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THE RISKS, PREVENTIVE MEASURES AND OPERATIONAL ACTIONS FROM THE PERSPECTIVE OF A NATIONAL LOTTERY

THE RISKS, PREVENTIVE MEASURES AND OPERATIONAL ACTIONS FROM THE PERSPECTIVE OF A NATIONAL LOTTERY EUROPEAN COUNCIL 11 DECEMBER 2012. OBLIGATIONS OF A LOTTERY OPERATOR: vigilance. LAND BASED NETWORK. Identifying and recording big prize winners Keeping a register of winners.

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THE RISKS, PREVENTIVE MEASURES AND OPERATIONAL ACTIONS FROM THE PERSPECTIVE OF A NATIONAL LOTTERY

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  1. THE RISKS, PREVENTIVE MEASURES AND OPERATIONAL ACTIONS FROM THE PERSPECTIVE OF A NATIONAL LOTTERY EUROPEAN COUNCIL 11 DECEMBER 2012

  2. OBLIGATIONS OF A LOTTERY OPERATOR: vigilance LAND BASED NETWORK Identifying and recording big prize winners Keeping a register of winners Training staff in anti-money laundering obligations Assessment and management of money laundering and terrorism financing risks Checking the exact identity of online gaming customers Detection of atypical gaming events/behaviour and opening of files ONLINE GAMING Breaking off commercial relations in the event of non-identification of customers In-depth review of all complex transactions and possible blocking of financial transfers Submission of suspicious transaction report files to the national financial intelligence unit

  3. Process

  4. Context: Fight against money laundering Characteristics of gaming offers

  5. COMBATING MONEY LAUNDERING IN A LAND BASED NETWORK

  6. What are the risks?

  7. Vigilance: What methods? Analysis of the winner files Recurrent winnings and analysis of stakes by a supervisory and control body Supervision and control of point of sale activity Use of information ‘from the ground’ -Alarms -Blocks Supervisory service files providing information and detailing stake trends FIGHT AGAINST MONEY LAUNDERING Inspection of the network

  8. What are the difficulties and what are the solutions? • Monitoring of retailers’ activity by the operator (monitoring, control and inspection) • Direct collaboration with government services in the event of doubt in order to firmly establish players’ identity • Organisation enabling this collaboration to work effectively: State monopoly • Retailer’s intermediary role • Knowledge of the player and the bet amounts • ( Know Your Winner)

  9. Case of detection and suspicion of money laundering: why the monopoly is important Analysis of the operator’s winners’ file Olivier F is flagged as a recurrent winner of large amounts in the Marseille area The winnings collected by Mr F result from large stakes placed over seven months in 2012 in nine sports betting outlets in Marseille and the surrounding area Significant winnings (>€1 million) paid in through a large number of cheques and transfers (several dozen) are recorded in the name of Olivier F, a 36-year-old Marseille resident. It is possible to analyse all his winnings from sports bets (>€1 million) because there is only one operator in France offering and paying out on sports betting. This means that a suspicious transaction report can be filed. This is done by the operator.

  10. Case of detection and suspicion of money laundering: case where a number of different operators exist Analysis of the operator’s winners’ file Olivier F is not flagged as a recurrent winner, because he has collected his winnings through a number of different operators The winnings collected by Mr F result from large stakes but have not been detected because they are divided between a number of establishments belonging to a number of operators Detecting the recurrent winnings and revealing the large stakes bet by the player are not possible because the bets are placed and the winnings paid through a number of different operators

  11. COMBATING MONEY LAUNDERING IN ON LINE GAMING

  12. What are the risks?

  13. Vigilance: how is monitoring carried out?

  14. What are the difficulties and what are the solutions? • Identity theft with or without the use of forged documents • Integration of cash through prepaid cards • Use of a number of accounts by accomplices within operator-imposed limits • - Pay out rate, an important consideration for money laundering, particularly in live betting • Banning or increased monitoring of prepaid cards • Analysis of the IP addresses used • Control of bank and identity documents: limits on copy-based work and problem of bank account detail slips, which are not official documents • Limit pay out rates and control their use

  15. Example no.1: using accounts opened by accomplices makes it possible to circumvent limits and facilitates money laundering

  16. Example no. 2: using forged identity and bank documents facilitates money laundering Forging of identity documents Forging of bank account detail slips Different typography; name changed, identity theft and possibility of opening a number of player accounts Different typography; the account does not belong to the person in question.

  17. Example no. 3: using a convenience account and prepaid cards facilitates money laundering A 73-year-old woman bets large amounts of money in poker games (several tens of thousands of euros) having paid €40,000 into her account over a period of a few months, using only prepaid cards. Pseudonym used: ruse1 Analysis of the gaming activities, the postal and IP connexion addresses and the deposits reveal that the account is used by other members of the same family who have set up a money laundering system.

  18. Conclusion (1/2) • In a Land Based Network: The duty of vigilance must take into account constraints linked to the retailer’s intermediary role and the difficulty of obtaining reliable knowledge about players. The key factors determining the success of the fight against money laundering are: • Perfect coordination between a responsible operator, the specialised criminal investigation units and the financial intelligence units • Recording winners with an identity card above a certain limit is an indispensable pre-condition • The principle of a single physical network operator to prevent the dispersion of amounts to be laundered by a player or a criminal organisation

  19. Conclusion (2/2) • On Line: The duty of vigilance must be applied taking into account the fact that the relationship is a remote one: • Real risk of forgery of identity and bank documents • Stake limits can be circumvented by using a number of accounts (for example in the organisation of a criminal network) => strict checks on the customer’s registration history • Prepaid cards make it easier to inject cash for laundering The implementation of an effective control system to fully control these three risks requires appropriate technical, human and legal resources.

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