Money laundering (ML) and funding of terrorism (FT) threaten the integrity of the financial sector and the broader economy, both locally and globally. Unfortunately, these threats are aggravated by the increased means at criminals’ fingertips and the continuous dynamicity of technology.
In itself, money laundering refers to the process of concealing the source of funds obtained from illegal activity within the financial system. Law and regulations are typically introduced to ensure any money gained through illicit or unethical practised are detected, thus effectively combatting the practice.
In 2017, the Malta Gaming Authority (MGA) and Financial Intelligence Unit (FIAU) jointly published a consultation document on the application of anti-money laundering and combating the funding of terrorism requirements to gaming operators, particularly those who hold a licence to operate games of chance and skill via means of distance communication (licensees).
The consultation document provides a general explanation of AML/CFT obligations, as well as a general outline of how licensees will be expected to comply with these obligations.
Malta Anti-Money Laundering (AML) - Compliance for Online Gaming Companies
Over the past thirteen years, Malta has seen an advancement in the online gaming sector. The industry has evolved in both size and complexity, inevitably rendering it a potential means for criminals to launder their funds. Upon the enactment of the Malta Gaming Act in 2018, the MGA, sets out certain licence conditions to counter this threat when issuing a remote gaming licence.
These conditions go on to include;
• The appointment of a Money Laundering Reporting Officer and a Key Official, as well as;
• Requirements for procedures to be in place, covering Know Your Customer, Anti-Money Laundering and Payout Management.
Such measures are, in turn, supported by a robust legal framework to combat ML and FT. Under the current scenario, only Casino licensees are considered as subject persons. However, this is bound to change upon the adoption of the 4th EU AML Directive (4AMLD).
The 4th EU Anti Money Laundering (AML) Directive: How it affects the Gaming Industry
The directive prompts the reinforcement of the EU’s existing rules on AML and combating of FT.
1. Enhanced Customer Due Diligence (CDD)
• The 4th EU AML Directive cracks down on the customer due diligence carried out for transactions of €2,000 or more. This is regardless of whether such transactions were carried out in a single transaction, or in a series of transactions that appear to be linked. The present threshold is presently pegged at €2,330 at the time a player withdraws funds. The €2,000 limit will go on to apply at an earlier stage, when players wager strakes. While obliged entities are already required to retain CDD (and other records) for a minimum period of 5 years from the termination of a business relationship, the 4AMLD vests Member States with the capacity of extending this period by a further 5 years upon transposing the directive into local legislation. Record retention requirements, moreover, are enhanced to cover areas like results of sanction screening and categorisation of customers based on their AML risks.
2. Risk Assessment
• The Directive now requires obliged entities to carry out a risk assessment that considers risk factors such as countries, customers, geographic areas, services, transactions and delivery channels. This risk assessment shall be documented, kept up-to-date and made available to regulatory bodies. Approved lists will no longer apply to the determination of higher risk jurisdictions. Nowadays, obliged entities must carry out their own risk assessment for non-EU countries. Procedures for risk assessments and the assessments themselves must be duly documented.
3. Politically Exposed Persons (PEPs)
• While there are already some rigorous requirements already in place for PEPs, the Directive widens the definition of a PEP to include domestic PEPs in addition to foreign PEPs. PEPs often connote a higher risk of ML instances and, therefore, enhanced CDD measures must be applied. Obliged entities, additionally, must continue to apply these enhanced measures for PEPs for 18 months, even after the individual has vacated his officers.
Our Gaming & Anti Money Laundering (AML) Services
The iGaming Unit at Chetcuti Cauchi can guide you in understanding the requirements imposed by the Malta Lotteries and Gaming Authority and the relevant laws and in adhering to these obligations in practice, namely by offering advice as to the manner in which anti-money laundering procedures should be implemented by the Malta remote gaming licensee in consideration of the class of licence and the mode of business being carried out.
Our Malta Anti-Money Laundering Advisory Services include assisting you with the drafting of the documentation relating to anti-money laundering, which documentation needs to be submitted to the Malta Lotteries and Gaming Authority for approval, including drafting of the required documentation outlining the rules which must be adhered to by customers of the Malta remote gaming licensee when making use of the gaming services being provided. These rules constitute the anti-money laundering policy which is to be integrated with the terms and conditions which all customers must abide by.
On a general note, Chetcuti Cauchi, through its Malta Anti-Money Laundering Advisory Services, shall guide you through the execution of these anti-money laundering processes not only during the Malta remote gaming license application stages but also during the implementation stages when the Malta remote gaming licence is granted and the operation has gone live.
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