The surge and growth of online gaming have led online sports betting to be a “special focus” for money laundering, according to the U.S. Department of Treasury.
The executive department highlighted these issues in the recent National Money Laundering Risk Assessment.
The report said that “particular illicit finance concerns are the emergent money laundering risks associated with sports betting, offshore sports betting, and virtual asset gambling.”
The U.S. Treasury reported that $220 billion has been legally wagered in America since PASPA was overturned in 2018. Sports betting is now legal in 38 U.S. states.
There are Anti-Money Laundering and Combating of the Financing of Terrorism compliance concerns because of sports betting operators' partnerships with land-based casinos and licenses with different states.
The department reported that operators “may not have robust AML/CFT controls,” may not be affiliated with a Bank Secrecy Act-covered casino or entity, may be unaware of BSA obligations, or have “limited visibility into potential crime” of third-party operator’s services.
This report comes just days before Super Bowl LVIII, which is set to break betting records. The American Gaming Association projected this week that nearly 68 million Americans will bet over $23 billion on Sunday’s Big Game.
Illicit activities
The U.S. Treasury’s report identified several methods and schemes in which money laundering could occur through legal sports betting sites.
One is depositing a sum of money and then withdrawing with little wagering action taking place. Another is when a group of people “collude” to make one or a series of wagers intended to hide illicit funds.
The report gave an example of a Georgia man charged with money laundering and other crimes in 2023 for misdirecting $30 million from faith-based charities and donations by depositing $1 million into an online sports betting account.
Another claim involves a New Jersey man arrested in 2021 for allegedly creating fraudulent bank accounts of stolen identity victims and transferring unemployment benefits into 1,800 online gaming accounts, later withdrawing the funds for himself.
Offshore headaches
Legal sports betting is highly regulated at the state level and still, the U.S. Treasury sees money laundering cracks in the system.
Offshore gaming, meanwhile, has been an industry the U.S. has been fighting for decades.
According to the U.S. Treasury, reports suggest that an estimated $64 billion annually is wagered by Americans with offshore operators. That makes up 40% of all money bet in the U.S.
The U.S. Treasury says there is recent evidence of Americans using offshore platforms to engage in illegal activity, including a 2023 case in which 11 defendants were charged in a $20 million tax evasion scheme involving a sports betting site located in Costa Rica.
The emergence of the crypto market and the ability to fund offshore gaming accounts through those virtual assets has created large transactional gambling firms since 2020. The ability to use virtual private networks to evade geolocation tracking has also contributed to money laundering, the U.S. Treasury reported.
