Sports and racing betting and AML/CFT

Betting services are at risk of being exploited by criminals to launder money. The New Zealand Racing Board is among organisations that will be affected by changes to the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act.

To help sports and betting services understand the risks they face, the Department of Internal Affairs has just released a sector risk assessment(external link) (SRA) on its website.

On this page:

The New Zealand Racing Board administers all racing and sports betting in New Zealand. It will need to put AML/CFT measures in place.

This will help prevent money laundering, make it easier for authorities to find out where ‘dirty’ money came from, prosecute criminals, seize illegally earned money and assets, and stop crime and terrorism.

Here’s a summary of the proposed changes.

What gambling services have to comply with the Act?

The Board will need to put AML/CFT measures in place when it:

  • provides accounts to customers for gambling or betting
  • carries out cash transactions above a specified threshold

AML/CFT measures will not apply to class 4 gaming services provided by the Board (that is, gaming machines in its retail outlets). Customers who use these don’t set up accounts and there’s a low risk criminals will use gaming machines to launder money.

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When does the Board need to start complying?

The Board will need to start complying with the Act from 1 August 2019.

To get ready, the Board will need to take a number of steps beforehand. For more information, see What does the Board have to do to comply with the AML/CFT Act?

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Why does the AML/CFT Act apply to the Board?

Criminals use betting services to launder illegally earned money, so it looks like they made it legally from gambling.

For example, they may store money in betting accounts for a short period before taking it out. Alternatively, they may use an account to receive cash from associates, to move cash nationally, or they may pool together funds from multiple sources, which makes it harder to trace where it came from. Even if they lose some money gambling, they still win enough back to make it worth their while, because their ‘dirty’ money is now ‘clean.’

Introducing AML/CFT measures will deter criminals from laundering money through racing and sports betting and help detect them if they do.

Importantly, it will also strengthen the overall AML/CFT system. Casinos have been covered by the Act since 2013. Also, the Board may detect ‘red flags’ that might not be picked up by a bank or other financial service providers who interact with the same customers. That’s because the Board may have more information about the people or funds involved in a particular transaction.

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What does the Board have to do to comply with the AML/CFT Act?

Initially, you’ll have to:

  • designate someone in your business as an AML/CFT compliance officer
  • assess and document the money laundering and terrorism financing risks your business may face
  • establish an AML/CFT compliance programme setting out how you’ll detect and manage these risks.

On an ongoing basis, you’ll have to:

  • verify the identity of customers before providing any service covered by the AML/CFT Act. In some circumstances (such as if they represent a company or trust), you may also need to ask for information about where money came from and the other people involved. For more information about verifying customers’ identities, see:
    Information for customers about anti-money laundering laws
  • submit a Prescribed Transaction Report to the Police Financial Intelligence Unit (FIU) if a client wants to conduct a transaction in cash that is $10,000 or more, or an international wire transfer of $1000 or more
  • monitor customers’ accounts to identify potential warning signs of money laundering and terrorism financing. You must report any suspicious transactions or activity to the FIU. For more information, see:
    Reporting suspicious activities
  • regularly review your risk assessment and compliance programme
  • have your risk assessment and compliance programme audited regularly
  • submit an annual report to the Department of Internal Affairs, which will supervise your sector.

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What can the Board do to reduce its compliance costs?

For information about ways to reduce compliance costs, see:

Working with others to reduce your AML/CFT compliance costs

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What help and oversight will be available?

The Department of Internal Affairs (DIA) will supervise the Board, as well as other businesses that Phase 2 of the Act applies to. DIA will help the Board comply with the law and enforce it when needed. Some of the things DIA will do include:

  • helping you understand how criminals could use your services to launder money or finance terrorism
  • providing support and guidance to help you identify money laundering ‘red flags’ and to comply with AML/CFT laws
  • investigating and taking action if you don’t meet your obligations.

A range of existing guidance material is already available to help get you started Now the Bill has been passed, we plan to engage with sectors to develop regulations, which will provide more clarity, and produce more guidance material. For more information, see:

AML/CFT supervision and support for businesses

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