Enhanced Due Diligence for High-Risk Players: Politically Exposed Persons, VIPs, and Criminal Red Flags
Enhanced Due Diligence (EDD) has become a cornerstone of anti-money laundering (AML) and counter-terrorist financing efforts in the casino and iGaming industry. Casinos – both land-based and online – handle large volumes of cash and high-value transactions, making them attractive targets for money launderers and other financial criminals. In response, regulators worldwide have heightened their expectations for robust due diligence, especially when dealing with high-risk players. These high-risk individuals include Politically Exposed Persons (PEPs), high-stakes VIP customers, and those who exhibit criminal red flag behaviors. For senior compliance officers and regulatory professionals, understanding and implementing EDD for such customers is essential to protect the business’s integrity and meet legal obligations. This article explains the concept and necessity of EDD for high-risk individuals, outlines international regulatory standards, breaks down key high-risk categories, identifies typical red flags, and highlights best practices and challenges for implementing EDD in both traditional casinos and online gaming platforms.
The Concept and Necessity of Enhanced Due Diligence
Enhanced Due Diligence refers to the in-depth, rigorous vetting and monitoring procedures applied to customers who pose a higher risk of involvement in money laundering, corruption, or other financial crimes. It goes beyond the standard Customer Due Diligence (CDD) steps (such as verifying identity and basic background checks) by requiring additional layers of scrutiny.
In a casino context, EDD is necessary because standard onboarding checks may not be sufficient to detect complex illicit schemes. High-risk players can introduce substantial illicit funds into the gaming environment – for example, by converting cash to chips and back to cash or transferring money through casino accounts under the guise of gambling. Without deeper investigation into a customer’s background and source of funds, a casino could unwittingly become a conduit for dirty money. Aside from the moral and security implications, failure to identify and manage these risks can result in severe regulatory penalties, reputational damage, and even the loss of operating licenses. Recent years have seen regulators impose multi-million dollar fines on casinos for lapses in due diligence, underscoring that “tick-box” compliance is no longer enough.
EDD is thus an essential risk management tool. It enables casinos and iGaming operators to know their customer at a granular level – understanding not just who they are, but where their money comes from and whether their gambling activity is commensurate with their profile. By applying EDD measures proactively, a casino can detect warning signs of money laundering or other criminal activity early and take appropriate action (such as filing suspicious activity reports or declining certain transactions). In essence, enhanced due diligence serves as a protective barrier, helping to safeguard the casino’s business from being exploited by criminals and ensuring compliance with the stricter regulatory expectations placed on the gambling sector.
Regulatory Expectations and International Standards
Global regulators and standard-setting bodies recognize casinos and online gambling platforms as vulnerable to financial crime, and they have established clear expectations for risk-based due diligence. Several key frameworks and authorities inform the EDD practices in this sector:
Financial Action Task Force (FATF): The FATF sets international AML/CFT standards and explicitly includes casinos as “Designated Non-Financial Businesses and Professions” (DNFBPs) under its recommendations. FATF guidance requires casinos to conduct customer due diligence for transactions above certain thresholds (commonly USD/EUR 3,000) and to apply enhanced due diligence for higher-risk customers and situations. For example, FATF Recommendation 10 mandates thorough CDD measures (including identifying the customer and verifying identity, understanding beneficial ownership, and monitoring transactions), while Recommendation 12 specifically addresses politically exposed persons, requiring that financial institutions (and by extension, casinos) implement EDD when dealing with PEPs. FATF recommends EDD steps such as obtaining senior management approval to onboard or continue business with a PEP, establishing the source of wealth and source of funds of high-risk customers, and conducting closer ongoing monitoring of their transactions. Similarly, FATF standards call for EDD on customers from high-risk jurisdictions or in any scenario that the institution’s risk assessment deems higher risk. Casinos operating internationally are expected to align with these FATF principles, which form the basis of many national laws.
European Union Anti-Money Laundering Directives (AMLD): EU regulations have progressively tightened AML requirements for the gambling sector. Under the 4th EU AML Directive (2015/849) and its subsequent updates, casinos and providers of gambling services are required to apply CDD for any transaction or series of transactions amounting to €2,000 or more, regardless of whether it’s in person or online. Importantly, EU directives mandate Enhanced Due Diligence in several scenarios, including when dealing with PEPs, when transactions involve high-risk third countries, or when other higher-risk factors are present. For instance, if a casino’s customer is based in or transferring funds from a country on the EU’s list of high-risk jurisdictions, the operator must implement EDD measures such as obtaining additional documentation and information on the customer and the source of the funds. EU directives also require member states to ensure that gambling operators have systems to detect and report suspicious activities and that they train staff in AML. Under these standards, PEPs (whether foreign or domestic, though domestic PEPs may be treated with a risk-based perspective) always warrant an elevated level of scrutiny. The European framework has also emphasized transparency of beneficial ownership (through registries and information-sharing) which assists in EDD processes. Casinos in EU jurisdictions are supervised by national regulators to enforce these requirements, and non-compliance has led to significant fines and enforcement actions across multiple countries.
United Kingdom Gambling Commission (UKGC): The UK, following EU standards (and retaining them post-Brexit with its own updates), imposes strict obligations on casinos and online gambling licensees regarding due diligence. The UK’s Money Laundering Regulations classify casinos as regulated entities that must perform both CDD and Enhanced Customer Due Diligence (often abbreviated as ECDD in the UK context) where appropriate. The UKGC expects operators to identify customers who pose higher risks – including PEPs, high spenders, and those suspected of criminal activity – and apply proportionate enhanced checks. Notably, UK regulations differentiate between foreign PEPs and domestic PEPs: recent amendments have indicated that while domestic PEPs still require EDD measures, they may be considered lower risk than foreign PEPs unless other risk factors elevate their profile. In practical terms, UK casinos must have policies ensuring that for any PEP (domestic or foreign), senior management approval is obtained before establishing or continuing the business relationship, the person’s source of wealth/funds is substantiated, and their gambling activity is subject to enhanced ongoing monitoring.
The UK Gambling Commission has also focused on VIP programs and high-value customers with specific guidance. Following a series of compliance failures in the industry, the UKGC introduced strict rules for managing “High-Value Customers” (HVCs). Operators are required to carry out thorough due diligence before conferring VIP status or special privileges on a customer. This includes ensuring the customer’s gambling is affordable and sustainable relative to their income or wealth, verifying their identity, occupation and source of funds, and checking for any signs of problem gambling or AML risk. A senior executive must be accountable for each VIP scheme’s compliance. The clear message from UK regulators is that being a big spender does not exempt an individual from scrutiny – rather, it increases the level of scrutiny required. Compliance officers in UK licensed firms are expected to document all checks and be able to demonstrate to auditors or regulators that they have robust EDD processes for their high rollers and risky clients.
