The Myth of Money Laundering and Online Poker in The EU
Every consultation, in every country which has considered regulating online gaming, includes a major focus on the problem of money laundering. The opponents of online poker use money laundering as a bulwark of their arguments. Until recently, the politicians and poker regulators seem to have taken such arguments at face value, however, recent events show that the tide is turning, and online poker may not pose the risk that its opponents suggest.
Mid March saw an extraordinary meeting take place in Brussels to discuss the regulation of online poker. The “workshop” was attended by national regulators, social science researchers, and industry representatives together with members of the European Parliament and Eurocrats from the European Commission. A detailed report of the meeting was published by gaminglaw.eu.
The meeting was billed as “Online Poker – Need for European Safety Standards?” In his opening address, meeting organizer Jürgen Creutzmann – MEP and key committee member for gaming regulation – suggested that the particular regulatory requirements of poker had been addressed only superficially. He pointed directly to the money laundering risks of online poker as an area that had been neglected.
Dr. Friedrich Schneider, an expert in the shadow economy, and Professor of Economics at Johannes-Kepler-Universität in Linz summarized the results of his extensive research into the prevalence of money laundering in unlicensed gambling sites.
In short, he opined: “Money laundering via online poker is not worthwhile.” He points out that even if all the money used for online poker was devoted to money laundering, its total volume would still be so small relative to other economic areas that it would not be attractive to criminals.
Detlev Henze, CEO of TÜV Trust IT GmbH was critical of the arguments made by online poker’s opponents that money laundering is a problem.
He announced that TÜV Trust IT was carrying out a study to “examine the actual relevance of money laundering activities in the area of online poker.” Preliminary study results have prompted the creation of a checklist for the assessment of the risk matrix of online gaming so that;” “Regulators and customers will then be able to judge the quality of the poker provider’s in-house safety measures.”
His organization has already carried out a detailed and influential study of German gambling looking at “the potential risk of addiction of online poker in its most popular variant No Limit Texas Hold’em.” That study has also produced a risk based matrix for assessing the effectiveness of poker sites’ problem gambling policies.
Sven Stiel, Director Northern Europe for PokerStars weighed in with the opinion that money laundering risks are barely relevant in online poker: “Online poker is usually played with relatively small sums which have no relevance with regard to money laundering. High stakes are only placed by so-called “high rollers”, professional players with large stakes who usually are personally known.”
Mr Stiel added that almost all poker deposits and withdrawals are made through licensed banks who have already subjected the funds to strict anti-money laundering checks. Although it is possible to deposit with pre-paid cards, he explained that such cards have very low limits, typically a maximum of €100 to €150.
All real money players have to verify their identity before they can cash out, and game servers track stakes and play so that dumping money to another player cannot be done regularly without being identified as potential fraud. “Due to the complete traceability of the transactions and gaming processes, we achieve a significant deterrent potential.”
Jürgen Creutzmann followed up on these presentations by proposing that, online gaming regulations to combat money laundering should follow a risk based approach. The fourth EU Anti-Money Laundering Directive (AMLD) was published by the EU Commission in January and adopts just such a risk based philosophy.
“It acknowledges that the levels and types of action required to be taken by member states, supervisors and firms will vary according to the nature and severity of risks in particular jurisdictions and sectors, and clarifies the types of situations in which simplified customer due diligence will be appropriate, as against those where it is necessary for firms to conduct enhanced checks.”
Six weeks ago the EU Commission proposed that the AMLD be applied to internet gambling. The European Betting and Gaming Association (EGBA) welcomed the proposal. Sigrid Ligné, Secretary General of the EGBA, said:
“Today’s changes will improve the legal certainty of the sector by being incorporated into another piece of EU-harmonised legislation. They will also improve market access for regulated operators as some Member States today still use the fight against money laundering as a justification to prohibit online gambling services.”
And a few days ago, the Draft Report on online gambling in the internal market (2012/2322(INI)) published by the Committee on the Internal Market and Consumer Protection contained this recommendation:
“17. Stresses the fact that online gambling is a non-cash-based environment and that – given the dependency on third-party financial service providers – additional safeguards against money laundering can be found in the EU’s regulatory framework for establishing and licensing financial service providers;”
The main author of that report is British MEP, Ashley Fox. In EU bureaucratese, he is the “Rapporteur” for this issue, which means that he presents the committee’s report to the EU Parliament and does most of the legwork involved in getting it published.
Mr Fox has a political interest in the issue of online gaming as he represents the South West England & Gibraltar constituency. Even so, his committee is extremely influential and will play a role in shaping the future EU wide regulatory framework envisioned in the current EU Action Plan for Online Gaming.
Slowly but surely, online poker is ridding itself of the reputation that it provides a safe harbor for drug money and terrorist finance.