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Fintrac Warns Casinos of Gamers Paying with Bank Drafts

Oliver Smith
December 11, 2019
3 minutes read
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Canada’s anti-money laundering agency is warning casinos to be cautious of customers who pay for their gaming with their bank drafts. Bank drafts are becoming the latest method for criminals to disguise dirty money.

FINTRAC, Financial Transactions and Reports Analysis Centre of Canda, issued an operational alert on December 10 that cash is not being favored anymore in illegal casino transactions due to excessive media and government scrutiny.

Instead of cash, criminals are choosing bank drafts for their liquidity and quasi-anonymity. According to the Fintrac director, Nada Semaan, professional money launderers are constantly changing their methods.

“They will always be looking at different ways to do it, and our job is to be a step ahead of them and figure that out. We can’t stop everybody, but we are working extremely hard on this and we are committed to doing more.”

Fintrac tries to identify and investigate the cash linked to terrorism and money laundering by going through huge piles of information annually from banks, securities dealers, insurance companies, money service businesses, casinos, real estate brokers and many others.

The latest alert published by Fintrac is a part of Project Athena, an RCMP-led public-private partnership aimed at disrupting money-laundering activity in British Columbia and across Canada. This project continues to upgrade previous initiatives targeting the fentanyl trade, romance fraud, and human trafficking.

Our latest Operational Alert, published today at our 2nd national Casino Forum, will help businesses better identify transactions that may be linked to money laundering through banks, casinos and money services businesses. https://t.co/zWmiaqdOeT pic.twitter.com/PDmZkSW51P

— FINTRAC_Canada (@FINTRAC_Canada) December 10, 2019

The operational alert and a list of signs that dirty money is being washed using casinos were generated through the analysis of Fintrac’s financial intelligence in collaboration with the Combined Forces Special Enforcement Unit in British Columbia.

Fintrac suspects that most people involved in dubious casino-related transactions were money mules who moved crime profits, consciously or unconsciously, on behalf of a money launderer.

According to the alert, the first type commonly reported their occupation as “student” or simply “unemployed”. The second type of money mule often reported their occupation as “homemaker”.

Fintrac is notifying casinos to examine patrons who:

— Deposit a high volume of bank drafts to a gaming-fund account or who regularly use bank drafts as a form of gaming buy-in;

— Are accompanied to a casino by someone subject to a gaming ban;

— Live in a jurisdiction subject to currency-control restrictions or sanctions and have no local ties to family or businesses.

Disclaimer: No warranty is herein provided that the information contained in this document is accurate, up-to-date, and/or complete. In no circumstance(s), does such information constitute legal or any other advice. Any person who intends to use, rely, pass-on, or re-publish the information contained herein in any way is solely responsible for the same. We suggest to verify the information and/or obtain expert advice independently if required.

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Lawyers in Malta Lag Behind in Complying with AML Measures
Malta obliged the various sectors to comply with risk assessment measures. According to the Financial Intelligence Analysis Unit, the legal industry is lagging behind in complying with these measures.

Only 57 per cent of the legal businesses had a system for business risk assessment (BRA) in place the previous year which places the legal industry at the bottom of the list of sectors for compliance requirements including credit institutions, gaming companies, service providers, auditors and accountants.

However, FIAU is driven to gain more compliance management measures from the listed sectors. The overall results indicate that the improvement was seen in every sector as Malta continues to focus on its fight against money laundering terrorism funding.

Business Risk Assessment is a tool through which the members of the financial services can analyse the risks attached to a client and which measures can ensure minimized risks. This tool is a part of anti-money laundering compliance.

FIAU reported a significant improvement among real estate agents that shot up to 73% from 40% in a year regarding the Business Risk Assessment.

Credit institutions made it to the top of the list with a 100% increase in having the Business Risk Assessment in place and the financial institutions made it to the second with 94%.

“The FIAU acknowledges the subject persons’ commitment to engage consultants to assist them in carrying out certain anti-money laundering and financing of terrorism obligations. However, subject persons remain solely responsible for the BRA and most importantly should ensure that they have knowledge of both the content and result of it,” the FIAU said.

The FIAU highlighted that the BRA must not be a side document that the operators are required to fulfil. It must be tailored to represent the business operations, scenarios, and models.

The financial watchdogs revealed that a number of operators took the help of consultants to carry out the risk assessment and they were responsible and understood the importance of the exercise.

FIAU analysed one risk assessment and discovered that “An operator listed the application of client due diligence (CDD) measures as a safeguard against risks arising from exposure to politically exposed persons (PEPs).” FIAU added, “This is not sufficient given that CDD measures are to be applied in all circumstances irrespective of the risk level. In cases PEPs, subject persons are expected to define in more detail the type of enhanced due diligence measures to be applied.”

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FinTech and FinCrime - The Global Regulatory Landscape
Also known as financial technology, FinTech is now among the fastest-growing industries. This sector’s ability to reduce costs and increase the efficiency of the business activities makes it an attraction for everyone. China is currently the biggest player in the FinTech market with a transaction value of USD 2,496 billion in 2020.

Due to the recent developments, regulators are now challenged to keep pace with technological developments and assess the accuracy of the regulatory framework of the industry. So, RegTech emerged and today, both sectors are closely related. In this context, new risks have evolved for banks and other financial institutions, especially for anti-money laundering and counter-terrorist financing. Regulatory bodies like the Financial Actions Task Force (FATF) have shared certain recommendations that are likely to assist the FinTech sector. Let’s have a look at the risks and regulatory initiatives that have been taken over the last few years for the FinTech sector.

