The Facts About Money Laundering and Online Poker

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One of the points Sheldon Adelson and his cohorts have been trying to drive home any chance they get is how online gambling sites can be used to launder money by everyone from drug cartels to terrorists.

But is this really the case? And perhaps an even better question to ask is, does regulation increase or decrease the ability of shady characters to launder money online?

Out of context, mischaracterized, and cherry picked

It’s not that the reports Sheldon Adelson and the Coalition to Stop Internet Gambling are citing are false. It’s the way in which Adelson and company are presenting these findings that cause them to fall somewhere between misleading and dishonest.

This deceptive information is proliferated by quoting passages out of context or by adding language and implying things that the FBI report from 2013 and the recent McAfee report simply do not say – even the author of the McAfee paper has said the findings are being misrepresented.

Know Your Customer Checks require player verification

Yes, the Internet provides a certain amount of anonymity, but not from the online poker sites and regulators. In a regulated market they have to provide accurate and provable details.

To register an account in a regulated market you’ll need to prove your real identity which includes surrendering your Social Security number, along with name, date of birth and address.

Money laundering in ring-fenced markets

One of the biggest falsehoods being perpetuated is that regulated online poker will somehow lead to more money laundering.

While they have not said this in so many words, the false choice being presented by Adelson and his ilk between banning online gambling or having regulated online gambling doesn’t allow for the offshore sites that will operate either way.

There is no tangible evidence or data they can point to that demonstrates prohibition will work.

In fact, regulated markets that ring-fence their players make money laundering useless, as the players must be in the same state to even compete against one another, destroying the golden rule of money laundering – doing it internationally.

Why would I deposit on online poker site in Atlantic City (surrendering my SS number and personal details) in order to launder money to a “mule” who lives in the apartment building next to me? Wouldn’t it be easier to just go into a casino and hand it to him and pretend like he won the money there while I lost it?

Regulations require compliance with Bank Secrecy Act

In the regulated online poker industry, any large deposit or withdrawal will be reported via the Bank Secrecy Act.

Attorney Sanford Millar said as much during his testimony at the recent California online poker hearing, telling the committee, “Money laundering is not an issue for intrastate online poker…there are too many trails.”

Compliance with the Bank Secrecy Act is not an issue with illegal, international operators.

Also during that hearing, where concerns over money laundering were dismissed out of hand, Tobin Prior of Ultimate Gaming said people claiming the technology to detect money laundering and run KYC checks doesn’t work were wrong. Prior also stated that the evidence exists to prove the technology works.

So, because of the BSA and the constraints of playing at a regulated online poker room, money launderers would have to launder only a few thousand dollars at a time (while paying the vig from the poker room and paying a percentage to their “mules”) or risk having their transactions reported.

Furthermore, considering the vigorous KYC checks players must succumb to, there would be a trail as wide as Rt. 95 to follow if someone wanted to try to launder money in a regulated online poker market.

Regulated markets do not allow player-to-player transfers

There is also the matter of getting money onto an online site.

Players are no longer able to deposit six and seven-figure sums, or transfer large sums of money to another player no questions asked (in fact you can’t transfer money to any player for any reason). And with strict deposit and withdrawal limits, the amount of money that can be laundered is inconsequential.

There is simply no incentive for money launderers to choose regulated online poker to scrub their money. There are countless ways that this can be accomplished that are easier, cheaper, and leave less of a paper trail.

- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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