Internet, Casinos and Money Laundering
| DOI | https://doi.org/10.1108/eb027180 |
| Date | 01 April 1998 |
| Published date | 01 April 1998 |
| Pages | 134-147 |
| Author | Anthony Cabot,Joseph Kelly |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control —
Vol.
2 No. 2
Internet, Casinos and Money Laundering
Anthony Cabot and Joseph Kelly
Money laundering, casinos and the Internet may
become unavoidably intertwined in the next
decade. Money laundering is the process by which
criminals transform the money that they receive
from criminal activities into funds that appear to
have been generated by lawful means and cannot
be traced by law enforcement to their illicit
sources. While the magnitude of money laundering
is unknown, law enforcement authorities estimate
that it consists of
an
annual $100bn-$300bn in US
currency,1 and a rough estimate of an 'annual
worldwide ... range of
$300
to $500 billion'.2
Money laundering involves three steps.3 The
first is placement, which involves changing the
form of the funds into a less suspicious, more
easily manipulated form. Placement is the most
well-known phase of money laundering. Crimi-
nals, particularly drug dealers, tend to accumulate
their money in smaller denominations as the pro-
ceeds of their criminal activities such as the sale of
drugs to customers. These funds tend to be bulky
and difficult to transport. Therefore, methods need
to be devised to convert the smaller bills into
larger bills, bank cheques, money orders, traveller's
cheques, or some other form of
cash
equivalent.
The next step is to layer the funds. Layering is
the method by which criminals distance them-
selves from the converted funds. The idea is to
provide a series of financial transactions that
inhibit the ability of law enforcement to track the
money back to their owner or source. This fre-
quently involves wire transfers between bank
accounts, often in foreign countries. The final step
is integration, which involves transferring the
layered funds from the foreign country into the
mainstream financial world in the USA through a
transaction that has legitimate commercial purpose.
Undoubtedly, casinos have often been perceived
as connected with organised crime. The general
public is well aware of stories reporting a connec-
tion between organised crime and casinos in pre-
Castro Cuba and their subsequent operation in
Great Britain before the Gaming Act of 1968.
Casino gambling is carefully regulated in many
countries since it is 'an expanding industry which
is central to the development of tourism' and has
been 'increasingly international in scale'.4
Concern over money laundering, and casinos,
however, go beyond historical connections with
organised crime. Casinos have drawn the attention
of money launderers because they are involved in a
cash business that could assist in both the place-
ment and layering of illicit funds. A money laun-
derer may attempt to place funds by depositing
them with a casino and requesting the casino
transfer the funds to his or her bank account.
Another method would be to deposit the funds
and receive a negotiable instrument that is easier to
deposit elsewhere or to take outside the country.
As opposed to simply depositing the funds and
expecting the casino to return them in a different
form,
the money launderer may attempt to dis-
guise the funds as winnings through a series of
wash transactions. For example, placing a bet on
both teams in a football game or on both red and
black on a roulette table would be a wash trans-
action.
Nevertheless, the person could argue that
one-half of the money returned on the winning
bet was 'winnings'. This changes the origin of the
funds from the proceeds of
an
illegal activity to the
proceeds from winning bets.
The issue of money laundering has been cited as
a reason both for and against legalising casinos. In
Brazil,
Roman Catholic spokesmen have warned
against legalisation of casinos partly because of fear
of money laundering.5 Likewise, the powerful
Moslem Judicial Council has urged the rejection
of casinos in Capetown, South Africa, partly
because 'casinos are known to be placed for money
laundering
.
. .'.6
In some circumstances, casinos are closed down
because of money laundering. For example, the
Turkish Government recently closed down casinos
partly because of the problem of money launder-
ing.7
The closing of Turkey's 78 casinos was facili-
tated by the killing of Omer Topal, known as
Turkey's casino
king,
which was ordered, in the
opinion of his widow, 'by rivals who were not
satisfied with money laundering arrangements he
made or refused to make'.8
Page 134
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