Fintrac Highlights Risks of Money Laundering for iGaming Businesses

Canada’s financial intelligence unit, anti-money laundering and anti-terrorist financing supervisor, the Financial Transactions and Reports Analysis Centre of Canada (Fintrac), released a new report, focusing on online gambling and highlighting different ways criminals exploit the sector to launder ill-gained funds.

In its report, Fintrac acknowledged the growth of the online gambling sector, propelled by the COVID-19 pandemic. It said that casinos closing their doors temporarily for visitors due to the pandemic and the regulatory changes across Canada played an important role in the expansion of iGaming.

This expansion puts licensed online gambling operators at risk of money laundering. Besides using the services of licensed operators, some criminals engaged with unregulated casinos in an attempt to launder proceeds of crime.

Within its new report, labeled Special Bulletin, Fintrac analyzed suspicious transaction reports related to online gambling activities between 2016 and 2023. Moreover, it probed data from different international governmental organizations, financial intelligence units and other sources that helped it outline suspicious patterns and trends.

Criminals Use Different Methods to Launder Ill-Gained Funds

Fintrac explained: “Online gambling sites offer prospective money launderers opportunities to conceal the source of their funds by using multiple different deposit and withdrawal methods.” As an example, the financial intelligence unit highlighted the use of prepaid vouchers or cards with money that are suspected to derive from illegal activities. Once those vouchers are purchased, criminals would deposit them into gambling accounts and then withdraw with an online bank transfer via a Canadian bank account. Those actions would disguise the source of funds which would appear as gambling winnings.

Another suspicious pattern identified in the recent report is the use of gambling accounts for limited gambling activities but many deposits and withdrawals. According to Fintrac, engaging in minimal gambling activity and withdrawal is a “common money laundering method used by criminals both at online and brick-and-mortar casinos.”

Other methods that criminals can use to disguise their winnings are related to peer-to-peer transactions. This is an activity called “chip-dumping,” where one player purposefully loses a large sum to another player early in a game.

When it comes to sports betting, some culprits with proceeds from criminal activity may engage in low-risk wagering. This common tactic is used as a way to disguise the funds while engaging in minimal betting activities.

Besides examples of common methods individuals may use for money laundering, Fintrac released a list of money laundering indicators related to online gambling for money services businesses, financial organizations and payment service providers. The recent report also released a similar list that may serve as guidance for licensed online gambling operators across Canada.