INSIGHT EU POLICY
If you are a regulated online casino in a
European country, this was a shock
result. The operators of these casinos are regulated and
controlled by the state, they are
compliant with the regulations of the
country and yet they are labelled at risk
level four. What is the idea behind the high risk rating to the online sector?
Assessment. Te reports authors were contacted with documented evidence to provide a true picture of the sector, with the aim to change their view and understanding of the business in the intervening years. Te land-based gaming industry communicated clearly its processes, and the responses back have shown a willingness to discuss the issues raised, ensuring that the banking sector is now better informed about the risks posed by the land-based sector.
FINANCIAL INSTITUTIONS REACTED SLOWLY - AT FIRST
In 2017, casinos were given the highest risk value. However, the effect wasn’t immediate, instead taking several years for regulators and banks to take note, consider the factors and ask questions about the level of risk they were prepared accept when doing business with companies operating in these sectors. Measures then began to be implemented and, unfortunately, in some countries, banks used the Supranational Risk Assessment as a guide to de-risk their own business. What this meant was that compliance, which is extremely expensive, became a resource that banks were unwilling to expend upon customers in these high risk sectors.
P74 WIRE / PULSE / INSIGHT / REPORTS
If you investigate a business, scrutinise the accounts, write reports, store the data and make sure you have proof of contact regarding certain transactions - this costs large amounts of money. As banks looked to de-risk their own transactions, they appraised their client lists against the Supranational Risk Assessment, resulting in the termination of services for many land-based casino clients.
Te banks’ took the stance that relationships with these businesses were too risky. Tey rationalised their position in view of the fact that they could expect to receive questions from financial investigation units concerning gambling-related transactions, making the processing of these businesses by the bank too expensive. It became cheaper to ask these businesses to find another bank.
After four years of the Supranational Risk Assessment, the banking sector started to react to the findings and their response was to aggressively de-risk their own businesses.
WILL BANKS REACT FASTER? Today, awareness of the SRA
assessment is universal, but the reaction time of banking and anti- money laundering authorities remains the same. Te biggest change within the latest Supranational Risk Assessment has been in regards to online gaming. Online gaming has been assessed as level four, the top grade for AML risk and the highest threat level for terrorism financing risk.
In contrast, land-based casinos dropped from the highest risk to level two, although when the first Supranational Risk Assessment was made, the criteria was different. Tere was a theoretical risk and a practical risk. Land- based casinos were given a theoretical risk level of four in 2017, and a practical risk of three. However, this hypothetical risk level rating system was abandoned, and now the new assessment only delivers a practical risk level.
LEVEL 4 CAME ‘OUT OF THE BLUE’ FOR ONLINE
If you are a regulated online casino in a European country, this was a dramatic result. Te operators of these casinos are regulated and controlled by the state, they are compliant with the regulations of the countries in which they operate and yet they are labelled at risk
level four. So, what’s the idea behind the high risk rating for the online sector?
Te rating actually focuses on the illegal side of online gambling, ie. cross border websites that are either unlicensed, or licensed via an offshore location, whereby there are only limited controls. Tey have considered these illegal operations in their findings, but the impact will be greatest on the legal and licensed industry.
Te effect won’t be immediate, but banks will consider and respond to the latest findings. If they service online gambling clients, they will have to consider how in the future the documentation of transactions within the business, with regard to money transactions, is to be handled. Businesses operating in the online sector will need to adjust the way they do business to prepare for future investigations, and they need to show how they’re dealing with risk and what measures they’re taking to lower their vulnerability.
Banking codes of conduct have changed the criteria for accepting clients based on the Supranational Risk Assessment for individual industry sectors. We have seen banks make judgements in relation
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