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Online Gambling Sites Shelter Money Laundering Schemes

The Wild West-like atmosphere of online gambling has given money launderers an easy way to wash large amounts cash through an industry with little oversight.

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By Paul Gaita

04/29/14

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A report from the computer security software company McAfee reveals that online gambling sites have become a favorite blind for money launderers and other criminals to move massive amounts of money through loosely policed and questionably legal companies.

With gross winnings expected to exceed 39 billion by 2015, online gambling, thanks to the layers of player anonymity provided by the sites and the sheer number of sites, has proven to be a largely challenge-free environment for large cash payouts. Individuals engaged in the trafficking of illegal proceeds can launder huge sums of money by wagering them as part of a gambling transaction and then receiving the payout as a win.

Since no actual physical money changes hands, it has proven difficult for law enforcement officials to follow the flow of funds; gamblers in many areas are not required to report their winnings to the government for tax purposes, which eliminates another means of monitoring transactions. The sites themselves provide an array of technological advantages to conceal players’ identities, from the use of unregulated digital currencies like Bitcoin to proxy servers that can hide locations and make it seem as if users are in another state or even country.

With these and other roadblocks a seemingly permanent part of online gambling, law enforcement has struggled to prevent money laundering efforts. Efforts like the 2011 shutdown of offshore Internet poker sites by the Department of Justice has only created a proliferation of illegal sites – the McAfee report estimates that there are some 25,000 unregulated gambling sites around the world – which has complicated matters.

Greater collaboration between U.S. and international agencies may help to stem the tide of criminals using sites to move illegal funds, but the McAfee report notes that the anonymity of players and site operators will make it impossible to bring the industry to an end. “A lot of operators work outside of law enforcement jurisdiction,” said Raj Samani, chief technology officer at McAfee. “You’d be crazy to launder through a U.S.-operated casino. With the click of a button, you can be in any country around the world.”

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