By Theocharis Georgiades, APC Sports
Money laundering describes the process by which criminals try to conceal the illicit origin of their money by making such proceeds appear to have derived from a legitimate source. A relevant United Nations study shows that about 2% to 5% of the world’s GDP is laundered every year, which is around $800 billion to $2 trillion. There are many ways that criminals use to legitimize their income, with sports betting being one of them.
First, we need to point out that there are three stages in money laundering: placement, layering and integration. The first is when illicit proceeds are placed into the financial system, the second refers to the process of disguising the audit trail of that money by moving it around, and the third concerns the appearance of that money as legal through, for example, real estate and other purchases. All of the above-described stages of money laundering may take place in the betting process.
Money launderers may attempt to use gambling as a quick and easy way to legalize their illicit income by placing that money in a legitimate gambling company. A common practice is the use of online gambling which is one of the newest and most common methods of money laundering. Individuals may open an online betting account where they enter their bank account number. They can then deposit money from various payment options, even anonymous ones such as prepaid cards, in that account. After depositing the money, the player has no or minimal betting activity and requests a refund of the money already deposited in the gambling account. As a result, the money is legitimized and can be justified, since it comes from a legitimate company and is considered as a result of betting activity.
Another way one can legitimize illegal income through sports betting is through segregation. A player chooses both bet options. This is most effective in cases where there is a binary choice. For instance, in soccer games you can bet for over 1.5 or under 1.5 goals. Put simply, you will bet $5,000 on over 1.5 and $5,000 on under 1.5. Let’s say that the game ends 1-0. That means that you will lose the $5,000 you placed on the over 1.5 goals. However, you will make at least a portion of that through your earnings from the $5,000 you placed on the under 1.5 goals. Despite sacrificing some money, the money launderer legalizes a large part of their money by justifying the profits received from the gambling company as a result of the betting activity.
It should be noted that with the rapid development of AI and machine learning, betting companies now have the ability to place certain controls and mechanisms in place to detect suspicious activity and thus mitigate the attractiveness of gambling for money launderers. Regulation of the betting industry is also becoming more rigorous right now and as a result sports betting is becoming less popular for potential money laundering activities.
For more information regarding the regulation of the betting industry in relation to money laundering and its potential use by money launderers, you can contact us at [email protected].