The Chips Are Down

Nefarious Actors Exploit Casinos to Launder Funds         

Millions of dollars in cash flows daily through casinos worldwide, and recent enforcement actions indicate that regulators are tightening their focus on the illicit cash that traverses the gaming industry. Regulators worldwide have stepped up enforcement, issuing millions of dollars in fines, and increasing criminal prosecutions of the casino industry, which provides ample opportunities to anonymously launder proceeds of crime.

• Gamblers can provide fraudulent information to the casino, which would not trigger a red flag. Gamblers playing online can also create multiple accounts, allowing them to structure multiple transactions. For example, a major illegal betting ring taken down by European authorities in October 2024 dispersed their profits across multiple accounts to avoid detection. The group used false IDs, virtual private networks (VPNs), forged documents, and e-wallets to facilitate their illicit activities.
• Dirty money can also be converted into casino chips, which allows those seeking to clean the proceeds of crime to play physical games, lose a small amount of money, and cash the rest out in the form of a check. For example, Triad member Tujie Lai, who is wanted in mainland China for kidnapping, extortion, and leading a criminal organization, in July 2017 bought $250,000 worth of casino chips in British Columbia and cashed out a total of $610,000 in Canadian currency (more than $423,000 in U.S. dollars) during the same period. Lai in November 2018 converted $20,000 in U.S. currency, made up of two bundles of $100 bills, into chips at the River Rock Casino in British Columbia.

Casino Money Laundering Fuels Criminal Activity

The UN Office on Drugs and Crime (UNODC) in January 2024 issued a report that found casinos, junkets, and digital assets are fueling organized crime in East and Southeast Asia and are a critical part of the region’s underground banking and money laundering infrastructure. The State Department in 2021 said that the proliferation of casinos, remittance networks, and drug trafficking in the border regions of Burma also represent money laundering vulnerabilities.

• The State Department noted that the creation and success of the money-laundering and underground banking infrastructure has helped expand the region’s broader illicit economy, attracting new participants to the criminal ecosystem.
• Media reports in 2019 indicated numerous casino VIP rooms in Macau—the world’s largest gambling center—operate as sites for money laundering, illegal loans, and other illicit activities.
• Human traffickers often force victims to work in online casinos and scams. Casino operators increasingly have moved bases of operation into loosely regulated and highly vulnerable jurisdictions including Cambodia, Lao PDR, and the Philippines, as well as several border areas controlled by armed groups in Burma, according to the UNODC report. Criminal organizations lure hundreds of thousands of victims to these areas with promises of lucrative employment, often using social media platforms, and forcing them to work as scammers or online casino operators. Proceeds of these scams are then laundered through both legal and illegal casinos.

Senior Executives Doing the Wrong Thing

Recent enforcement actions underscore how vital governance—specifically management commitment—is to compliance and setting the “tone from the top” about the importance of combating financial crimes. Willy Allison, who, among other things, hosts the World Game Protection Conference in Las Vegas, highlights the significance of leadership commitment to effective compliance. “Casinos can train staff to fill out reports, but if executives are mishandling them, it will end poorly,” he says.

• Former President and Chief Operating Officer of Resorts World Las Vegas Scott Sibella in late 2024 pleaded guilty to federal charges of failing to report illegal gambling and had his gaming license revoked by the Nevada Gaming Commission. He was accused of willfully ignoring the source of a customer’s funds and failing to file a suspicious activity report after allowing an illegal gambler to play at MGM Grand in 2018.
• The Financial Crimes Enforcement Network (FinCEN) in October 2024 fined Lake Elsinore Hotel and Casino over money laundering violations. The casino agreed to pay roughly $900,000 to settle allegations of AML deficiencies including failure to implement and maintain an effective AML program and file currency transaction and suspicious transaction reports. FinCEN said the casino’s management failed to assign anyone to ensure day-to-day compliance and its compliance program lacked adequate procedures to detect suspicious transactions.

Other Countries Stepping Up Enforcement

U.S. regulators are by far not alone in their increased focus on money laundering and other financial crimes at casinos. Organized crime poses a particular problem in Southeast Asia, especially the Mekong region, according to UNODC. Casinos and special economic zones have proliferated in the region, especially during the COVID pandemic, and junket and casino operators have effectively become bankers for organized crime, drawing the attention of regulators in the region.

• Chinese national Yan Zhenxing, who was the subject of an Interpol Red Notice issued by China, in December 2024 was arrested by Indonesian authorities following a recent crackdown on illicit online gambling operations in Southeast Asian countries, which are often linked to criminal gangs.
• Australian regulators in December 2024 announced civil penalty proceedings against Entain, alleging that the gambling giant “deliberately obscured the identities” of high-risk customers and accepted $152 million in bets from 17 high-risk customers despite being aware that they may have been laundering money through their betting accounts. Australian regulators also accuse Entain of failing to properly screen for politically exposed persons, leaving the company at significant risk of exploitation by illicit actors.
• Australian regulators in October 2024 imposed a $15 million fine against Star Entertainment after regulators accused the casino giant of violating AML protocols. Star Entertainment is accused—among other compliance failures—of failing to ascertain sources of wealth for high-risk customers. The Sydney casino’s license is suspended until at least March 31, 2025.
• Brazilian authorities in September 2024 arrested a famous Brazilian country music star on suspicion of money laundering using illegal online gambling. Gusttavo Lima is accused of receiving more than $2 million through companies he owned from companies accused of laundering proceeds of a popular illegal lottery in Brazil.

Given the increased regulatory focus on illicit financial transactions in the gaming industry, casinos and other gambling venues must increase their due diligence efforts and closely monitor customers and transactions.