Why Sports and Racing Betting Need AML/CTF?
Sports and Racing Betting operators act on behalf of their clients, engaging in activities of placing a bet on the outcome and putting money on a horse. As a business of betting or wagering, you need to put anti-money laundering/counter-terrorism financing (AML/CFT) measures in place if you engage in the following activities on behalf of a client:
Sports and Racing Betting operators act on behalf of their clients, engaging in activities of placing a bet on the outcome and putting money on a horse. As a business of betting or wagering, you need to put anti-money laundering/counter-terrorism financing (AML/CFT) measures in place if you engage in the following activities on behalf of a client:
- act on behalf of your client to place bets through a bookmaker or sportsbook, or
- carry out cash transactions above a specified threshold; or
- conduct off-track betting on horse races or greyhound racing events; or
- provide accounts to customers for betting, including mobile wallets, for storing money.
In certain jurisdictions, if you have gross annual revenues greater than a stated amount, you may be deemed as “financial institutions”. For instance, the Bank Secrecy Act (USA) makes businesses grossing over US$1 million a regulated entity, while Austrac requires Identity Verification (IDV) and reporting for payouts over AU$10,000.
Risk exposure
Sports and racing betting activities, including betting in race circuits, are cash-intensive and involve huge monetary transactions. Complex transactions can camouflage the illegal sources of the cash through layering. The speed of cash flying through gambling operations allows the proceeds of illicit funds to be laundered easily. The ability to receive cash from associates and to pool together funds from multiple sources, exchange money, store money in betting accounts for a period before cashing out, “messenger betting” or placing “cash-out bets” are practices that expose them to risks of money laundering and terrorism financing (ML/TF).
Compliance requirements
All betting and gambling businesses, including sportsbooks and tech-driven betting platforms, must begin by registering with your regulatory authority. Further, you must demonstrate a strong culture of compliance by reporting physical cash receipts or transactions above the prescribed amount, despite any deemed betrayal of client trust. Extensive customer vetting is required, including KYC and IDV, client due diligence, monitoring, record keeping, and reporting of out-of-state bettor transactions, especially involving foreign currencies, transactions with cryptocurrency exchanges, or sanctioned entities or countries.
Gaps in compliance
The ability to use the betting platforms to store or transfer illegal cash, manipulate transactions and conceal any unlawful activity, allows clients to conceal illicit gains and avoid statutory laws. This exposes the betting businesses to ML/TF by being facilitators or acting on behalf of their client. Conflict of interest, lack of legalisation and regulations in “live betting”, the fear of losing business in the race to attract a wider pool of bettors, are the biggest gaps in compliance in the sports and race betting sector.