11 Anti-Money Laundering
|11.3||Proceeds of Crime Act 2002 Overview|
|11.4||Risk Based Approach|
|11.5||The Process for Reporting Potential Money-Laundering Activity|
|11.7||Operating Policies and Procedures|
|11.8||Duties under the Proceeds of Crime Act|
Licensing Objective: Preventing gambling from being associated with crime and disorder.
Operators have a responsibility to uphold the three licensing objectives set out in the Gambling Act 2005 (the Act). The first of those licensing objectives is to prevent gambling being a source of crime or disorder, being associated with crime and disorder, or being used to support crime.
All gambling operators have a responsibility to keep financial crime out of gambling. The Proceeds of Crime Act 2002 (POCA) places a legal obligation on gambling operators to be alert to attempts by customers to gamble money acquired unlawfully, either to obtain legitimate or ‘clean’ money in return (and, in doing so, attempting to disguise the criminal source of the funds) or simply using criminal proceeds to fund gambling. Both modes of operation are described as money laundering.
Operators should report instances of money laundering or attempts by customers to launder money to the National Crime Agency (the NCA) and, where appropriate consent is requested, wait for such consent to deal with a transaction or an arrangement involving the customer, or wait until a set period has elapsed before proceeding.
The Gambling Commission sets out an Ordinary Code Provision at 2.1.2 which highlights the risks for gambling companies in relation to money laundering and reads:
A second Ordinary code provision at 3.8.2 covers money lending between customers.
The Gambling Commission have published an advice document and a quick guide for gambling operators: ‘Duties and responsibilities under the Proceeds of Crime Act 2002 – Advice to operators (excluding casino operators); Third edition; November 2016’. This document relates to the original Proceeds of Crime Act 2002. The links to this document and the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 are available at the Resource Centre.
Money laundering is a process by which the proceeds of crime are converted into assets which appear to have legitimate origin (clean money/laundered money), so that they can be retained permanently as legitimate funds or recycled into further criminal enterprises. This means that potentially any employee could contravene the Proceeds of Crime Act 2002 if they were to be aware of, or suspect the existence of criminal property and continue to be involved in a matter which relates to that property without reporting their concerns.
Money Laundering is also the process of hiding illegal sources of money. The Proceeds of Crime Act 2002 (POCA); Part 7 provides for various money laundering offences. A person commits an offence if he or she:
a) conceals, disguises, converts or transfers criminal property or removes it from England and Wales or Scotland or Northern Ireland
b) enters in to or becomes concerned in an arrangement which he or she knows or suspects facilitates the acquisition, retention, use or control of criminal property
c) acquires, uses or has possession of criminal property
Money Laundering includes:
a) conspiracies (agreements between people to break the law)
b) attempts to commit these offences
c) counselling (advising someone to break the law)
d) aiding or abetting (helping), and
e) procuring (getting goods or service by illegal means).
These are serious offences that carry a maximum 14 year sentence and or an unlimited fine.
Money laundering offences can be committed by operators and their employees if they have knowledge of or a suspicion that gambling stakes are the proceeds of criminal activity.
11.3 Proceeds of Crime Act 2002
Part 8 of POCA provides the definitions for confiscation, civil recovery, detained cash, money laundering and exploitation proceeds investigations. It also provides for the investigative powers to conduct these investigations, including the powers to obtain production orders, search and seizure warrants, disclosure orders, customer information orders and account monitoring orders. Only an appropriate officer (for example, a police officer) may make applications for these investigative tools to a court. Applications for orders in civil recovery, detained cash, and exploitation proceeds investigations must be made to the High Court. All other applications may be made to the Crown Court. Powers of entry are provided under search and seizure warrants and under production orders in limited circumstances.
11.4 Risk Based Approach
Operators need to identify and assess the risk of money laundering to their business.
A risk-based approach involves a number of discrete steps to assess the most proportionate way to manage and mitigate the risks faced by the operator. These steps should include:
a) identifying the money laundering risks that are relevant to the operator
b) designing and implementing policies and procedures to manage and mitigate the assessed risks
c) monitoring and improving the effective operation of these controls
d) recording what has been done, and why.
In all but one area of the business the risk level was seen to be low or very low. The area where this had moved up to a medium risk was Ticket In Ticket Out (TITO) gaming machines and Automatic Ticket Redemption (ATR) which are machines that exchange TITO tickets for cash. There is also some risk in change machines with note acceptors where staff are trained to look out for dyed notes which would be marked as a consequence of robbery.
Suspicious activity may take the form of large amounts of cash being deposited, but then
withdrawn through a TITO machine after no or low levels of play. This would be done in order to get a legitimate ticket from the gaming machine for redemption through the ATR.
Indicators of problem gambling activity could be a customer making large deposits and continuing to gamble over a large period of time without breaks until all, or most of the funds are spent.
In these two cases above, the player behaviour could indicate either money laundering or problem gambling.
11.5 The Process for Reporting Potential Money Laundering Activity
The company should appoint a Designated Money Laundering Officer (MLO) also known as a nominated officer.
Staff should be trained on the requirements of the regulations and will need to report any suspicious cash transactions over a pre-determined amount to the Duty Manager.
The Duty Manager will assess the situation, involve their line manager and compliance officer (if not the MLO), complete an incident report and then report it to the MLO.
The MLO will then decide whether to pass on the information to the National Crime Agency (NCA) and will be responsible for the internal disclosure.
When this has been done the local management cannot be prosecuted for the principal offences under POCA, as the decision whether or not to report to NCA is the sole responsibility of the nominated officer.