What is AML in FinTech?

Anti Money Laundering compliance in FinTech is a regulatory requirement in the majority of the countries in order to prevent financial crime including money laundering and terror financing. FCA, FINMA and AUSTRAC are some of the major regulatory bodies across the world and all FinTech companies have to abide by the laws.

FinTech and AML Regulations – From 2014 to Date

FinTech is only a decade old and regulatory bodies came into action in 2014. Ever since law enforcement agencies have been imposing enhanced rules and regulations to control the substantial rise in FinCrime. Here is a glimpse of the journey of regulatory bodies in FinTech from 2014 to date.

Suggested: Brexit to Change Sanction and Money Laundering Regulations in 2021

2014 – Financial Conduct Authority (FCA)

The FCA was the first regulatory authority to offer authorisation and regulatory sandbox regimes in the United Kingdom. Last year, the FCA amended some of the regulations to meet the new anti-money laundering directive and incorporate the FATF’s international requirements. As per the amendments, some additional information is required from high-risk entities and monitoring in some cases as well.

2015/16 – BaFin

For German FinTechs, there are no relieving conditions and BaFin published notes in October 2015. These notes have six different business models along with supervisory information. As compared to other European regulators, BaFin’s conditions for AML/CFT were stricter making it difficult for businesses to grow. Hence, there was a need for unified regulations in European Region.

2017 – Financial Actions Task Force (FATF)

The first-ever FATF conference for FinTech and RegTech was held in February 2017 and the sole purpose of this summit was to unify the AML and CFT laws. As of today, FATF focuses on different rules that apply in various regions of the world for digital identity verification and customer due diligence protocols.

Recommended: | 40 recommendations of FATF – Shaping the future of your business

2018 – European Central Bank

The ECB published two guidelines in March 2018 regarding the evaluation of license applications and credit applications of FinTechs.The latter guideline outlines the requirements for a license application for the bank business models that offer technology-based services. The purpose of ECB is to ensure that FinTech banks are authorised properly and have risk controlling equipment that can assist them in mitigating risks within their field of operation. As per the ECB, FinTechs must be treated by the same standards as other credit institutions.

2020 – BSA and FinCEN

Financial Crime Enforcement Network (FinCEN) is the regulatory body of the United States and as per FinCEN, money laundering and terrorist financing have significantly changed over time. The regulatory authority has taken recommendations from the AML Effectiveness Working Group and its most recent amendment in the Bank Secrecy Act (BSA) is the implementation of beneficial ownership and customer due diligence requirements. Now, FinTech companies of the region have to obtain beneficial ownership information and report to FinCEN.

The Current State of FinCrime in FinTech

Currently, money laundering and terror financing cases are increasing rapidly. A few weeks back, the Financial Conduct Authority (FCA) narrowed down its attention to Wirex, a crypto and fiat currency payment provider. The company was accused of money laundering as per an investigation by Fintech Futures. In response to this allegation, the legal team of the company said,

“The article in question contains a number of false, defamatory and misleading statements, including the allegations that money is being laundered through the company, and Wirex is currently considering its legal options to have the article removed immediately.”

Initially, the concerns were raised in February 2019 when employees of Wirex independently reached out to FCA and complained about the customers’ money being laundered through the firm. One of the senior compliance officers also pointed out crypto trade that didn’t belong to Wirex.

Wirex was found to be violating the Fifth Anti-Money Laundering Directive (5AMLD) that was effective in January 2020. Furthermore, Wirecard (former payment processor of Wirex) has activities seized in the United Kingdom since last June when €1.9bn errors were identified on its balance sheet.

Many other cases have been reported over the past few years and so, the regulations on FinTech firms has significantly increased. Without rigid regulations, the cases like Wirex will increase at a faster pace making it difficult to control them later.

To Sum Up…

The FinTech industry is growing rapidly and its growth is a goldmine for financial criminals. To combat money laundering and terror financing, FinTech firms have to follow certain laws from FinCEN, FCA and other regulatory authorities. Non-compliance with these regulations results in hefty penalties and after 2020’s record-breaking fines, the year 2021 can expect a rise in these penalties. Criminals have become more sophisticated in their illicit activities and without rigid regulations in the FinTech sector, it will not be easier to combat FinCrime.

Shufti Pro AML compliance solution deploys thousands of AI models that can verify the identities and check backgrounds in seconds along with 98.67% accurate results. You can onboard legitimate customers only, comply with regulations and keep your FinTech company secure from fines.

To know more about AML in the FinTech sector, talk to our experts right away!

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Fintrac Warns Casinos of Gamers Paying with Bank Drafts

FinTech and AML Regulations – From 2014 to Date

2014 – Financial Conduct Authority (FCA)

2015/16 – BaFin

2017 – Financial Actions Task Force (FATF)

2018 – European Central Bank

2020 – BSA and FinCEN

The Current State of FinCrime in FinTech

To Sum Up…

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

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Cyprus

United Kingdom

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Fintrac Warns Casinos of Gamers Paying with Bank Drafts

What is AML in FinTech?

FinTech and AML Regulations – From 2014 to Date

2014 – Financial Conduct Authority (FCA)

2015/16 – BaFin

2017 – Financial Actions Task Force (FATF)

2018 – European Central Bank

2020 – BSA and FinCEN

The Current State of FinCrime in FinTech

To Sum Up…

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

Add to your Homescreen!