FATF puts its online gambling laundering fix in member governments' licensing rules

The red flag is where a bank's money goes. Emily Griffin of Moody's describes a customer who moves relatively small sums to an online betting site and then repeatedly moves much larger amounts from the platform back into the bank account ^[10]. There is no dollar threshold in it. "I think banks need to see their role as recognizing money going out," Griffin said ^[9]. A majority of US states have legalised online sports betting over the last eight years ^[6], which is at least 26 of 50 at roughly three states a year ^[15], and every winning bettor in those states produces the same shape on a statement.

Licensing and registration rules to stop criminals controlling gambling operations, and closer international cooperation, are things a government does to the operators; the third item asks members to consider public-private partnerships for information sharing ^[4]. None of the three puts an obligation on a bank ^[16]. FATF was founded in 1989 at the G7's initiative and has roughly 40 members, including the United States, the European Commission and China ^[5].

Griffin said compliance departments have traditionally looked at gambling from the standpoint of whether the transactions themselves are legal, for instance whether the bettor lives in a state where gambling is authorised ^[14]. That check is a lookup against an address. Working out whether an inbound transfer from a sportsbook is winnings or someone else's money is a person reading statements, and Griffin said criminals are funding accounts from multiple sources including Zelle, Venmo and Apple Cash to obfuscate where the money came from ^[8]. Neither the advisory as reported nor Moody's attaches a cost to that labour ^[17]. "Is the person just a fantastic bettor who's winning all their bets, or is it that, 'Hey, he's also putting money in from other places ... and having it look like it is a winning when it's really not?'" Griffin said ^[11].

Prediction markets serve a similar function to sports betting sites for many users and are perhaps more vulnerable to market manipulation ^[12]. "That area is growing so quickly that the regulation, and then also the expertise to enforce any kind of regulation is still slow to catch up," Griffin said ^[13].

My read is that for a bank the usable content here is a typology, adopted by a monitoring team at whatever pace its model risk process allows, while the enforceable half waits on roughly 40 jurisdictions rewriting licensing law ^[5][4]. The counter-reading is in the advisory's own sentence: "The illegal gambling market rivals or even exceeds the legal market in some countries and continues to proliferate, attracting players through promotions and greater levels of confidentiality" ^[7]. An offshore operator that never applies for a licence is untouched by licensing, and the deposit account is the only place its flows meet a regulated firm. So the burden lands on banks by default. The read fails if a supervisor cites the 13-page advisory in an examination before any member changes a law ^[1].