Jackpot! Money Laundering Through Online Gambling

Transcription

1 Jackpot! Money Laundering Through Online Gambling McAfee Labs Executive Summary Jackpot! Money Laundering Through Online Gambling McAfee Labs Executive Summary 1

2 Introduction Jackpot! Money Laundering Through Online Gambling McAfee Labs Executive Summary This executive summary was written by: Charles McFarland François Paget Raj Samani Since the genesis of online gambling in the mid-1990s, the proliferation of online casinos has been nothing short of staggering. According to the global gambling market research firm H2 Gambling Capital, this growth should continue to surge by nearly 30% over the next three years to more than 28 billion (US$39 billion). 1 This growth has fueled the development of technical capabilities that can be used to launder money. Online gambling involves huge volumes of transactions and cash flows that can obscure and disguise money laundering. Online gambling does not involve a physical product or exchange of physical currency, complicating the task of tracking the flow of money. Furthermore, gambling winnings are tax free in many jurisdictions, making mandatory reporting to governments unnecessary, and thus infrastructure for monitoring transactions is nonexistent in those cases. As a result, illegal proceeds can be laundered by wagering them on one end of a transaction and receiving the payouts as gambling wins on the other end. Gambling wins can also be exchanged as payment for illegal goods or services changing hands elsewhere. Jackpot! Money Laundering Through Online Gambling McAfee Labs Executive Summary 2

3 The availability of player anonymity and location-hiding services simplifies the technical obstacles money launderers face. For every licensed online gambling site, there could be up to nine unlicensed online gambling sites. BENEFITS OF MONEY LAUNDERING THROUGH ONLINE GAMBLING There are three critical areas in which online gambling platforms enable money laundering: Anonymity Advantages. Because online casinos are designed to operate across jurisdictions and in a commercial trade illegal in many jurisdictions casino operators are fairly advanced in the ways in which they support player anonymity. These tactics include: Absence of substantial personal information gathered during service registration. Support for Bitcoin or lesser-known digital currencies such as CasinoCoin to avoid heavily regulated monetary systems. Use of the free worldwide TOR (The Onion Router) network of 5,000 relays to conceal player identity, location, and activity. Use of proxy servers, which can make web connections appear as if they are coming from another city or country. Player traffic encryption through a virtual private network to hide gambling activity from the prying eyes of an ISP or law enforcement. Money-laundering tools that allow customers to anonymously convert to and from virtual currencies. Payment Options. The popularity of online gambling has driven the development of a wide variety of gambling options, featuring various account deposit and withdrawal methods and middleman entities processing the transactions: Gambling options: The player chooses from a variety of games, including bookmakers, betting exchanges, poker tables, bingo cards, and skill games. Payment options: The player chooses from deposit and withdrawal options, including credit cards, debit cards, prepaid cards, bank wire transfers, ACH transfers, checks, payment gateways, player-to-player transfers, and mobile telephone billing debits and credits. Processor options: Player deposits and withdrawals are handled by payment processors in a variety of currencies, including virtual currencies such as Bitcoin. Too Many to Police. The sheer number of online casinos is so great that it is difficult for local authorities to monitor, let alone police, their activities. As of November 2013, there were approximately 104 international jurisdictions that regulated a total of 2,734 Internet gambling websites in at least one form of wagering. In addition, there are estimated to be more than 25,000 unregulated gambling websites around the world. Jackpot! Money Laundering Through Online Gambling McAfee Labs Executive Summary 3

4 Greater collaboration between law enforcement agencies to target unlicensed gambling sites is required, particularly with those that operate outside the visible Internet. Fighting Back: Solutions and Strategies Given the growing and ever-changing landscape of online gambling, those working to apprehend cybercriminals must be able to leverage cross-sector, cross-border, and public-private partnerships, combining the capabilities of law enforcement, ISPs, Internet security companies, independent monitoring organizations, academia, and the financial institutions ultimately in receipt of suspicious fund transfers. One example is Europol s European Cybercrime Centre, which has established a sound strategy and tactical capabilities to take on cybercrime on a number of fronts: 2 Data fusion: The gathering and processing of information on cybercrime, and maintaining technical expertise for law enforcement in all member states. Operations: Providing member states with the technical, analytical, and forensic expertise required to conduct cybercrime investigations. Local/global partnerships: Facilitating law enforcement cooperation with partners within and without the member community, and coordinating complex transnational cases in close collaboration with organizations such as Interpol, Eurojust (EU agency for judicial cooperation), European Union Cybercrime Taskforce, and European Cybercrime Training and Education Group. Strategy: Producing threat assessments, including trend analyses and forecasts as well as new developments on cybercriminal activity and functional processes. Training and awareness: Collaborating closely with organizations such as police academies to develop training activities and generally raise cybercrime awareness among trainees, as well as informing and building capacity among law enforcement officials, judges, and prosecutors. Research and development: Developing forensic tools to enable member states to more effectively detect and prosecute cybercriminals. Only with a strong online law enforcement capability can we prevent cybercriminals from cashing in and getting away with it. Jackpot! Money Laundering Through Online Gambling McAfee Labs Executive Summary 4

5 Conclusion Knowingly or unknowingly, online casino operators are fueling the increase in cybercrime by making it easy to cash in on cyberthefts. Given customer demand to enable gaming across legal jurisdictions, online gambling sites provide a wide variety of anonymity capabilities that can also be abused for money laundering. The online gambling value chain offers many games, payment methods, and access methods, resulting in greater opportunities for criminals to hide their illicit gains from law enforcement. The proliferation of gambling sites is so rapid that it is very difficult for local authorities alone to regulate licensed and police unlicensed gambling properties. Actors working to fight cybercrime must be able to leverage cross-sector, crossborder, and public-private partnerships, with efforts such as data gathering and sharing, operational support, local entities partnering globally, joint threat analysis and strategy prescriptions, training and awareness, and research and development of forensic tools. A copy of the full report can be found at There s Nothing Virtual About the Opportunity in Real-Money Gambling, 2013, Odobo/H2 Gambling Capital. 2 The information in this document is provided only for educational purposes and for the convenience of McAfee customers. The information contained herein is subject to change without notice, and is provided as is, without guarantee or warranty as to the accuracy or applicability of the information to any specific situation or circumstance. McAfee and the McAfee logo are registered trademarks or trademarks of McAfee or its subsidiaries in the United States and other countries. Other marks and brands may be claimed as the property of others. McAfee provides the specifications and descriptions herein only for information, subject to change without notice, and without warranty of any kind, expressed or implied. Copyright 2014 McAfee, Inc exs_jackpot_0414_fnl_PAIR Jackpot! Money Laundering Through Online Gambling McAfee Labs Executive Summary 5