The proposed fourth anti-money laundering directive (the ‘4th Directive’) – the GBGA’s view


EGBA_Outubro 2013...

Peter Howitt
Chief Executive,
Gibraltar Betting and
Gaming Association



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Gibraltar’s online gambling operators are currently subject to specific anti-money laundering (AML) guidance, that deals with the risks arising within the online gaming sector. Under the proposed Directive, currently being debated in the European Parliament, the industry will now be directly subject to AML legislation as a result of a specific extension to the entire gambling sector in the 4th Directive.

The principle concerns of operators are the multi-jurisdictional issues which arise considering the inherent cross-border nature of the online gambling sector. The Directive should aim to achieve consistency and ease of compliance for proper lawful business practices across the EU. However, based on previous AML experience, it appears that operators are still going to be left with the task of deciphering the law in each member state and to comply with very different regimes once the new Directive will have been implemented.

Under established AML principles, usually the AML law of the home member state where an operator is based applies to its activities, but in as many as 9 member states, the AML provisions of  the country where the customer is located may also be applicable. Sometimes, this is also the case for operators who have local agents, group companies and even commercial partners. This will undoubtedly increase the confusion to which foreign financial investigation unit the reporting should be done.

In addition, the checks necessary for Politically Exposed Persons (PEPs) are also a major issue where customers are based in multiple territories as checks for local, foreign or international political exposure must be undertaken. Crucially, and frustratingly, it is rarely made obvious which law applies and accepted practice is often not published or known outside of banking and similar services. The consequent compliance costs of managing AML requirements in a fragmented field are disproportionately high.

3The GBGA is advocating that gambling operators and associations ensure that the industry lobbies effectively for tailored national and supra-national risk based approaches relating to online gambling. It is key that this is done or the industry will again suffer with unclear parameters for complying with AML laws. The necessity for change to the 4th Directive is even more apparent when there is no obvious supra-national body for gambling unlike say banking and electronic money (where the EBA will be responsible). This deficit in the Directive is likely to lead to sectoral discrimination, a lack of coherence in dealing with cross-border conflicts and policy rather than risk based transposition and enforcement. These concerns can already be evidenced by the stricter limits for due diligence suggested to be applied for gambling services (€2000 threshold proposed in the draft 4th Directive) and its wording about increased risk of money laundering from gambling. It is ironic that in a Directive that purports to move to an evidence driven risk based approach to AML there is such striking language that is not supported by any evidence of increased risk.

The 4th Directive goes some way to move away from the ‘tick-box’ approach which was difficult to apply to the online gambling sector and did not achieve the aims of the legislation. However, there has been no attempt to ensure that AML legislation EU wide is consistent and easily applied. Operators will not be in a position to easily, and properly, assess what is required of them in each member state. Essentially, the 4th Directive means that with the risk-based approach expected, states are left with considerable leeway to formulate AML law. In turn operators also have leeway in formulating policies that comply with national law which it takes into account that there are certain transactions where the risk of money laundering is limited and others where there are enhanced risks. However, the potential for significant differences in the AML law of each member state remains.

The addition of online gambling to the 4th Directive without greater consideration of cross-border coherence suggests that more work is required to ensure that with increased obligations for the online gaming industry there are also increased rights (including of representation). It is imperative that there is more clarity on cross-border issues and coherence of dialogue and co-operation between the industry and the various supervising authorities, as there is a high risk that courts will not wish to intervene where a member state declares that legal preventative action against operators is necessary based on AML, even if such action is not risk driven or evidence based. A supra-national authority responsible for the gambling sector is therefore a must have.

Fonte: EGBA

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