Austrac sues Entain over AML and CTF rule breaches
### Key Points at a Glance
Austrac, Australia’s financial crime regulator, has initiated legal action against Entain. The allegation: violations of anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. Entain, known as the operator of brands like Ladbrokes and Neds, faces potentially significant financial consequences. The investigations uncovered compliance weaknesses that made the company vulnerable to criminal activities.
###
Background of the Investigation
In September 2022, Austrac launched an investigation into Entain. The goal was to assess compliance with AML and CTF regulations. It was revealed that the company committed multiple violations, making it easier for criminals to launder illegal funds through gambling activities. A particularly problematic issue was the inadequate monitoring of third parties depositing cash on behalf of customers. Entain failed to verify the identity and the source of funds for these customers.
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Key Findings of the Investigation
The investigation highlighted several critical issues:
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– **Lack of Oversight:** Entain’s management and board did not exercise sufficient control over AML/CTF processes.
– **Inadequate Monitoring:** Third parties were allowed to deposit cash without proper scrutiny of these transactions.
– **High Risks from Pseudonyms:** Seventeen high-risk customers were able to open accounts under false names, complicating traceability.
– **24/7 Operations:** The continuous online operations created opportunities for anonymous users to exploit the system.
These shortcomings made Entain vulnerable to money laundering and other criminal activities.
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Austrac’s Criticism and Legal Action
Brendan Thomas, CEO of Austrac, expressed strong criticism of Entain. He emphasized that money laundering is often linked to more severe crimes such as fraud and corruption, which cause significant harm to society. Austrac accuses Entain of failing to develop an effective AML program and not adequately assessing risks. The Federal Court of Australia will now decide on potential violations and sanctions.
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Entain’s Response
Entain has acknowledged the allegations and stated its full cooperation with Austrac. The company has already taken steps to improve its AML and CTF systems. Full implementation of these changes is expected to be completed by June 2025. CEO Gavin Isaacs highlighted the company’s commitment to combating financial crime in the gambling sector.
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Outlook on Potential Consequences
If the court finds violations, the penalties could be substantial. Previous cases in Australia indicate that fines in the millions are not uncommon. The ongoing legal proceedings are expected to take some time. Austrac has announced that it will not provide further comments during the process.
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Our Assessment
The allegations against Entain underscore the importance of robust compliance systems in the gambling sector. For globally operating companies like Entain, adhering to stringent AML and CTF standards is essential to minimize regulatory risks. The announced improvements are a step in the right direction, but their implementation will be crucial. For players, it remains to be seen whether and how these developments will impact Entain’s offerings.
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