UK Gambling Crackdown Signals AML Enforcement Drive

Signs are emerging that UK authorities could toughen enforcement of anti-money laundering (AML) regulations ahead of an impending on-site inspection from the world’s top financial crime watchdog.

Sister publication GamblingCompliance revealed on Friday that the UK Gambling Commission has threatened to revoke the licences of five online casino operators, after an investigation into the conduct of the sector.

“Due to the serious nature of the assessment findings, we have already started investigations into 17 remote operators and are keeping under consideration whether it is necessary to commence a licence review of five operators under Section 116 of the Gambling Act 2005 with a view to exercising our regulatory powers under Section 117 of the act,” the commission wrote.

Andrew Cotton, an attorney with Gordon Dadds, said the crackdown is likely linked to a Financial Action Task Force (FATF) evaluation of the country’s AML controls scheduled for February and March this year.

The UK has not been assessed by FATF for more than a decade; the previous review pre-dated the financial crisis, the creation of the Financial Conduct Authority (FCA) and the introduction of the soon-to-be-replaced Payment Services Directive (PSD1).

That has prompted warnings to payment and e-money institutions that they too should be able to demonstrate a high level of compliance with financial crime regulations, should authorities’ attention turn to the sector.

“There is pressure across financial services firms, driven largely in part by the FATF review, the 4th Anti-Money Laundering Directive (4th AMLD) and the ‘5th’ AMLD,” said Greg Atkins, an associate with Bovill’s financial crime team.

“Gambling sector and payment sector pressure isn’t necessarily comparable. The pressure serves as a reminder for non-traditional financial services providers that their AML and counter-terrorist financing (CTF) controls are likely to gain regulatory attention.”

Atkins said the focus on the gambling sector should also be seen in the broader context of other initiatives, including pressure on avoiding consumer detriment.

However, he suggested the action should be a “timely reminder to firms in the payments and e-money sector to question whether their systems and controls meet regulatory expectation”.

The FCA will already be scrutinising those firms’ controls as part of the ongoing reauthorisation process, demanded by the incoming revised Payment Services Directive (PSD2).

All payment and e-money firms, including those already regulated under the previous directive, are required to submit applications for reauthorisation to the authority within the next three months.

Failure to affirm their regulatory status in time would ultimately mean they will no longer be allowed to continue operating.

“Firms in the payments and e-money sectors should be mindful that their AML/CTF systems and controls — including their financial crime risk assessment — will be assessed by the FCA as part of their reauthorisation applications that they are required to submit by April 13,” said Atkins.

Although many payment firms, such as digital wallet providers, offer services to the gambling sector, the FATF inspection could also have implications for other types of fund transfer companies.

Liat Shetret, a senior advisor for financial integrity programmes at Global Center on Cooperative Security and the former director of the think tank’s New York office, said cross-border payment providers often catch the eye of authorities preparing for an evaluation.

“In all countries that are due for an evaluation or a mutual assessment, they’re busy going down a tick-box list of the regulations they ought to have in place,” she said.

“Because so many of the countries have deficiencies around the likes of non-profit organisations, money transfer services and so on, those tend to be the areas they are enforcing more on now.”

Authorities typically issue additional guidance and increase supervision visits, Shetret said.

“What that’s translating into is seen as an uptick in regulatory enforcement with money transfer services.”

Additional reporting by David Altaner

Jan 8, 2018 John Basquill

Source: PaymentsCompliance

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