United States FinCEN and Bank Secrecy Act (BSA) Requirements: In the U.S., casinos (generally those with gross annual gaming revenues above a certain threshold) are considered financial institutions under the Bank Secrecy Act. They must implement AML programs often referred to as Title 31 compliance (Title 31 of the U.S. Code contains the BSA regulations). Core requirements include: verifying customer identity for significant transactions, filing Currency Transaction Reports (CTRs) for cash transactions over $10,000 in a day, and filing Suspicious Activity Reports (SARs) for any transactions suspected to involve illicit funds or that lack apparent lawful purpose (with a threshold of $5,000 for mandatory SAR consideration, though good practice is to report any suspicious activity regardless of amount). While U.S. casinos historically have not been subject to the full “Customer Due Diligence Rule” that banks must follow (for example, they don’t have an across-the-board requirement to collect beneficial ownership information for every customer as banks do for account-holders), the industry is under growing pressure from FinCEN to enhance its due diligence efforts. FinCEN guidance and enforcement cases make it clear that casinos are expected to take a risk-based approach – meaning if a patron is high-risk, the casino should voluntarily perform deeper checks even if not explicitly mandated by a specific regulation. For instance, U.S. authorities expect casinos to identify when a patron is a foreign political figure or a known criminal and then apply additional scrutiny accordingly. There have been notable enforcement actions by FinCEN against casinos that failed to implement effective EDD, such as cases where casinos continued to cater to high-rollers with dubious backgrounds or obvious suspicious transaction patterns without filing SARs or investigating the source of their funds. The Anti-Money Laundering Act of 2020 further strengthened the U.S. regulatory framework, increasing penalties for compliance violations and implicitly encouraging all financial institutions (casinos included) to obtain more information about their high-risk customers. In practice, many U.S. casinos have adopted measures beyond the bare minimum legal requirements, recognizing that doing so not only avoids regulator wrath but also protects the business from fraud and scandal.
Other Jurisdictions and Standards: Many other countries have aligned their casino compliance requirements with FATF recommendations. For example, in Australia and parts of Asia, recent casino scandals have prompted stricter oversight by regulators, mandating comprehensive due diligence on junket operators and VIPs. The Asia/Pacific Group on Money Laundering (APG), an FATF-style regional body, has pushed its member countries to ensure casinos implement stronger EDD controls. In Canada, provincial gaming regulators and FINTRAC (the financial intelligence unit) similarly require EDD for large transactions and high-risk patrons, and they demand detailed documentation of efforts to establish source of funds. Globally, there is a trend toward harmonization of standards: collaborative initiatives and information-sharing (for instance, between regulators or through industry associations) aim to close loopholes where criminals might otherwise venue-shop for the weakest controls. For compliance professionals, this means that regardless of jurisdiction, the expectation is to err on the side of caution: if an individual or situation seems high-risk, enhanced due diligence procedures should be applied, even if local law might not spell out every detail.
In summary, regulatory expectations everywhere point to a risk-based, enhanced approach for high-risk players. Casinos and iGaming firms are expected to be able to demonstrate that they know who their high-risk customers are, that they have taken concrete steps to verify those customers’ identities and wealth, and that they are continuously monitoring for any suspicious activities. Failing to meet these international standards is not an option for a compliant casino — the costs of non-compliance, in terms of fines and reputational damage, far outweigh the investment in a solid EDD program.
High-Risk Categories Requiring EDD
Not all customers pose equal risk. The essence of a sound compliance program is to segment customers by risk level and apply commensurate due diligence. In casinos and online gaming, three categories of patrons almost always warrant the highest level of scrutiny: Politically Exposed Persons (PEPs), VIP/high-value customers, and any individual who triggers criminal red flags through their behavior or background. While these categories can overlap (for example, a VIP might also be a PEP), it is useful to consider each separately to understand why they are high-risk and what signs to watch for.
Politically Exposed Persons (PEPs)
Politically Exposed Persons are individuals who currently hold or have held a prominent public position. This includes heads of state, senior politicians, high-ranking government, judicial or military officials, important political party officials, and senior executives of state-owned corporations. Family members and close associates of such persons are also typically classified as PEPs because wealth or influence can be transferred through those relationships. By virtue of their positions, PEPs carry a higher risk for potential involvement in corruption, bribery, or misuse of public funds. If a politician or high official were to receive kickbacks or illicit funds, one way to cleanse or enjoy that money might be through gambling, where cash can be converted into chips or credits and then back into seemingly legitimate winnings.
Risk Indicators and Red Flags for PEPs: Because of the above, regulators presume PEPs to be high-risk customers. Some red flags and risk factors specific to PEPs in a casino context include:
Lifestyle and Wealth Mismatch: The PEP’s known official salary or public profile does not align with their gambling spending. For example, a government minister from a country with modest public sector wages gambling vast sums of money suggests the funds could originate from illicit sources.
Source of Funds Is Unclear or Suspect: The PEP is unable or unwilling to provide a credible explanation or documentation for where their gambling money comes from. Perhaps they claim it is from “savings” or a gift, but cannot substantiate this. Alternatively, funds might be coming through third parties – for instance, the individual’s corporate owned by their associate is wiring money to the casino account – which could indicate an attempt to obscure the true source.
Connections to Corruption Scandals: Adverse media reports or intelligence linking the PEP (or their close associates) to corruption cases, embezzlement of state funds, or sanctions. If a PEP appears on international sanctions lists or has been publicly accused of financial crimes, any transactions they engage in at the casino should be treated with extreme caution. Even if not convicted of a crime, politically exposed individuals often appear in leaks or investigative reporting (for example, mention in the Panama Papers for offshore holdings) which raise questions about their wealth.
Use of Proxies or Corporate Vehicles: The PEP may try to distance themselves by using a front person or company to gamble on their behalf. For example, a close associate might purchase chips or deposit funds and then the PEP uses those chips in private salons. Or a PEP might set up a private company that opens a casino account or VIP membership. Unusual arrangements like this often indicate deliberate obfuscation and should be a trigger for EDD – the casino should drill down into who is ultimately behind the activity.
Reluctance to Cooperate with EDD: If identified as a PEP, the person may display reticence or annoyance when asked for detailed information (such as refusing to disclose their source of wealth, or questioning why the casino needs certain documents). While no customer loves extra scrutiny, a uniquely defensive posture from a PEP can be a red flag in itself.
Given these risks, EDD measures for PEPs are stringent. Casinos should have systems in place to identify PEPs at onboarding and on an ongoing basis (often by screening against PEP databases and watchlists). Once a PEP is identified, the account should be flagged for high risk and the following steps taken: senior management approval for the relationship, gathering detailed information on the individual’s background and wealth (perhaps including asking for financial disclosures or proof of income sources), closer monitoring of all transactions (with lower thresholds for internal alerts), and ensuring that any transactions above certain amounts are reviewed in detail. The enhanced monitoring should continue for the duration of the business relationship, and best practice is even to continue treating a former PEP as high risk for a period (for example, at least 12 months after they leave office, as per many regulations) since the risk associated with their prior position may linger. In short, with PEPs, a casino must conduct business with “eyes wide open”, fully aware of who they are dealing with and vigilant about any sign that the gaming account could be misused for laundering illicit funds.
