Money Laundering: A Gamble Not Worth Taking

Money Laundering

By Niall Hearty, Rahman Ravelli Partner 

Gambling and risk go hand in hand. Yet the gambling giant 888 has paid a heavy price for its own risk taking.

888, which took over William Hill last year in a £2 billion deal, has seen its chief executive Itai Pazner resign in the wake of the company discovering failings in its anti-money laundering processes. Perhaps even more significant for 888 is that the news breaking of the money laundering risks it was running was followed by a 27% drop in the value of its shares.

For a company that makes its profits through gambling, it appears to be paying a heavy price for taking a chance when it comes to money laundering.

But the current plight of 888 is far from unique. If anything, it is a high-profile reminder to all businesses of the importance of having robust anti-money laundering processes in place. 

In the UK, gambling firms and all other companies that provide financial services are subject to the Proceeds of Crime Act (POCA) – they are regulated. They must also comply with the directives and regulations of the global money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF) and (depending where they are based or trade) the European Union. 

Such compliance makes it necessary for regulated companies to have in place well-devised programmes for assessing whether any money coming into the business may be the proceeds of crime. Such programmes have to be more than a box ticking exercise. They have to be operated properly by trained staff, who are fully aware of their obligations, and revised when the need arises. 

Introducing such a programme with the simple intention of being seen to jump through the required hoops will not be enough. Regulated companies are subject to a comprehensive range of obligations – and are scrutinised to ensure they comply with them. Without wanting this article to become one huge list, it is worth stating that FATF has identified nine ways in which gambling companies are vulnerable to money laundering; from accepting cash payments and identity fraud through to the use of third parties. Some – but not all of these – will apply to other regulated businesses, as there is always a risk that a company accepting payments is receiving money that derives from crime.

888’s current situation is an indicator of what can happen if a company is not alert to those risks and doing all it can to tackle them. It is worth pointing out that the company was fined £9.4 million less than a year ago for money laundering and social responsibility failings. And in the same year, the UK government reviewed its anti-money laundering regime. It concluded that more needed to be done, including the possibility of placing additional obligations on regulated companies and enhancing the supervision of them.

The fact that the UK government is looking to further toughen its approach to money laundering should be more than enough of a prompt for companies to make sure their anti-money laundering procedures are up to the task and being operated properly. Those firms that fail to do this will be odds-on favourites to face enforcement action and the unwanted financial and reputational fall-out that can follow.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.