UK Gambling Commission warns of AML failures, rising fraud risks

The UK Gambling Commission has raised concerns over inadequate anti-money laundering (AML) practices in the betting sector, warning that operators are failing to properly scrutinize customer data and financial transactions.  

John Pierce, the Commission’s enforcement director, outlined these risks at the Gambling Anti-Money Laundering Group Training Day on Feb. 12, highlighting ineffective customer monitoring and a reliance on weak verification methods.  

The regulator said operators are not sufficiently reviewing customer risk profiles, particularly in assessing financial transactions, geographic exposure, and product risks. It also flagged an over-reliance on self-declarations and open-source information, which has created vulnerabilities in AML controls.  

Pierce criticized current AML procedures, stating that many operators fail to assess customer spending against their salary and wealth, allowing large transactions before conducting appropriate checks.  

"We expect source of funds information to be requested on a risk-based approach but, where this is done, it should not be treated as a tick-box exercise," Pierce said.  

He urged operators to adopt realistic and effective financial and non-financial thresholds for further scrutiny, ensuring proper verification and record-keeping.  

The Commission also flagged rising risks from artificial intelligence (AI) and cryptocurrency transactions. Fraudsters are increasingly using AI-generated identification documents to bypass AML checks, making it harder for financial institutions to detect fake identities. Additionally, ID farming—where criminals collect personal data to open fraudulent accounts—is becoming more prevalent.  

Mule accounts, which are used to launder illicit funds through gambling platforms, are also on the rise. The Commission expects cryptocurrency-related risks to grow as more payment providers offer crypto payment options, further complicating efforts to combat financial crime.

"As cryptocurrencies become more prevalent, we expect more payment providers to offer crypto payment facilities. Operators need to have a full understanding of the services provided by their payment providers," Pierce warned.  

Despite regulatory concerns, the UK’s online gambling sector saw strong growth in Q4 2024:  

• Online gross gambling yield rose 21% year-on-year, reaching £1.54 billion ($1.92 billion).  

• Total online bets and spins increased by 8% year-on-year to 25.9 billion.
  
•However, average monthly active player accounts declined by 3% in the same period.