Casino’s €229,000 fine: Turkey CEO allowed to play €1 million from cash and bank funds

Serious shortcomings in risk assessment procedures and due diligence at Casino Malta Limited in St Julian’s has cost it over €229,000 in administrative fines from the Financial Analysis Intelligence Unit.

The FIAU said the casino had failed to carry out necessary enhanced due diligence measures on identifiable high-risk players, which the investigators found in 28% of cases reviewed.

Examples included a company CEO with connections to Turkey, with no information on his source of funds, and whose medium-risk was raised high when he dropped over €1 million in cash and from eight different bank accounts.

“A change in transaction pattern was noted... the fact the player utilised eight different bank accounts and the change in transaction pattern [means] the Company should have carried out additional measures such as obtaining documentation as to this player’s source of wealth as well as the income earned, and other returns generated through his employment/businesses,” the FIAU said.

In a second case, a student with links to China played over €200,000 and lost over €80,000, without any reassurance as to how a student could afford such substantial gaming activity/deposit over the course of justice 12 months. “When conducting EDD measures, it is not enough to simply check the ownership or other involvement in companies through the Malta Business Registry. The company was required to understand further and evidence the players’ source of wealth and source of funds.”

Another player dropped over €2million and lost circa €900,000 between 2016 and 2019, but while the funds did flow from a reputable bank, “this cannot be considered as a measure aimed at mitigating the risks of the customer. This since this measure does not identify nor evidence the SOF but simply outlines the flow of funds,” the FIAU said.

A former PEP (politically exposed person) who registered with the casino in 2015 was incorrectly allocated a low-risk rating. Then in 2019 the casino realised that the player had alleged involvement in bribery and tax evasion at the time of the formal appointment. “Notwithstanding this discovery, the customer was still allowed to continue wagering great amounts in cash. Despite all of this, the Company failed to submit an STR to the FIAU.”

A business owner who in 2019 was given a low-risk rating, was known to owe €500,000 in back taxes, but the casino failed to submit a suspicious transaction report to the FIAU on grounds of potential tax evasion.

And a self-employed plasterer with a low-risk rating from the casino, and who was later issued a freezing order for alleged drug trafficking, was not reported to the FIAU.

The FIAU found that a customer risk assessment (CRA) was carried out in January 2019, with a number of inadequacies where only the place of residency was taken into consideration to consider risk when determining the geographical risk the customer poses to the business relationship.

Casino Malta explained that the residency risk refers to the place of business or legal residence of the customer. But the FIAU said it was unclear how the casino calculated the Visit Frequency risk and the Drop Behaviour risk, since the dropdown selections for these two risk categories were ‘usual’ and ‘unusual’, with both of them having a rather vague description attributed to them. The FIAU  said at least 20% of the player profiles reviewed were attributed a low or medium risk rating even though they presented a higher risk of money laundering, with this being mainly due to the size of the transactions which were undertaken throughout the business relationship.

The FIAU also said 10% of the player profiles did not have a permanent residential address listed, with their hotel address listed instead. And 6% of the player profiles reviewed had a foreign address which was either non-existent or otherwise invalid.

The casino was also said to rely only on the players’ occupation details provided by the customers upon registration, without further explanations or proof of source of wealth and source of funds. In 12% of the player profiles reviewed, the occupation information was generic.

At the time of writing the penalty is not yet final and may be appealed by the company before the Court of Appeals.