Suspicious Activity Reports (SARs) – Disclosures under POCA of known or suspected money laundering activity must be made in the prescribed manner and form. In this regard, the operator or operator’s nominated officer (where one has been appointed) must disclose to the NCA any transaction or activity that, as a result of undertaking an evaluation, the nominated office knows or suspects may be linked to money laundering. The prescribed form for the making of a disclosure to the NCA is known as a SAR. Such reports must be made as soon as is reasonably practicable after the evaluation information comes to the operator or nominated officer. NCA’s preferred method for operators to submit their SARs is the NCA Suspicious Activity Report Form.
Operators should also supply the Gambling Commission with the URN (unique reference number) given to the SAR by the NCA, as the Commission has access to the United Kingdom Financial Intelligence Unit (UKFI) database.
Operators should ensure systems are in place to cover all part-time or casual employees.
Operators should train their staff on the POCA legislation, identifying the signs of money laundering and how to report on and record any known or suspected money-laundering activity.
Where a nominated officer has been appointed, they should be actively involved in formulating and managing the delivery of the training, taking particular care to ensure that systems are in place to cover all part-time or casual employees.
11.7 Operating Policies and Procedures
The operating policies and procedures for monitoring money laundering cash transactions may include policies in relation to:
a) Large amounts of cash banked in machines but withdrawn without play including gaming machine TITO (ticket in ticket out) transactions
b) Large deposits and play patterns on electronic bingo terminals (EBTs) including large amounts of cash left on the system
c) Customers bringing large amounts of coins into the club or high denominations of notes i.e. £50 notes
d) Significant exchange of one set of bank notes for other bank notes
e) A customer gambling large amounts and finding it acceptable to lose
f) Customers requesting receipts for winnings
g) Customers attempting to sell goods in the clubs
h) Transactions over €2000 (about £1,600).
11.8 Duties Under The Proceeds of Crime Act 2002
POCA imposes duties on all operators to:
a) disclose instances where operators know or suspect that another person is engaged in money laundering
b) and make disclosures in the prescribed form and manner
c) and obtain appropriate consent to do a prohibited act, where appropriate.
If a person carries out any action falling under the principal offences (see C6.4.3), then failure to make a disclosure to the NCA prior to carrying out the action can result in a criminal offence which can be committed by any employee of the operator. The employee does not commit any of these offences if a proper disclosure is made and, where applicable, appropriate consent is obtained from the NCA. Consent is referred to by the NCA as ‘requesting a defence’ from the NCA under POCA.
- Operators should have a system clearly setting out the requirements for making a disclosure. This system could include:
a) the circumstances in which a disclosure is likely to be required
b) how and when information is to be provided to the person responsible for making reports to the NCA
c) resources which can be used to resolve difficult issues regarding a disclosure
d) how and when a disclosure is to be made to the NCA
e) how employees can manage a customer when a disclosure has been made and consent is awaited
f) the need to be alert to circumstances which could lead to charges of prejudicing an investigation.
- General Managers should involve their line management and compliance department, where they believe a disclosure is required. In most organisations there will be a ‘nominated officer’ and he will be responsible for the ‘internal disclosure’. When this has been done the local management cannot be prosecuted for the principal offences under POCA, as the decision whether to report or not to report to NCA and request appropriate consent is the sole responsibility of the nominated officer.
- Operators with chains of outlets may have an employee who holds a Personal Management Licence issued by the Commission, who would be suitable to appoint as the nominated officer for that chain. In the case of small or solo operators, a person of reasonable standing in the business can act as the nominated officer.
- Where the operator does not formally appoint a nominated officer, it is still advisable for a manager to take particular responsibility for complying with the operator’s obligations under POCA.
- The nominated officer should receive all disclosures from employees and review them with a view to making a decision on whether to make a disclosure. Where necessary, the nominated officer must make the required disclosure to the NCA as soon as practicable after the information has come to him or her.
- It is important to note, however, that the position of a nominated officer brings with it responsibilities and associated offences, if he or she fails to take the required action, even though the operator may be outside the regulated sector.
- The roles of a nominated officer are detailed in the Duties and responsibilities under the Proceeds of Crime Act 2002 advice to operators (excluding casino operators) Fourth edition October 2017 (see link in 6.12).
- Suspicious activity reports (SARs) – Disclosures under POCA of known or suspected money laundering activity must be made in the prescribed manner and form. In this regard, the operator or operator’s nominated officer (where one has been appointed) must disclose to the NCA any transaction or activity that, after his or her evaluation, he or she knows or suspects may be linked to money laundering. The prescribed form for the making of a disclosure to the NCA is a SAR. Such reports must be made as soon as is reasonably practicable after the information comes to the operator or nominated officer. NCA’s preferred method for operators to submit their SARs is through the NCA SRA online system.
Licence Condition 15.2.1
Reporting key events and other reportable events
A key event is an event that could have a significant impact on the nature or structure of a licensee’s business. Licensees must notify the Commission, or ensure the Commission is notified, in such form or manner as the Commission may from time to time specify, of the occurrence of any of the following key events as soon as reasonably practicable and in any event within five working days of the licensee becoming aware of the event’s occurrence.
(Extract from licence condition; item 24)
- The making of a disclosure pursuant to section 330, 331, 332 or 338 of the Proceeds of Crime Act 2002 or section 19, 20, 21, 21ZA, 21ZB or 21A of the Terrorism Act 2000 (a suspicious activity report): the licensee should inform the Commission of the unique reference number issued by the United Kingdom Financial Intelligence Unit of the National Crime Agency in respect of each disclosure and for the purposes of this key event the five working day period referred to above runs from the licensee’s receipt of the unique reference number.