Red flags & risk factors: Isle of Man's study reveals dark side of online gambling
A new report released by the Isle of Man Financial Intelligence Unit (FIU) outlines typologies, red flags, and actionable insights associated with the misuse of online gambling platforms for money laundering (ML), terrorist financing (TF) and proliferation financing (PF). The report aligns with international standards, particularly those set out in FATF Recommendation 29.
Report aims to mitigate financial risks
The aim of the report is to help industry stakeholders detect and mitigate financial risks associated with online gambling platforms. It stresses the need for continuous monitoring and due diligence required to tackle the misuse of such platforms. This is especially important when dealing with clients or transactions involving high-risk jurisdictions.
Contributing approximately 14 percent of the island’s GDP, online gambling isn’t just a pastime on the Isle of Man. The sector employs a significant workforce and attracts global operators due to its favorable yet tightly regulated environment. Licences under the Online Gambling Regulation Act 2001 (OGRA), operators need to follow the AML and CFT obligations. These obligations are to be met depending on the operator’s licensing model – ranging from full to sub-licences, and software supplier roles.
‘Cash in, cash out’
The FIU’s report outlines how criminals are exploiting the gambling system. Several methods are outlined in the report that show how criminals exploit anonymity, speed, and international nature of online platforms. At the core of many money laundering strategies lies the ‘cash in, cash out’ technique. This involves depositing illicit funds into gambling accounts, placing minimal or no bets, and withdrawing the funds—now seemingly ‘clean’. This method enables dirty money to flow undetected through legitimate financial channels. Other methods include parallel betting by colluding actors, chip dumping in P2P games and misuse of fake identities.
In related news, Seow Gim Shen, director of the Isle of Man-based gaming software firm Metagrow Solutions Limited, has been banned from holding any role in the island’s gambling sector. , the Isle of Man Gambling Supervision Commission (GSC) announced that it found Seow to “lack integrity” and ruled he is not a fit and proper person to be involved in any key position within an online gaming company.
Last year, in October, a responsible gambling survey from the Isle of Man Gambling Supervision Commission (GSC) revealed notable progress by operators in blocking underage gambling attempts. Covering the period from 1 January to 31 December 2023, the survey was distributed to 35 OGRA-licenced operators, with 33 respondents detailing their responsible gambling practices and their proactive interventions in line with GSC’s strict RG guidelines.