VIP and High-Value Customers
In the gambling industry, VIPs or High-Value Customers (HVCs) are those patrons who wager and spend significant amounts of money. These are the “high rollers” who might have access to special VIP lounges, personal account managers or hosts, generous credit lines, and lavish comps (complimentaries) such as free hotel stays or travel. From a business perspective, VIPs are highly sought-after as they contribute a large share of revenue. However, from a compliance perspective, they represent a double-edged sword: the combination of large financial transactions and historically more lenient oversight (due to their status) has made some VIP programs a target for abuse by criminals.
Why VIPs Are High-Risk: Not every high-stakes gambler is a criminal, of course. Many are wealthy individuals who legitimately enjoy gambling as a leisure activity. Yet the very nature of VIP play – large sums moving in and out – inherently poses a higher risk of money laundering. Criminals may seek to exploit VIP schemes to get preferential treatment or less scrutiny. In some past cases, casinos have been found to relax their controls for their top spenders, perhaps not wanting to drive them away with intrusive questions. That attitude has had to change. Now regulators explicitly warn that a customer’s high economic value cannot exempt them from AML measures – if anything, it should heighten them. VIPs also often engage in activities that require additional diligence: they may transfer funds internationally to fund gambling, request winnings to be paid to third-party accounts, or gamble with credit extended by the casino. Each of these actions needs a careful review under AML protocols.
Risk Indicators and Red Flags for VIPs: Compliance officers should be alert to a number of signs that a high-roller might in fact be a conduit for illicit funds:
Unexplained Wealth or Income: A classic warning sign is when a person appears to gamble far beyond what their known occupation or financial profile would suggest. For example, if a customer who is known (or discovered via open-source research) to be a mid-level businessperson or a person with an unclear source of wealth is betting millions in a year, that gap needs to be reconciled. The casino should seek information to confirm how this wealth was generated (did they inherit money? sell a business? have other business ventures?). If no plausible legitimate source is evident, suspicion should increase.
Rapid Movement of Funds with Minimal Play: A money launderer posing as a VIP might deposit or buy in for very large amounts, then engage in minimal gambling activity and withdraw the funds. This is often called a “minimal play” or “chip walking” scheme – essentially using the casino as a currency exchange or banking facility rather than for entertainment. For instance, a customer buys $500,000 in chips, plays only a small percentage at the tables (or bets both sides of a game to guarantee most money back), then cashes out $450,000 as a casino cheque or wire transfer. Such patterns are a glaring red flag. Legitimate high rollers typically exhibit at least some volatility in their play (winning and losing) and spend time gambling; they don’t usually treat the casino like a short-term money park.
Multiple Casinos or Accounts and Structured Transactions: Some high-risk individuals may try to fly under the radar by spreading their activity across different venues or account names. If the same VIP is known to patronize several casinos and makes just-under-reportable transactions at each, it suggests a deliberate attempt to evade thresholds (for example, carrying $9,000 into five different casinos in one day to avoid CTRs). In the online world, a similar risk is multiple accounts: a person could set up several accounts on a gambling site (perhaps using variations of their name or using associates’ identities) to distribute large transactions in smaller chunks. Modern detection systems and information sharing can sometimes pick this up – for example, by noticing common device fingerprints or IP addresses. Compliance teams should take note if a high-value player’s pattern involves many small transactions or if there’s intelligence that they are active at other properties with unusual behavior.
Third-Party Funding or Payments: If a VIP’s account is frequently funded by somebody else – e.g., a friend, business partner, or relative consistently deposits money on their behalf – this is unusual and risky. It raises the question of whose money is really entering the casino. Similarly, if a VIP requests the casino pay out winnings to a different person or a company, that should prompt further inquiry. This could be a sign of laundering (using one person’s play to clean funds and then transferring the “clean” winnings to the actual owner of the money) or even illegal gambling financing arrangements.
Resistance to Due Diligence Requests: An honest VIP, while perhaps not thrilled about compliance checks, will eventually understand that providing proof of funds or identity is part of the modern gambling environment. If a high roller balks at sharing information, refuses to complete source-of-funds questionnaires, or becomes hostile when asked about their occupation or wealth, it is a concerning sign. Such pushback can sometimes indicate that the person has something to hide or believes their status should shield them from scrutiny.
In dealing with VIPs, best practices for EDD include conducting thorough background checks when someone qualifies as a high-value client. This might involve verifying their employment or business ownership, checking corporate records, reviewing property holdings, or using commercial databases to estimate their net worth. Many casinos institute thresholds (either an aggregate spend or a single transaction amount) beyond which a customer is automatically escalated for review by the compliance team. For example, if a patron deposits or loses beyond $X in a period, a full source of wealth review is triggered. Ongoing monitoring is also critical: a patron might initially check out as having a legitimate profile, but their risk can evolve. Regularly updating the information (perhaps annually or upon significant changes) and watching their gameplay and transactions for anomalies ensures that any emerging red flags are caught. Additionally, from a governance perspective, casinos should ensure their marketing and VIP hosting teams work hand-in-hand with compliance. There must be clear policies that no matter how valuable a customer is, they cannot receive preferential treatment that bypasses compliance rules. In fact, dedicated VIP compliance managers or committees are increasingly common – their role is to vet prospective VIPs and continually review existing ones. This dual approach – preventive checks before giving VIP status and reactive checks during play – helps in striking the balance between nurturing important customers and keeping out dirty money.
Individuals Triggering Criminal Red Flags
Beyond formal categories like PEP or VIP, any patron – whether a casual player or a high roller – can become high-risk if there are indications of criminal connections or suspicious behavior. These are cases where something about the person’s background or their pattern of play suggests potential involvement in criminality. The gambling sector has seen instances of organized crime figures, fraudsters, or money laundering networks making use of casinos to wash funds or conduct illegal transactions. Identifying such individuals is challenging because they may not announce themselves as criminals. Instead, compliance officers must rely on red flags from various sources: law enforcement intelligence, negative media, sanctions/watchlist screening, or in-casino observation of unusual activities.
Typical Criminal Red Flags:
Negative News and Watchlist Hits: A standard component of due diligence is checking customers against databases of known risks. If an individual’s name, alias, or business interests show up in negative news articles (for example, being arrested or charged with financial crimes, mentioned in court cases, or suspected of organized crime ties), this customer should immediately be treated as high risk. Likewise, if they appear on any watchlists or blacklists – such as international sanctions lists, law enforcement wanted lists, or even industry self-exclusion lists for fraud – then enhanced measures are warranted. For example, a person who appears to be on the Office of Foreign Assets Control (OFAC) sanctions list or on a list of known associates of a criminal syndicate should likely be barred entirely or at least subjected to intense scrutiny and reporting if found in the customer base.
Unusual Transaction Patterns: Casinos use transaction monitoring to detect suspicious patterns that can indicate money laundering or other illicit conduct. Some classic red flag behaviors include:
Structuring: Making multiple cash transactions just under reporting thresholds, as mentioned earlier (e.g., repeated buy-ins of $9,900 to avoid the $10k CTR threshold). This behavior strongly suggests deliberate evasion of reporting.
