Report,’ which includes comment on specific countries, is available on New Zealand’s Department of Internal Affairs website http://www.dia.govt.nz

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