European Commission Supranational Risk Assessment Report 2022: What you need to know

On October 27, 2022, the European Commission published its report onsupranational risk assessment (SNRA) for the European Parliament and the Council on the “risk of money laundering (ML) and terrorist financing (FT) affecting the internal market and linked to cross-border activities. The findings and recommendations of this report indicate that the online gambling sector is a high-risk area when it comes to combating money laundering (AML) and the financing of terrorism (FT).

Composed of two documents, the report and a staff working document detailed, the NARS assessment analyzes the risks of money laundering and terrorist financing and recommends a comprehensive action plan to address them. The report also examines “sectors or products for which relevant changes have been detected. »

This report is the third of its kind, the Commission having published a first NARS report in 2017 then the second in 2019 in application respectively of 4th and 5th anti-money laundering guidelines.

Risk of money laundering and terrorist financing linked to online games

After recalculating the risk levels of various groups of products and activities, the NARS 2022 report reclassified the ML/FT risk for online gambling of level 3 (important, with a high risk) to level 4 (very important, with a very high risk). According to the Commission, this is mainly due to “the non-face-to-face element and the huge and complex volumes of transactions and financial flows. The possible use of virtual currencies and e-money as well as the rise of unlicensed online gambling sites increase this risk.

To mitigate the latter, the working paper calls for better cooperation between competent authorities to better understand the risk factors inherent in online gambling and provide effective guidance. Member States are also invited to strengthen the customer due diligence obligations and increase the number and quality of Suspicious Transaction Reports (STRs).

The working document also lists the following “risk scenarios” related to online gambling:

  • A criminal uses gambling sites to deposit illegal funds and then demands payment of winnings or unplayed balance.
  • Legitimate online gambling accounts are credited with illicit funds and tracked with gambling activity on only a small portion of the funds. The remaining funds are then transferred to another player who cashes them out as if they were legitimate winnings.
  • Criminal organizations use multiple “smurfs” to bet against each other using illicit funds. One of the “smurfs” will receive all funds as a front winner and then cash out the funds as if they were believable gambling winnings.
  • Criminal organizations can also invent and bet on fictitious matches or events to ensure winnings.

The compliance team should analyze the risk scenarios highlighted by the working group and consider configuring their set of rules accordingly to prevent and detect AML/CFT risks related to online gambling.

Recommendations to Member States

Following the Commission’s recommendations from the 2019 NARS report, the report also provides an updated list of guidelines for Member States, including:

  • Keep national risk assessments up to date, ensuring that they cover all relevant risks and include appropriate mitigation measures.
  • Fully implement the provisions set out in the Anti-Money Laundering Directive relating to the registers of the beneficial ownership.
  • Ensure that AML/CFT supervisors and FIU cells have the appropriate resources to fulfill their mission.
  • Carry out on-site inspections that are proportionate, in terms of frequency and intensity, to the ML/FT risks identified for the non-financial sector. Member States should ensure that their competent authorities carry out sufficient spot checks, in particular of dealers in high-value securities, real estate professionals and antique dealers.
  • Extend the list of obligated entities to all crypto-asset service providers, as recommended by the Financial Action Task Force (FATF).
  • Ensure that the rules of customer care are not bypassed.
  • Engage in close and ongoing cooperation between competent AML/CFT authorities, FIU units, law enforcement agencies and the private sector.
  • Provide unique and continuous training to obligated entities.
  • The Commission will continue to monitor the application of its recommendations and will publish an updated report by 2024 in the light of any changes that may be introduced in the current EU regulatory framework.

The Compliance team must inform itself of any updates to the current legal framework for the fight against money laundering and the AML/CFT action plan. These updates are to flow from the Expert Group Meeting on Money Laundering and Terrorist Financing that took place on November 24, 2022. The draft agenda published before the meeting must also mention the points of information concerning the use of public-private partnerships and the consolidation of a list of politically exposed persons (PEPs).

Originally posted December 2, 2022, updated December 2, 2022