Chip Passing and Collusion: Individuals working in groups to launder money might pass chips or tickets among each other. For instance, one person buys chips, then discreetly hands them off to another who cashes out. Or two players might repeatedly bet opposite sides of even-chance games (like red vs. black in roulette or Player vs. Banker in baccarat) essentially transferring funds between them depending on who “wins.” If surveillance or game monitoring notices patterns of patrons seeming to coordinate bets or always cashing out at the same time, this could indicate a laundering scheme.
Large Cash Exchanges Without Play: A customer might frequently exchange small denomination bills for larger ones (or vice versa) at the cage, or purchase chips and then shortly thereafter redeem them without significant play (“chip redemption with no or little play” is a red flag in most AML guidelines for casinos). Essentially, using the casino cashier as a bank teller is suspicious.
Rapid In and Out in Online Gaming: Online, a similar pattern is deposit large sums, perhaps make a few token wagers (or wager in a way guaranteed not to lose much, such as betting both outcomes with two linked accounts), then withdraw most of it. The speed and frequency of such transactions can be detected via algorithms. If someone treats an iGaming account purely as a pass-through for funds, that’s a red flag.
Misuse of Third Parties and Accounts: An individual triggering criminal suspicion might try to conceal their identity or involvement by using other people. We discussed this in context of PEPs and VIPs, but it can happen with any criminal actor: for example, using a girlfriend or associate to gamble on their behalf, or funding someone else’s account. Likewise, some might attempt to open accounts under aliases or with fake identification. Online, this could mean identity theft cases where a criminal uses another person’s name and details to set up an account (to distance themselves from the money flow). Rigid KYC verification processes help catch fake IDs, but criminals constantly test these defenses.
Indicators of Other Crimes: Sometimes a gambler’s behavior might hint at other criminal activity. For example, someone on the gaming floor frequently tries to recruit other patrons to engage in schemes, or a patron who spends a lot of time talking about large cash businesses or discloses they deal in things like illicit drugs or unlicensed money services – these are qualitative red flags. Another example: a patron is observed offering large tips or gifts to staff for no clear reason, which could be attempted bribery to avoid scrutiny.
When a customer exhibits one or more of these criminal red flags, the casino should escalate the case for EDD immediately. This may involve:
Conducting a deep dive investigation into the person’s background (using investigators or specialized databases to look into their corporate affiliations, criminal records, known associates, etc.).
Increasing the level of monitoring on all their transactions and gameplay. For instance, applying a rule that any transaction above a very low threshold for this customer gets manually reviewed.
Engaging law enforcement or intelligence if appropriate. In some jurisdictions, casinos maintain close communication lines with financial intelligence units or police; if a patron already has a known criminal history, the casino might coordinate on how to handle the situation (all while still meeting obligations to file SARs independently).
Critically, filing a Suspicious Activity Report at the earliest sign of concrete suspicion. EDD and SAR filing go hand-in-hand: enhanced due diligence will often uncover information that either dispels suspicion or confirms it. If after EDD checks, doubts remain about the legitimacy of the player’s funds or intentions, a SAR should be filed with the relevant authorities to report the activity.
In sum, any individual can become high-risk if their profile or conduct raises red flags. Casinos must remain vigilant not just to the known categories like PEP and VIP, but also to those “unknown” customers who might quietly be attempting to misuse the gambling facilities for illicit ends. A robust risk assessment process will consider a variety of risk factors – including geography (customers from high-risk countries), business association (customers from high-risk industries like arms trade, cryptocurrency, payday lending, etc.), and personal history – to continuously flag players that require EDD.
Best Practices for Enhanced Due Diligence Measures
Once a customer has been identified as high-risk, what exactly should a casino or iGaming operator do? Enhanced due diligence is essentially about going deeper and broader in gathering information and verifying it. Here is a breakdown of key EDD measures and best practices for implementing them:
Thorough Identification and Verification: Start with making sure you truly know who the customer is. This means not accepting at face value a simple ID check if risk is high. Use independent sources to corroborate identity details. For example, for online players, leverage identity verification services that validate passports or driver’s licenses for authenticity and use biometric checks (like a selfie match) to ensure the person using the account is indeed the person on the documents. For in-person casinos, require a government-issued photo ID and consider secondary identity documents for high-risk clients. If there is any doubt about the authenticity of provided identification, pause the relationship until it can be resolved. This might involve contacting the issuing authority or using document forensic tools. High-risk clients might also be asked to provide additional data points like proof of address (utility bills) or references from a bank or other reliable institution. The aim is to eliminate any alias or fake identity – you want full confidence that the person’s real name, age, and other key details are correct, as all subsequent screening depends on it.
Source of Wealth and Source of Funds Verification: Distinguishing between these two concepts is crucial:
Source of Wealth (SoW) refers to how the customer obtained their overall wealth – essentially, what is the origin of their financial standing or net worth. This could be their occupation/profession, business ownership, inheritance, investments, etc.
Source of Funds (SoF) is more immediate and transaction-specific – it asks, for the particular funds the customer is gambling with or depositing, where did that money come from (e.g., from a particular bank account, from the sale of a property, from a year-end bonus, etc.).
For EDD, a casino should gather information and evidence for both. Best practices include asking the customer directly via questionnaires or interviews, as well as verifying through documentation. A high-risk customer might be asked to provide bank statements, proof of earnings (like payslips or tax returns), business financials if they claim business income, or sale documents if they say the money came from selling an asset. For instance, if a player claims their source of wealth is from owning a chain of restaurants, the casino can perform checks on that business (Is it real and active? Is it profitable? Is the scale consistent with the wealth being displayed?). They might request financial statements or do a credit check on the company. If the source of funds for a large deposit is said to be an inheritance, the casino could ask for a letter from the estate executor or a bank document showing receipt of the inheritance.
The key is to corroborate stories with evidence. It is not sufficient to have a client fill a form saying “I have $5 million because I’m a successful entrepreneur”; a compliance officer should verify aspects of that statement (for example, confirm the person is indeed the director of a certain company via a corporate registry, or find news articles about the sale of their startup, etc.). Additionally, in practice, many casinos use open-source intelligence (OSINT) techniques here: searching the internet for clues about the person’s wealth (such as real estate ownership, luxury assets, or known business dealings). Any inconsistencies – like the person claiming modest means yet obviously spending extravagantly – should prompt further investigation or even denial of service. Regulators expect that for significant VIP play or PEPs, the casino has documented evidence of probing the source of funds. It’s one of the first things they might ask for in an audit or inspection: “Show us how you know that this million-dollar wire came from a legitimate source.”
Adverse Media Screening and Background Checks: A crucial component of EDD is looking beyond what the customer directly tells you and finding independent information about them. Adverse media screening involves searching for any negative news or publications about the individual (and potentially their close associates or companies). This could reveal, for example, that the customer was arrested in another country for fraud, or that they are suspected to be a gang member, or perhaps involved in controversial businesses. With technology, casinos often employ databases or services that compile global news and watchlist data, making it easier to search a name and get hits for things like criminal records, court cases, regulatory sanctions, or even social media controversies.
