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Report's author says both sides misrepresent study on Web gambling, money laundering

29 Apr 2014

By Howard Stutz
The author of a new report on the use of Internet gaming for money laundering activities said Monday the findings of the study have been misrepresented by both anti-online wagering activists and pro-Web gaming backers.

The white paper — “Jackpot! Money Laundering Through Online Gambling” — was released last week by cyber security firm McAfee, which supplies Internet safety software for businesses and home computers.

The paper immediately fueled heated rhetoric over its conclusions.

“I feel like I kicked a hornets’ nest,” Raj Samani, chief technology officer of McAfee and lead author of the report, said in a phone interview from his offices in London. “Unfortunately, there has been some angry debate over the report. The reality is the most of (the discussions) are irrelevant to the findings.”

Samani and his co-authors said online gaming was “the most prominent method” used by cybercriminals to launder money. McAfee highlighted six different efforts jurisdictions could take to halt the activity.

“Greater collaboration between law enforcement agencies to target unlicensed gambling sites is required, particularly with those that operate outside the visible Internet,” the report stated.

In an interview, Samani said cybercriminals will attempt to launder money through several means, with online gaming being a popular source. However, Samani said the small U.S.-based regulated Internet gaming operations “are just a drop of water in the ocean” when looking at the realm of the online wagering universe.

Cybercriminals in the U.S., he said, look to unregulated websites in foreign jurisdictions, to launder money.

“In any jurisdiction criminals can circumvent any obstacle used to block their access,” Samani said. “You put in regulations, the criminals will find another vehicle.”

Samani said the report was written as a follow-up to a McAfee study on cyber crime that was produced a year ago. The findings were seized upon by both opponents and proponents of legalized Internet gaming in U.S.

Three states — Nevada, New Jersey and Delaware — have laws that legalize forms of Internet wagering. Some 10 states are exploring the idea. Meanwhile, in Congress there two competing bills that would legalize and regulate Internet gaming and an opposing bill that would outlaw the activity.

In a statement Monday, the Coalition to Stop Internet Gaming, which is funded by Las Vegas Sands Corp. Chairman Sheldon Adelson, said the McAfee report backed up previous warnings by the Federal Bureau of Investigation that Internet gambling will lead to money laundering by terrorists and other criminal groups.

“In the world that proponents of Internet gambling want to impose on the rest of us, there will be 50 different laws regulating Internet gambling sites, and innocent Americans could find themselves gambling with dangerous criminals or terrorists and unknowingly help them move money,” the coalition said in a statement.

Alison Harden, a spokeswoman for the Coalition for Consumer and Online Protection, which is funded by MGM Resorts International, Caesars Entertainment Corp, and the American Gaming Association, said the McAfee study showed banning Internet wagering would lead to additional unregulated websites.

“(The authors) repeatedly argue that licensed sites provide more protection for Americans, and that unlicensed black market sites present the biggest concern for criminal activity,” Harden said in an emailed statement. “In fact, they say that, ‘requiring licenses for gambling operators is an important approach,’ in dealing with the problem.”

Samani said he spoke with representatives of both sides of the issue after the report was released, but he refused to debate publicly with either party.

“You can’t make an argument in 140 characters,” Samani said in reference to several Twitter feuds that were fueled by the report. “We didn’t have any skin in the game, so to speak. To be fair, we saw both sides of the story.”

While Samani said regulated Internet gaming can help stem some of the illegal activity, the report said, “For every licensed online gambling site, there could be up to nine unlicensed online gambling sites.”

Gaming Control Board Chairman A.G. Burnett read the report and said Monday he disagreed with one finding concerning money launderers using Bitcoin and other online currencies.

“Nevada does not allow the use of crypto currencies when it comes to gaming,” Burnett said.

He said Nevada addressed money laundering issues when the state drafted its online gaming regulations.

“The standards created are as tough or tougher than the standards for land-based operators,” Burnett said. “We have minimized the risk by very rigorous auditing, accounting and enforcement standards.”

Samani said money launderers are more likely to avoid American sites because of the small number of Internet locations.

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