Uncovering the Shadow: How Payment Processors Unwittingly Fuel Illegal Online Gambling Operations

Payment processors and the online casino and gambling industry
Spread financial intelligence

Update Feb 3, 2024: We have removed the FCA-regulated payment institution Volt from the list of payment facilitators for online casinos and gambling platforms. Their lawyers, Simmons & Simmons (website), have admitted that Volt’s technology, websites, and brand are used by online casino operators but that Volt does not actually do this. Absurd? Probably. We have prepared separate reports on the Volt case.

We’ve uncovered a concerning trend in our recent analysis of the online casinos and gambling sector, particularly focusing on the high-risk aspects of these activities and their associated payment processors. Many payment processors, including those regulated by financial authorities, seem to be unknowingly engaging in unauthorized and, consequently, illegal online gambling operations. FinCrime Observer published an interesting report about this scene and its payment processors.

It’s crucial for entities involved in processing payments for the online gambling industry to recognize their obligations and the potential legal ramifications of servicing unlicensed operators. This clarification aims to highlight the necessity for due diligence and compliance with regulatory standards to avoid facilitating illegal online gambling activities.

The UK Regulation

UKk 2023 Gambling Act Whitepaper

The regulatory landscape for online casinos and gambling in the UK has recently seen significant reforms aimed at enhancing consumer protection, particularly in the digital space. These changes, detailed in the 2023 Gambling Act White Paper and major reform announcements by the UK Government, reflect a concerted effort to update laws to better address the realities of online gambling, including issues of addiction, financial risk, and the safeguarding of vulnerable populations. Read more about the regulatory framework in the UK here.

In the UK, the government has introduced a range of measures to tighten control over the gambling industry. These include the implementation of frictionless player protection checks, extra powers for the Gambling Commission to tackle black market operators, rules to prevent harm from bonus offers, and a new industry ombudsman for dispute resolution.

A significant reform is the introduction of a statutory gambling operator levy to fund treatment and education for gambling-related harm, replacing the voluntary system deemed inadequate. These reforms are the most comprehensive since the Gambling Act of 2005, addressing the ease of access to gambling through digital platforms and aiming to protect at-risk individuals from gambling harm​​​​.

The EU Regulation

Regarding the EU’s approach to online gambling regulation, while the specifics can vary significantly between member states, there is a general trend towards tightening restrictions on advertising, implementing stake limits, and enhancing player protection measures. For instance, the UK’s proposals for digital space regulation, including affordability checks and restrictions on advertising, reflect broader concerns present within the EU about protecting consumers and preventing gambling-related harm​​.

Operators wishing to target customers in a specific EU country must comply with that country’s specific regulations and, in most cases, hold a license issued by the national regulatory authority. The EU does not have a unified regulatory framework for online gambling, which means that a Curacao license is not recognized as a blanket authorization for offering gambling services across the EU. Operators must navigate the regulatory landscape of each EU member state they wish to operate in, which may include obtaining a local license and adhering to local laws and standards regarding gambling.

The Curacao Question

A Curacao license alone is insufficient for operators to legally offer online gambling services in the UK or the broader EU. In the UK, any business, regardless of its location, must obtain a remote gambling license from the UK Gambling Commission to legally provide gambling services to British residents. This requirement is in place to ensure that all operators adhere to the UK’s strict gambling regulations, which include measures for player protection, fairness, and anti-money laundering (AML) practices.

Operators with a license from Curacao seeking to operate in the UK and the EU must navigate these regulatory frameworks, which often require adherence to strict compliance measures, including anti-money laundering (AML) laws. In the UK, for example, gambling licenses are mandatory for any business, regardless of location, that offers gambling services to British residents. The Gambling Commission assesses various factors, including the integrity of the applicant and compliance with laws and regulations. Licenses are subject to renewal and can be reviewed, suspended, or revoked for non-compliance​​.

High-Risk Payment Processors

Payment processors that handle transactions for online casinos and gambling providers are also under scrutiny. These entities bear significant responsibilities in the context of EU and UK money laundering laws. They are required to conduct due diligence on their clients to prevent the facilitation of money laundering activities.

This includes understanding the nature of their clients’ businesses, monitoring transactions for suspicious activity, and reporting any such activities to the relevant authorities. The UK has introduced an “economic crime levy” on entities regulated for anti-money laundering purposes, including casinos, based on their UK revenue, indicating the level of regulatory focus on preventing financial crimes within the gambling sector​​.

The most important payment processors for online casinos and gambling providers include Jeton, MiFinity, eZeeWallet, Payop, Sofort (Klarna), Unlimit, Coinspaid, MoonPay, Changelly, Rapid, and Skrill. Report Information

If you have any information about illegal online casinos and gambling schemes and their facilitating payment processors, please let us know via our whistleblower platform, Whistle42.

Leave a Reply

Your email address will not be published. Required fields are marked *