FinCEN Addresses Illegal Sports Betting

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FinCEN issued an alert indicating that certain organizations and individuals have been circumventing various laws related to sports betting, including by permitting “third-party betting” and reminding the industry about the importance of applying a risk-based approach with respect to this issue and the need to implement reasonably designed AML programs to address among other risks, the risks associated with third-party betting.

FinCEN further noted that criminals are making bets with legally operating sports books, including by using intermediaries to place bets on behalf of unidentified third parties (third-party betting). In these cases, the intermediaries rarely voluntarily disclose to the casino that a transaction is being conducted on behalf of a third party, thereby disguising the third party’s role in the transaction and obscuring the source of funds used to place the bet. This poses distinct money laundering risks for casinos. In addition to concealing the owner and the origin of funds, third-party betting poses distinct money laundering risks for casinos because it allows criminal organizations, illegal sports books, and others located in any state, where gambling may be illegal,
to place bets within states where sports betting is legal.

Casinos should be aware that failure to identify a third party on whose behalf a transaction is conducted may constitute a violation of the casinos’ recordkeeping and reporting obligations under the BSA.