US Treasury issues stark warning of money laundering risk from online betting
In a new report, the government department says rapid growth of industry has led to “unique money laundering risks”
The US Treasury has issued a warning against the increasing risk of money laundering in online sports betting as a record number of Americans are expected to place bets on the upcoming Super Bowl.
The Treasury released its 2024 National Money laundering Risk Assessment this week, which highlights the risk the online sports betting industry poses to money laundering protection efforts.
The government department said the rapid growth of the sports betting industry and the lack of uniform regulation across the states where its legal are the main factors to “significant and increasing money laundering risks” and “now present unique money laundering risks.”
It is predicted by industry research and consultancy Eilers & Krejcik Gaming that Americans will bet $1.25bn on the upcoming showpiece event between the Kansas City Chiefs and the San Francisco 49ers in Las Vegas.
The report also revealed that Americans have become prolific gamblers since the repeal of PASPA in 2018, noting that since then US citizens have placed more than $220bn in bets as of 2023.
Under US law, all US operators have a number of obligations that are laid out in the Bank Secrecy Act (BSA) of 1970, which relates to money laundering regulations in the US.
Most operators are licensed through a BSA-covered market-access deal with a casino, so they are bound to the law’s stipulations.
Key points from the BSA include requiring financial institutions to provide documentation to regulators when suspicious cash transactions involving sums of more than $10,000 are made.
However, the report noted that operators might not be aware of their obligations, or they might be licensed directly with the state’s regulator, or the casino that the operator has a license with might not have insight into whether the operator is complying with the BSA.
The assessment estimates that around 40% of sports betting occurs in illegal or offshore platforms.
The US Treasury also highlighted multiple money laundering schemes in online sports betting to have occurred in recent years.
One example was a man from Georgia who was charged in August 2023 for funneling $1m through a betting account to hide the source of the money, which was later discovered to have come from donations from faith-based charities and individual donors.
In 2021, New Jersey state authorities arrested a man for allegedly using stolen identities to create and fund more than 1,800 online gambling accounts through Atlantic City’s online gaming providers.
As part of his scheme, he allegedly created fraudulent bank accounts using the victims’ stolen identities. He then transferred funds generated from fraudulent benefits claims into those accounts.
The US Treasury also highlighted the risks of cryptocurrency in its assessment.
Following the report’s publication, EGR reached out to the American Gaming Association (AGA) for its take on the report.
Alex Costello, VP of government relations at the AGA, said: “It is our long-held view that new forms of legal gaming, like online sports betting and igaming, require specific BSA guidance to ensure the US financial system is protected from money laundering.
“In the absence of such guidance, AGA members have built on decades of experience from robust casino compliance to create and deploy AML controls for igaming.
“Our members stand ready to work with the Department of Treasury to ensure that legal, online operators have the guidance needed to build on our current programs and meet the high standards already employed by the casino industry.
“This is in stark contrast to the illegal, offshore marketplace. These predatory websites, which rely on cryptocurrency and employ no AML safeguards, pose the most significant risk of gambling-related financial crimes.
“The federal government must prioritize enforcement against these bad actors to protect American consumers and the US financial system.”