Best practice is to perform an adverse media search at onboarding for high-risk customers and then periodically during the relationship (since new information might surface later). If anything notable is found, it should be evaluated for risk. Not every negative news item is a deal-breaker, but patterns of concerning behavior are. For example, a one-off lawsuit for a minor issue is different from repeated mentions in connection with money laundering investigations. Part of background checking can also include litigation history (are they suing or being sued frequently?), bankruptcy filings, and checking if they’ve been banned from other casinos or financial institutions. In some cases, hiring professional due diligence firms to conduct a comprehensive background check (sometimes called an “enhanced due diligence report” in the industry) is warranted – particularly for very high-value or sensitive PEP clients. These reports can provide a deep analysis of the person’s career, reputation, and any risk-relevant incidents.
Beneficial Ownership and Third-Party Verification: When a customer is not acting purely on their own behalf or is funded by complex arrangements, EDD means peeling back those layers. If a casino customer is a corporate entity (which might occur if, say, a company establishes a corporate casino account for entertainment of clients or some junket scenario), the casino must identify the beneficial owners of that entity – i.e., the real persons who ultimately own or control it (usually defined as those owning 25% or more, or exercising significant control). This concept, common in banking, applies in gambling whenever legal entities or arrangements (like trusts) are involved in transactions. Knowing the beneficial owners ensures you are screening and performing diligence on all relevant individuals, not just a front company. For example, a company may be used to mask that a sanctioned individual is behind the funds; EDD aims to prevent that kind of evasion.
Even in person, beneficial ownership plays a role if someone is providing funds for another. Casinos should have policies to address situations like third-party payments or chips purchased by one person for another. EDD best practice is to verify the identity of any third party involved and assess their risk as well. If, for instance, a husband is consistently funding a wife’s gambling account, both should be looked at, not just the primary account holder. If money comes via bank transfer, the originator’s name should be checked against the customer’s name; mismatches should be resolved by determining the relationship and reason (and both parties might need to provide IDs and info). Tracing beneficial ownership can be challenging if shell companies or offshore firms are used, but compliance officers should document attempts to gather that information and flag if any ownership structure is overly opaque or convoluted (itself a red flag).
Ongoing Monitoring and Transaction Analysis: EDD is not a one-time checkbox; it requires continuous vigilance. High-risk customers should be subjected to enhanced ongoing monitoring. This means that their account activity is watched more closely than a normal customer’s. Automated transaction monitoring systems can be calibrated to apply stricter rules or lower thresholds for generating alerts on high-risk accounts. For example, while a $5,000 cash buy-in might not trigger a review for a low-risk player, for a tagged high-risk player it might prompt the compliance team to look closer or even ask the patron for additional information on the spot. Ongoing monitoring also includes regularly refreshing the customer’s profile information. Many compliance programs set periodic review cycles (3 months, 6 months, 12 months depending on risk level) where they revisit the customer’s risk rating, update their background checks, and see if the previous understanding of their source of wealth is still current. If a PEP, is the person still in office or have they taken on a new role? If a business owner, has their business situation changed significantly? These reviews keep the EDD file up-to-date and useful.
Furthermore, the results of monitoring should feed back into action. If an alert or unusual behavior is observed (say a PEP suddenly brings in double their usual bankroll from a new bank account in a high-risk country), the casino should escalate that internally. This might entail a compliance manager reaching out to the customer for an explanation or further documentation, increasing the frequency of account audits, or in extreme cases, considering whether to continue the relationship at all. In sum, “EDD” is not just extra checks at onboarding – it’s an enhanced level of awareness and scrutiny that persists throughout the relationship with the high-risk customer.
Documentation and Senior Management Involvement: A sometimes overlooked but vital part of best practices is meticulous record-keeping of all EDD steps taken and ensuring management accountability in the process. Every time enhanced due diligence is performed – whether it’s an interview with a client about their funds, a copy of a deed they provided, a printout of an adverse media article, or an internal memo about a decision – it should be documented in the customer’s KYC/EDD file. Regulators and auditors will expect to see a clear narrative of what the casino knew and did regarding a high-risk player. Strong documentation provides evidence that the casino is following its procedures and allows for internal quality control (for instance, another compliance officer or an auditor can review and see if the analysis made sense).
In addition, many regulatory frameworks explicitly require involvement of senior management for approving the acceptance or continuation of high-risk relationships (especially PEPs). In practice, this means a compliance officer cannot single-handedly decide to take on a very risky VIP; there should be a formal approval by a high-ranking executive or a committee after weighing the risks. This assures that the organization’s leadership is aware of potentially risky clients and accepts responsibility for managing them appropriately. It also ensures a higher level of oversight—senior leaders may ask tough questions or impose conditions on the relationship that strengthen controls. From a best practice perspective, having a designated committee that reviews and approves all new VIPs or PEP clients is an excellent control. That committee might review the due diligence file prepared by compliance, ask for clarifications, and either approve, reject, or request further monitoring for the customer in question.
Implementing these EDD measures requires well-trained staff, adequate resources, and often the support of specialized tools and external services (like databases for PEPs and adverse media, or consultants for complex investigations). The outcome of a good EDD program is a much clearer picture of who the casino is dealing with and the ability to make informed decisions – whether that’s allowing a high roller to continue playing because everything checks out, or cutting ties with a customer who cannot demonstrate the legitimacy of their funds. It also means that if suspicious activity is present, it will be spotted and reported promptly, allowing law enforcement to potentially intervene and preventing the casino from being an unwitting accomplice to criminal financial flows.
Technology and Data Solutions Supporting Effective EDD
In the modern era, technology has become an indispensable ally in carrying out Enhanced Due Diligence, especially given the volume of data and speed of transactions in both land-based and online gambling. Advanced tools and data solutions can greatly enhance the efficiency and effectiveness of compliance teams by automating processes, connecting data points, and uncovering patterns that manual reviews might miss. Here are key ways technology supports EDD:
Automated Screening Systems: Casinos leverage sophisticated software to automatically screen customers against various risk databases. Upon a customer’s registration or when they reach certain thresholds, these systems can check global sanctions lists, PEP lists, and law enforcement watchlists within seconds. They also often include adverse media screening capabilities that use web crawlers and machine learning to flag news articles or web content that mention the individual in a negative context. Automated screening is particularly critical for online platforms which may onboard thousands of new players weekly – doing this manually is impractical. These systems typically generate alerts if there’s a potential match (e.g., the name matches a sanctioned drug trafficker or a politically exposed person in another country), which can then be reviewed by compliance analysts. By having this immediate check, a casino can, for example, instantly know if a new VIP is actually on a prohibited list or if a high-risk individual requires EDD before they even place a bet.
