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The UK Gambling Commission Sounds Alarm on AI and Crypto Threats to AML Compliance

uk gambling commission aml gambling crypto

The UK Gambling Commission has raised serious concerns about the adequacy of anti-money laundering (AML) compliance within the gambling industry. Speaking at the Gambling Anti-Money Laundering Group Training Day, John Pierce, the Commission’s enforcement director, warned that operators are failing to scrutinize customer data properly. He emphasized the need for a more thorough approach to reviewing customer profiles, ensuring that AML risk assessments account for all relevant factors, including transactional activity, geographic location, and product risk.

Pierce highlighted that some gambling firms rely too heavily on self-declared financial information and open-source data, leading to significant lapses in monitoring irregular spending patterns. He also noted instances where large transactions were processed without undergoing appropriate AML reviews.

“Operators should also consider setting realistic and effective monetary and non-monetary thresholds and triggers for determining when further information should be sought from customers, as well as seeking such conversations earlier on in the customer relationship,” Pierce stated.

A key concern is that some operators are not following their internal protocols when verifying the source of funds. He stressed that source of funds (SOF) checks must be conducted based on a risk-based approach rather than treated as a mere formality.

Pierce also highlighted two evolving threats to AML compliance: the rise of artificial intelligence (AI) in document forgery and the increasing use of cryptocurrency for transactions. He explained that there has been an uptick in cases where customers use AI-generated fake documents to bypass identity verification and source-of-funds checks. Furthermore, ID farming—where personal data is stolen and used to create fraudulent bank and gambling accounts—is becoming more sophisticated.

Another significant concern is the growing use of mule accounts, which enable criminals to move illicit funds through gambling platforms. The Gambling Commission has observed an increase in operators unknowingly facilitating money laundering through these accounts.

“As cryptocurrencies become more prevalent, we expect more payment providers to offer crypto payment facilities,” Pierce said. “Operators need to have a full understanding of the services provided by their payment providers.”

He urged operators to strengthen their due diligence when assessing payment providers and to implement robust policies that mitigate the risks associated with crypto transactions.

The Gambling Commission’s Financial Risk Checks Pilot

To further enhance AML enforcement, the Gambling Commission has been conducting a pilot program focusing on financial risk assessments for online gambling. This initiative aims to integrate frictionless financial risk checks into existing AML frameworks, leveraging historical credit data to assess customer risk profiles without causing significant disruptions.

The pilot program is being tested against four key criteria:

Evaluating how many high-spending customers can be assessed without interrupting their gambling activities.
Measuring the speed and efficiency of credit reference agencies in delivering assessments.
Assessing the relevance and accuracy of financial data in identifying AML risks.
Determining how seamlessly these assessments can be integrated into operators’ existing compliance workflows.

The Commission aims to complete the pilot by April 2025, with findings expected to influence future AML policy frameworks within the industry.

In a parallel effort, several major UK banks have aligned with the Gambling Commission’s initiative to address gambling-related financial harm. Barclays, first direct, HSBC UK, Monzo, Starling, Virgin Money, and Nationwide have all joined the Money and Mental Health Policy Institute’s Gambling Harms Action Lab. This innovation program is designed to develop tools and strategies to protect individuals from the financial risks associated with problem gambling.

The initiative, funded through a regulatory settlement approved by the Gambling Commission, will run for 18 months. It aims to address key challenges in providing better support for individuals affected by gambling-related financial issues. The program is expected to yield new policies and tools that can be implemented across the financial and gambling sectors to enhance consumer protection.

Conclusion: Strengthening AML Measures in a Changing Landscape

The gambling industry is facing increasing scrutiny as AI and cryptocurrency reshape the landscape of financial crime. With regulators warning about the inadequacy of existing AML measures, gambling operators must take proactive steps to enhance their compliance frameworks. Strengthening customer due diligence, improving SOF checks, and closely monitoring the evolving risks associated with AI and crypto payments are crucial in meeting regulatory expectations.

As the Gambling Commission continues its pilot program on financial risk assessments, industry stakeholders must adapt to a more rigorous compliance environment. The involvement of major UK banks in tackling gambling-related financial harm further underscores the need for a multi-stakeholder approach to protecting consumers and preventing financial crime.