News of illegal money laundering is coming to light in Lithuania. The local casino industry seems to be involved in this high risk operation. Even the remote gambling sector is a potential culprit.
The Lithuanian government has carried out a risk assessment for the industry using data derived from a variety of international and national sources, such as studies, reports and statistics provided by a number of gambling businesses.
In fact, the country’s Financial Intelligence Unit has been mobilized, supported by supervisory and law enforcement authorities. It appears that money laundering is taking place under the definition of “attractiveness and ability of criminals to exploit a specific medium to launder criminally obtained property.”
Casinos were rated at the maximum risk level of 4 on a 1-4 scale. According to the report, the casino sector is at a high risk due to inherent on-going cash flow activities. It is a way for organized crime to do their dirty work.
PEPs, or politically exposed persons, are those coming from high-risk countries to launder money. Their modus operandi is easy to implement with just some basic planning and minimal knowledge of how gambling systems work.
The risk for slot machine parlors, betting and online gambling were lower at level 3, but still at a high risk. The online gambling industry is attractive for money launderers due to the high volume and fast execution of transactions.
This includes cross-border transactions as well as those with low identification requirements. Criminals can therefore easily convert illegal funds into legitimate gambling earnings.
Lotteries came in at level 2, indicating a medium risk. Each sector has some vulnerability based on the “totality and effectiveness of measures aimed at preventing the realization of a money laundering risk, taking into account the scale and perception of the risk”.
Why does it happen. Casinos allow only cash operations and do not verify the source of funds. In addition, they have difficulties in performing customer due diligence. Of note, some casinos receive customers from sanctioned or high-risk countries, such as Iran and Syria.
The report revealed that the country’s Gambling Supervisory Authority is poorly equipped to deal with the threat of money laundering in local casinos. Insufficient investigations have been conduction over the last several years. They are not proportionate to the risk factor.
“This might be caused by the lack of human resources of the supervisory authority, which has only three employees dedicating only 15% of their time for [money laundering and terrorist financing] supervision within the sector.”
The report has also made some suggestions for casinos and slot parlors. Bettors could use debit cards for more easily traced transactions.
Plus, these venues could set limits on cash deposits, the usage of player cards to track each player’s gambling activity, and “secret shopper” style inspections.
As for online operators, because they have stricter anti-money laundering requirements than others, they are rated at the lower level 2.
The recent report marks the second time that Lithuania had completed a National Money Laundering and Terrorist Financing Risk Assessment, with the first done in 2015.