AI-Powered Transaction Monitoring: Traditional rule-based transaction monitoring (e.g., flag every deposit above X amount, or if someone deposits X within Y days) is useful but can produce many false positives and might not catch creative patterns. Artificial Intelligence and Machine Learning tools are increasingly being used by gaming operators to analyze large volumes of transaction and gameplay data to detect anomalies. AI can learn what normal behavior looks like for players of certain profiles and then highlight deviations that may indicate risk. For instance, machine learning models can identify subtle patterns like a customer who usually plays high stakes baccarat but suddenly starts making a flurry of small slot machine cash-ins and cash-outs – a sign they might be layering money through different channels. Or AI can cross-reference across the database to find links between accounts (say, multiple accounts that frequently fund each other or play at the same table patterns, suggesting collusion). The advantage of AI systems is that they can adapt over time as new money laundering techniques emerge, flagging suspicious betting behavior in real-time. This reduces reliance on purely manual monitoring and helps compliance teams focus on truly high-risk incidents.
Blockchain Analytics for Cryptogambling: With some online casinos and sportsbooks starting to accept cryptocurrencies, tracking the source and flow of funds has a new dimension. Blockchain analysis tools can trace crypto transactions from the player’s deposit back through the blockchain to see if the funds come from known illicit sources (for example, wallets associated with darknet marketplaces or crypto addresses flagged from ransomware attacks). These tools provide risk scores for cryptocurrency wallets and can alert if a player’s crypto deposit has a tainted history. They can also help ensure that if a casino allows withdrawal in crypto, it isn’t sending funds to a sanctioned wallet. By integrating these analytics, an online casino can apply EDD to crypto users in a way analogous to traditional source of funds checks (since the blockchain can reveal the chain of custody of the coins).
Data Aggregation and KYC Utilities: There are emerging data solutions that pool information across institutions, sometimes known as KYC utilities or data-sharing consortiums. In some jurisdictions, casinos might share data on banned patrons or SAR information under certain legal frameworks, to collectively combat risks. While privacy laws limit some information sharing, technology can be used to anonymize and match patterns so that, for instance, if Patron X was kicked out of Casino A for suspicious activity, Casino B could get a heads-up if the same person tries to play there. Additionally, government-driven platforms in some countries allow regulated entities to query if an individual has known risk factors (for example, a system where law enforcement can input that a certain person is under investigation, and casinos can check against it in a secure way). These solutions are still evolving, but they represent how data connectivity can strengthen EDD beyond one institution’s silo.
Business Intelligence and Case Management: Managing EDD cases (especially for large casinos that might have hundreds of high-risk patrons) is facilitated by case management software. These are platforms where all information on a customer can be stored, linked, and analyzed. They often include risk scoring engines: a customer’s profile gets a risk score that updates based on new information (like a new high transaction or a new adverse media hit). Visual dashboards can help compliance officers see the most significant risks at a glance – for example, highlighting that out of 100 VIPs, these 5 have the highest risk scores due to recent activities. Case management tools also ensure nothing falls through the cracks: they can schedule periodic reviews, send reminders for updates, and record all actions taken. With advanced analytics, some systems can even predict risk – for example, by correlating attributes, it might suggest “This new customer shares many characteristics with a known high-risk profile, treat them as high-risk until proven otherwise.”
Identity Verification and Biometrics: On the front end of customer onboarding, technology is shortening and strengthening the KYC process. Solutions now allow players to scan IDs with their mobile phones, which are then automatically verified for authenticity using AI (checking holograms, text, photo, etc.). Liveness detection ensures that the person is real and present by asking for a selfie or a short video. Biometric verification can also later be used for login or cash-out authentication, ensuring the account isn’t being taken over by someone else. In land-based settings, some casinos are using biometric entry systems or digital IDs for patrons: for example, facial recognition cameras at entrances or at the cage can match patrons to watchlists in real time. If a high-risk individual known to the system walks in, security and compliance can be alerted immediately. While raising some privacy considerations, these tools illustrate the growing role of tech in proactive risk management.
Automated Regulatory Reporting: Technology also eases the burden of reporting which is closely tied to EDD outcomes. Many casinos use systems that automatically populate Currency Transaction Reports or Suspicious Activity Reports with data from their databases, ensuring consistency and timeliness. For example, if multiple transactions by a patron triggered alerts and an investigation, the SAR reporting tool can pull all those transactions, customer details, and even narrative notes from the investigation into a report template. Some advanced systems can even prompt analysts with risk factor checklists or narrative suggestions based on patterns identified, ensuring that the report filed to authorities is comprehensive. This integration helps because an effective EDD program should result in effective reporting – and regulators often gauge a casino’s compliance by the quality of its SARs.
Incorporating these technologies, however, does not mean human judgment is removed. The role of experienced compliance officers remains crucial in interpreting the findings, deciding on the appropriate actions, and handling the nuanced discussions with high-risk customers. Technology provides the tools and intelligence, but people provide the insight and oversight. The ideal state is a well-calibrated synergy: routine tasks and large-scale data analysis are handled by software (reducing error and freeing up time), while compliance staff focus on investigations, decision-making, and continuously improving the risk models based on their expertise.
Implementation Challenges and Practical Tips
Implementing Enhanced Due Diligence in casinos and iGaming comes with real-world challenges. These can vary between the brick-and-mortar casino environment and the online gambling environment, but there is overlap as well. Below, we discuss some of the key challenges in each context and offer practical tips to address them, ensuring that compliance measures are effective without crippling the business operation or customer experience.
Challenges and Tips for Land-Based Casinos
Challenge: High Cash Volumes and Anonymity. Traditional casinos deal heavily in cash. Patrons can walk in off the street with cash and start gambling, often without upfront identification unless they hit certain triggers. Unlike banks, casinos (outside of membership-based clubs) might not have a prior relationship with a customer. This creates a challenge: a criminal can attempt to stay anonymous by doing multiple small transactions or by not signing up for player loyalty programs that would record their identity. Even with thresholds for ID (like the common $3,000 identification threshold in many jurisdictions), a crafty individual might try to avoid detection by staying just under it or by using accomplices to break up transactions.
Tip: Casinos should consider lowering internal thresholds for identification and tracking, beyond the legal minimum, based on risk. For example, if the law says ID must be taken at $3,000, the casino might internally decide to politely engage any customer buying $2,000 in chips to join their loyalty program (which involves providing ID) as a “service” to the customer (offering incentives like a reward card benefits). The idea is to capture identity on more patrons proactively. Also, use the cage or the floor staff to monitor repeated transactions – even if each is under the limit, if they see the same face coming multiple times in a shift, that should be aggregated and trigger an ID check. Training employees to spot structuring behavior is important, so they don’t inadvertently assist it by treating each transaction as unrelated.
Challenge: Integration of Surveillance and Compliance. In a bustling casino, surveillance teams might observe suspicious patterns (like chip passing or someone avoiding the use of player card), but that information needs to reach compliance officers timely. Conversely, compliance might have intelligence on a patron (like being in law enforcement spotlight) that surveillance or the pit bosses aren’t aware of. Coordination can be a challenge, especially in large resorts where multiple departments operate semi-independently (cage, pit, slots, surveillance, marketing, etc.).
