Suspicious Transaction Reports and Their Impact on Effective AML

The freedom that the internet brings to the marketplace is invaluable nowadays. How it makes the world seem smaller; bringing companies and individuals closer using its universal reach, has done more for business and technology than any other platform ever has.

Of course, its freedom and diversity make it a hotspot for money laundering and other criminal activities, too. It has never been easier to clean money than it is today, and of course, one of the obvious targets for these sorts of activities are online casinos.

As such, Anti Money Laundering (AML) protocols are important in the gambling industry and play a big part in the overall operation of casinos and regulators.

Security Remote Gambling Operators: Bastions in Fighting Cybercrime

As online casinos run a high risk of encountering fraud, money laundering, and other financial threats, they must remain vigilant about the way in which their clients behave – actively watching the nature of their spending. If something seems fishy or out of the ordinary, they are required to complete a Suspicious Transaction Report (STR) and submit it to the correct Finance Intelligence Unit for further investigation.

In Malta, 80 remote casinos provided 1445 reports to the Financial Intelligence Analysis Unit (FIAU) in 2019, which is 106% more reports than were submitted the year before. This means that casinos are really taking the crime-fighting business to heart at a time when crime is ramping up in the world.

Often the predicated offence is not identified initially by the casinos. Their protocols seem to be designed more to pick up irregular activities on their sites rather than to diagnose the actual crime taking place. This remains a valuable service and the first step in investigating potential criminal activity.

It is clear from reports, however, that operators are responsible for uncovering a mass of felonies, including identity fraud, forgery, tax crimes, robbery and theft, illegal gambling, and more.

More Details How Casinos Identify Crime

There are several ‘flagging’ categories that casinos use to identify possible crimes. The more popular ways include:

Transaction Irregularity: Inconsistencies between a customer’s profile and the transactions carried out on the profile are always a red flag for potential crime.
Behavioural Indicators: When customers become uncooperative when requested to provide documents, it is seen as suspicious.
Verification Processes: Where identity/supporting verification documents seem suspicious.
Customer Profile: Where the source of funds/wealth is unclear.
High-Risk Jurisdictions: When transfers are made to high-risk regions without apparent sense in doing so.
Cybercrime Notifications: This is where it has become apparent that a customer’s account was hacked or fraudulently used by a third-party.

Where any of the above are flagged by a casino in Malta, they are required to alert the FIAU authorities immediately. The protocols outlined by the investigative authority in such an instance include:

‘’When the money laundering/financing of terrorism suspicion is linked to a transaction still to be processed, subject persons must refrain from carrying out the same and must submit an STR. The execution of the transaction must be delayed for one (1) working day following the day on which the licensee files the STR.’’

Hereafter, the FIAU is expected to gather as much information as possible on the case and report their findings to the Maltese Police, who will undertake criminal proceedings against guilty parties if it is deemed necessary.

Alert What the 2019 Stats Tell Us

While it is positive that the number of STRs reported last year seem to show an increased vigilance by operators in the industry, it also shows that some operators are more actively involved in this type of work than others.

Of the 1445 reports, 955 (67%) of them were reported by only 8 operators and the remaining reports provided by a further 72 entities. From the 210 registered remote gambling operators on the FIAU Caspar system, 130 seemingly had no cases to submit.

A possible reason for this is that criminals may have targeted specific sites to conduct their business. However, a more likely scenario is that most of the Maltese market do not take Suspicious Transactions seriously enough. This could be an area where the Malta Gaming Authority could improve, as more of their licensees should be following stricter anti-crime protocols.