A recent investigation by Canada's Financial Intelligence Agency, FINTRAC, has raised concerns over the ease of money laundering through online casinos. This has led to concerns about the need to have tighter controls in place. A recent report has suggested that online casinos are being used to launder the profits from drug trafficking in Canada.
iGaming and Fentanyl Money Laundering Could be Linked
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) raised the alarm and they suspect that online casinos may be being used to launder the proceeds from fentanyl production and sales. The analsys was carried out as part of Project Guardian in a bid to combat money laundering involving illegal synthetic opioids. It suggests that the opioid crisis that has been rampant in Canada over the past number of years may be linked to the online gambling industry.
From what is being reported, it seems that known individuals involved in drug trading have been making significant deposits at online casinos and then later withdrawing the funds through different payment processors within Canada, Malta, and the UK, and disguising them as winnings. This activity masks the origins of the funds and by using legitimate payment processors as withdrawal options, it makes the transactions appear legitimate. Regulated payment processors do use AML policies, but these are not fool proof and there are unlicensed operators where these protections may not be in place.
FINTRAC Found 5,000 Suspicious Transaction Reports from 2020-2023
The findings from the FINTRAC report were based on 5,000 suspicious transactions from 2020 to 2023. These related to the distribution of fentanyl and opioid in Canada. The findings also noted that this is a well organized criminal network with chemicals and equipment being purchased from China and India. The drug products were then distributed via Vancouver and Toronto. Transactions were often facilitated using cryptocurrencies and via the darknet.
These organized crime group are sophisticated and often route payments via third countries like South Korea and Singapore. FINTRAC were able to trace these and discovered how online casino payment processors play a vital role.
In one of the examples highlighted, an individual was using a particular payment processor for money transfers. This payment processor makes online gambling deposits and withdrawals easier as it uses e-transfers to send money on behalf of the individual to and from online casinos and this allows the user to bypass any possible rejection or flagging from financial institutions. The transactions all appear as an e-transfer from the payment processor rather than from the online casino.
Online Gambling and Drug Trafficking Presents Significant Challenges
Canadian law enforcement is likely to face significant challenges as online gambling continues to grow. The global reach and the ease of access have made it a target for criminal networks to target. Being able to stop them will require cooperation from international regulators, financial institutions, and law enforcement.
The issue raised by FINTRAC is not limited to Canada and it is something that other jurisdictions also have concerns about. The use of Canadian online casinos as money laundering platforms is not new but stricter check on payment processors are going to be necessary if a reduction in money laundering is to be successful.
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