Tip: Establish a cross-departmental communication protocol for AML concerns. A practical measure is to form an AML Committee that includes members from compliance, security/surveillance, operations, and VIP marketing. They can meet regularly (say weekly) to review any current high-risk patrons or incidents. Additionally, create real-time channels: for instance, if compliance flags a patron as high-risk, there could be an indicator on that person’s profile accessible by cage and floor staff (many casinos have management systems where a note or a special code can pop up when the patron’s card is swiped or their name is entered). Conversely, empower surveillance to immediately inform compliance of things like unusual patterns of play or suspicious interactions on the floor. Some casinos train dealers and floor staff to use subtle methods to alert security/compliance if they suspect something (like calling for “pick up” on a stack of chips that a patron is trying to hand off, which cues surveillance to zoom in). The main point is breaking silos: all departments should be aware that AML is everyone’s responsibility and unusual activity must be shared.
Challenge: Balancing VIP Hospitality with EDD. In land-based casinos, VIPs often have hosts whose job is to keep them happy – arranging perks, smoothing over any friction. Imposing EDD can sometimes create tension: asking a long-time VIP for financial documents or source of funds can feel intrusive and potentially insulting, and hosts might fear upsetting a whale and losing their play. In worst cases, hosts or executives have been known to push back on compliance recommendations to scrutinize a VIP because the individual is so important to revenue.
Tip: Cultivate a culture of compliance from the top-down that makes it clear that no customer is exempt and that protecting the business comes first. Practical steps include training VIP hosts specifically on AML risks (so they understand why these measures protect the casino’s longevity and even the patron’s welfare by keeping crime out). Also, involve hosts in the process positively: for example, a host can help communicate requests for information to the VIP in a customer-friendly way, framing it as the casino doing its due diligence in line with regulations that apply to all big players. Many VIPs, if handled respectfully and privately, will comply. It’s often the approach that matters – a senior compliance officer might join the host in a conversation with the VIP to explain requirements and reassure how the information will be kept confidential. In addition, having a senior executive accountable for VIP compliance (as the UK now mandates) means that revenue considerations cannot override compliance; the accountable executive’s performance is measured in part by compliance, aligning incentives correctly.
Challenge: Physical Logistical Issues in Verification. In a live casino, verifying source of funds is not straightforward. If someone walks in with $50,000 in cash, you can ask them where it came from, but they might just say “from my safe at home” or “business proceeds” – you can’t exactly demand proof on the spot without causing a scene. The fast-paced environment can pressure staff to accept vague answers.
Tip: Use a risk-based threshold for retrospective EDD. For example, allow the play to continue if nothing else is off, but before that customer is allowed to cash out large sums or on their next visit, follow up for documentation. Some casinos implement a rule that any cash buy-in or cumulative buy-ins above a certain amount triggers a letter to the customer (or a conversation at cash-out) along the lines of: “Thank you for your patronage. In line with regulations, for buy-ins exceeding $X, we conduct routine source of funds checks. Could you provide us with [specific documents] within [timeframe]?” Meanwhile, they might hold any cash-out above that threshold until the check is satisfied. It’s a delicate dance: you don’t want to illegally withhold a customer’s winnings, but you can often delay a payout for investigation if suspicious (especially if a SAR is being contemplated). At a minimum, you can ensure that before that customer comes back or continues playing high amounts on another day, you get the info required. The tip here is also to have clear policies that staff can lean on – so they can tell the patron, “This is not personal, it’s our policy that applies to everyone at this level.” Clear, consistently applied rules help avoid confrontation and claims of unfair treatment.
Challenge: Keeping up with Volume in Busy Venues. A large casino might handle thousands of customers on a busy night, and dozens of them could have transactions hitting reporting thresholds. Ensuring all reports are filed, all surveillance reviewed, and any potential SARs identified is a huge task.
Tip: Invest in training and sufficient compliance staffing, and use technology for efficiency. A practical approach is to have on-floor compliance liaisons during peak hours – these are compliance staff or well-trained supervisors who roam the gaming floor and high-limit areas, ready to assist with any issues (like verifying an ID, or observing a patron who’s flagged). This immediate presence helps address things proactively. In the back office, make sure your Title 31 / AML system is aggregating data properly so that you don’t miss multiple smaller transactions adding up to a trigger. Regularly conduct audits or “mystery shopper” tests to ensure procedures are followed (e.g., send someone to attempt structuring and see if staff catch it). Essentially, rigorous oversight and continuous improvement are needed to manage volume. Encourage a speak-up culture where any employee can escalate a concern if they notice something off – sometimes a cage cashier might notice a pattern that an automated system doesn’t, and they should feel empowered to alert a manager.
Challenges and Tips for Online Casinos and iGaming
Challenge: Remote Verification and Fraud. Online gambling operators face the difficulty of verifying customers who they never meet in person. This opens the door for identity fraud or the use of fake documents. Criminals may attempt to use synthetic identities (combining real and fake info) or steal someone’s identity to set up an account that can move illicit money. Additionally, if the site is global, verifying documents from various countries (in different scripts and formats) is complex.
Tip: Use robust multi-layered KYC processes at registration, and don’t rely on a single document. Modern online KYC often uses a combination of government ID verification, database checks, and biometric confirmation. Operators should employ reputable identity verification providers that cover a wide range of countries. Also, implement knowledge-based verification or liveness tests to guard against stolen identities (for instance, asking the player to perform a real-time task like turning their head on a video call, or providing micro-deposits verification if linking a bank account). Importantly, adopt a policy of no gambling before verification. Many regulated markets (like the UK) now forbid letting players deposit or play even a penny before their age and identity are verified. This prevents the scenario where someone could gamble and cash out under a false identity before checks complete. While this might add a bit of friction in sign-up, it dramatically reduces AML loopholes at the entry point.
Challenge: Speed and Volume of Online Transactions. Online platforms can see rapid transactions – deposits and withdrawals happening in minutes, 24/7. A criminal might attempt to exploit quick in-out movements or even automated systems (like trying to withdraw before a deposit clears, etc.). Monitoring in real-time and keeping up with large data flow is a challenge.
Tip: Implement real-time transaction monitoring rules and risk scoring for accounts. The system should be able to auto-flag anomalies like a player who usually bets $20 suddenly depositing $20,000, or someone who deposits and requests a withdrawal immediately without gameplay. A useful practice is to enforce a short delay and review for large withdrawals, giving compliance a window to take a closer look. Many online casinos have thresholds where any withdrawal above, say, €/$10,000 is paused until a compliance officer approves it (checking that the player’s documents are in order, source of funds information is gathered, and gameplay was legitimate). This can catch laundering attempts where the withdrawal is essentially the “cash out” of laundered money. It’s also wise to utilize machine learning analytics that can sift through huge volumes of small transactions to identify suspicious patterns that might be missed if looking at each transaction in isolation.
Challenge: Multiple Jurisdictions and Regulatory Overlaps. An online operator might serve players in several countries, each with slightly different rules about due diligence (different ID requirements, data privacy considerations, reporting formats, etc.). Keeping compliance uniformly high while tailoring to each legal regime is complex. For example, what’s considered a PEP or what database access you have can differ by country.
