Jackpot or not? Report says combo of online gambling sites and Bitcoin facilitate money laundering

By Christine Duhaime | April 27th, 2014

According to a report released by McAfee Labs, available here entitled “Jackpot! Money Laundering Through Online Gambling,” the global online gambling sector appears to be rife with money laundering problems and Bitcoin is facilitating it.

It may be that money laundering is happening on a large scale through unlicensed online gambling websites but the report itself is based on assumptions that are not accurate:

  1. The Report claims that the global online gambling sector will grow 30% in three years starting in 2013 (hence the problem of money laundering online will allegedly get worse). That seems doubtful since it is based on assumptions that the US will authorize online gambling across all states by 2016, which will not happen.
  2. The Report says that as between poker, casinos, betting and bingo, in the online gambling environment only poker and casinos are money laundering risks – there is no greater inherent risk with poker or casinos than with betting or bingo.
  3. The Report purportedly looked at licensed online gambling around the globe which it described as “regulated gambling” and with respect to Canada, for example, it stated that Canada has 120 online regulated gambling websites. Actually, it only has three regulated online gambling sites – those operated and managed pursuant to the Criminal Code of Canada and provincial gaming control legislation by the provincial governments in British Columbia, Quebec and Manitoba. Canada never had and does not have 120 regulated online gambling websites.
  4. The Report describes how money laundering at online gambling sites occurs – purportedly by what is called in the industry “minimal play” whereby in the land based environment for example, a person feeds a slot machine with say $100,000 and cashes out after minimal play for a casino cheque. According to the Report, gamblers go online and invest proceeds of crime in “minimal play” transactions then cash out, presumably with cleaned funds; or in a second scenario, they play online and with the gambling wins (the Report assumes gamblers always wins whereas the reality is that the house always wins) they purchase illegal goods (likely drugs) which allows the  seller of the illegal goods to earn revenue tax free and the purchaser to acquire goods online illegally.  In the first scenario, gamblers who engage in minimal play then cash out online have gained no money laundering benefit because they have not structured or washed the funds at all – all they have done is moved funds online and the remainder comes right back to them from the casino operator in the same form. In the second scenario, most money launderers would not use proceeds of crime to acquire illegal goods, such as drugs, as a money laundering method and expose themselves to additional risk of detection by law enforcement. They almost always use proceeds of crime to buy something legal – that’s how it gets cleaned.
  5. The Report states that the use of digital currencies such as Bitcoin at licensed online gambling sites makes it less likely that transactions will be subject to scrutiny of deposits and withdrawals, increasing money laundering risks. However, at the present time, there are no licensed and regulated gambling entities in the world that accept digital currencies as a payment method – that is because no gambling regulator has approved the use of digital currencies for gambling purposes. It is not possible, therefore, for the acceptance of Bitcoin as a payment method at regulated online gambling sites to cause an increase in the risk of money laundering – simply because Bitcoin cannot even be accepted at regulated gambling sites.
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