Heightened Sports Betting Scrutiny

By the time you read this, we’ll already know whether the Seahawks or Patriots won the Super Bowl, if either team deflated a football or caused another trending Twitter topic, and how much the Las Vegas sports books took in for the Big Game.

And, if we’ve been paying attention to recent sports betting news reports, we might have an inkling about something else, and that is that Vegas sports books likely stepped up their game in terms of watching out for suspicious illegal wagering activity on one of the biggest sports wagering games of the year.

It’s something the Treasury Department’s Financial Crimes Enforcement Network (better known as FinCEN) is taking quite seriously. Recent correspondence between the department and the American Gaming Association shows heightened concern about whether such illegal activity is being conducted at legal sports books.

In a Dec. 24 letter to the American Gaming Association, the Treasury Department told AGA President Geoff Freeman that casinos must take steps to combat illegal sports gambling. In addition, the letter included FinCEN guidance relating to watching for suspicious illegal wagering. It reminded Freeman that the Bank Secrecy Act requires that casinos ask gamblers whether their bets are for themselves, and to report any wagers for third parties as suspicious activity. In addition, the letter also stated casinos must take a risk-based approach to compliance, focusing on gaming presenting the greatest money laundering threat.

The letter states that FinCEN believes that certain organizations and individuals have been circumventing various laws related to sports betting. “More specifically, criminals are making bets with legally operating sports books, including by using intermediaries to place bets on behalf of unidentified third parties (third-party betting),” the letter states. “In these cases, the intermediaries rarely voluntarily disclose to the casino that a transaction is being conducted on behalf of a third party, thereby disguising the third party’s role in the transaction and obscuring the source of funds used to place the bet.”

This, according to FinCEN, “poses distinct money laundering risks for casinos because it allows criminal organizations, illegal sports books, and others located in any state, where gambling may be illegal, to place bets within states where sports betting is legal.”

The Treasury Department’s letter, which followed correspondence from the AGA after a Thompson Reuters news article, drew a quick response from Freeman. “AGA members are committed to robust anti-money laundering measures in every aspect of their operations and invest significant resources to tailor risk-based compliance programs for every corner of the casino, including sports books,” he said in a Jan. 16 statement. “The industry welcomes continued guidance from FinCEN to protect against attempts to use casinos for money laundering and illicit financing and to ensure the integrity of the U.S. financial system.”

Importantly, Freeman also used the opportunity to note that the risk of money laundering is far greater in the vast, unregulated, illegal sports betting market than in the highly regulated, legal gaming industry.

“While casinos routinely look for suspicious bets at sports books and have worked with law enforcement to identify illegal activity—in some cases leading to criminal convictions—no such oversight exists for the illegal sports betting market.”

The AGA on Jan. 22 released its own estimate that Americans would make $3.8 billion worth of illegal bets on this year’s Super Bowl, in stark contrast to the approximately $100 million that is legally wagered yearly.

We applaud Freeman and the AGA for sending a strong message that the gaming industry is proactively addressing these issues, including its recent move to release a comprehensive set of Anti-Money Laundering (AML) Best Practices.

Peter Mead
Casino Enterprise Management

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