Tip: Develop a comprehensive compliance program that meets the highest common standard, and then adjust for local nuances. In other words, have a global baseline in your policies that assumes strict EDD (covering PEPs, high-risk checks, etc.), then have country-specific addendums. Practical measures include maintaining a matrix of requirements and using your platform’s capability to segment players by country for compliance handling. For instance, if source of funds evidence is required at a lower threshold in Country A than Country B, your system should flag and enforce that for those players. Centralizing the compliance oversight but localizing knowledge is helpful: you might have specialized teams or consultants for key markets to keep track of regulatory changes. Technology can assist by automatically recognizing a user’s jurisdiction from their account info and applying the corresponding rules (like automatically screening against that country’s domestic PEP list or formatting reports for that country’s FIU). The tip is to never assume one-size-fits-all entirely; always be conscious of local laws, but default to the stricter policy when in doubt.
Challenge: Crypto and Alternative Payment Methods. Online casinos often support e-wallets, prepaid cards, or even cryptocurrency. Each of these can introduce opacity. For example, if a player uses an e-wallet, the casino might see the wallet company as the sender, not the underlying source of funds. With crypto, the user can deposit directly from a personal wallet which could be funded by anything. These alternative payment channels can be exploited to disguise sources of money.
Tip: Apply the same EDD logic to payment methods: require KYC for any payment instrument used. For e-wallets or cards, only accept those from providers that themselves have KYC (perhaps disallow anonymous prepaid cards or unknown e-money services). If possible, integrate with payment providers to get info on the source (some wallet companies have programs to share sender info under AML agreements). For cryptocurrency, as mentioned, integrate blockchain monitoring solutions and treat crypto users as high-risk by default until proven otherwise. Some crypto-accepting casinos require an extra layer of ID verification or even proof of source of crypto (like a screenshot of the wallet holdings or an explanation of how they acquired the crypto). While that’s new territory, doing so signals to regulators that you aren’t giving crypto users a free pass on EDD.
Challenge: User Experience vs. Compliance. Online customers expect quick and easy service. Lengthy due diligence processes can frustrate them and lead to abandonment or complaints. The challenge is meeting regulatory obligations without driving away legitimate business.
Tip: Embrace a customer-centric but firm approach. One tip is to make the verification process as seamless as possible: use modern interfaces for document upload, allow the process to happen on mobile, and clearly communicate why you are asking for information. Gamify it slightly by showing progress bars for profile completion, so users feel it’s part of account setup rather than a punitive measure. Offer quick support: have a dedicated KYC/EDD support line or chat to help users who have questions about the process or need alternatives (for instance, if someone doesn’t have a particular document, what else can they provide?). Transparency helps: many players, when they understand it’s about law and security, are cooperative. It’s when they get requests out of the blue with no explanation that they resist. Therefore, provide brief, polite explanations in communications like, “As a licensed operator, we are required to confirm the source of funds for larger transactions to ensure a safe and compliant gaming environment. Please help us by providing…”.
Also, segment your approach: reserve the most invasive checks for those who truly trigger high thresholds or risks, and keep initial requirements reasonable. That way, casual players are not over-burdened (which could deter them), while serious anomalies get the full scrutiny. Essentially, use the risk-based approach to preserve user experience for the low-risk majority, while unapologetically enforcing rules on the risky minority.
Common Considerations Across Both Environments
Some challenges and tips are universal:
Training and Awareness: A well-trained staff is the front line of any EDD program. Both online and offline operations should invest in regular training for all relevant employees – from customer support and VIP hosts to dealers and cage cashiers – so they understand the “why” and “how” of enhanced due diligence. Staff should know the red flags to look for and the procedures to follow when they see them. Frequent refreshers and updates (especially when regulations change or new patterns emerge) are necessary to keep everyone sharp.
Resource Allocation: EDD can be resource-intensive. Management must ensure the compliance department is adequately staffed and funded to carry out its enhanced checks. For a casino, this might mean hiring investigators or EDD analysts with specialized skills (like forensic accounting or languages for international research) and giving them access to the needed tools (databases, software, legal counsel, etc.). Cutting corners on resources almost inevitably leads to compliance failures.
Maintaining Updated Policies and Procedures: Both land-based and online operators need to regularly update their AML/EDD policies to keep pace with evolving threats and laws. A policy should clearly outline the risk factors, the EDD measures to apply, and the escalation process. It’s a living document. For example, if authorities highlight a new trend (say, criminals using certain online games for collusion laundering), the policy and internal controls might need an update to address that.
Audit and Testing: Periodic independent audits (whether by internal audit teams or external consultants) can test the effectiveness of the EDD program. They might, for instance, sample some high-risk customer files to see if all required information was collected and up to date, or test whether a known risky individual could slip through the onboarding without being flagged. These audits identify gaps so they can be corrected before regulators find them. Regulators themselves will also test, sometimes through mystery shopping or during inspections asking very pointed questions – so it’s best to self-identify weaknesses and fix them early.
Collaboration with Regulators and Peers: Consider engaging in industry forums or public-private partnerships focused on AML in gaming. Sharing typologies and red flag experiences with other compliance professionals (in a legal way that doesn’t breach confidentiality) can improve everyone’s defenses. For example, one casino might discover a novel scam and by sharing it via an industry association, others can be alerted to watch for it. Regulators often appreciate when industry takes initiative to collectively raise standards. In some regions, there are regular meetings between gaming companies and the regulator to exchange insights – participating actively in those can give an operator an edge in understanding what examiners are looking for and how to meet those expectations.
Conclusion
Enhanced Due Diligence for high-risk players is no longer optional or merely “nice to have” – it is an essential practice embedded in regulatory requirements and critical for protecting the casino and iGaming sector from abuse. Politically Exposed Persons, VIP high-rollers, and customers with criminal red flags each present unique challenges, but the underlying principle in dealing with all of them is the same: know your customer in depth and remain vigilant. Through comprehensive EDD measures – from verifying identities and sources of funds to leveraging advanced technology for monitoring – casinos can uncover the truth about who they are transacting with and detect when something isn’t right.
For senior compliance officers and regulators, the focus is on creating an organizational culture that values compliance as much as customer service. With the right tone at the top, ample training, and by equipping teams with modern tools, even traditionally cash-heavy and privacy-challenged environments like casinos can achieve a robust level of financial integrity. Yes, challenges exist, and implementing EDD can be complex, especially across different channels and jurisdictions. However, as outlined, there are practical solutions and strategies to overcome these hurdles.
The global trend is clear: regulators from the FATF to local gaming commissions expect casinos and online gaming platforms to apply a risk-based approach with teeth – meaning when a customer’s risk is elevated, nothing short of enhanced due diligence is acceptable. By adhering to international standards, being thorough in screening and monitoring, and continuously improving processes, the industry can mitigate the risks associated with high-risk players. In doing so, casinos not only avoid enforcement actions and protect their licenses, but also contribute to the broader fight against financial crime. Keeping illicit money out of the gaming world preserves the trust and safety of the entertainment for legitimate players.