Nearly one million suspicious activity reports (SARs) were submitted to the UK’s National Crime Agency (NCA) in 2021/22 – a 21% increase on the year before. It’s a similar story in Malta, where many UK firms base their main operations, as the latest report by its Financial Intelligence Analysis Unit (FIAU) revealed a 40% increase in reports in 2021.
As criminals continue to filter dirty money through sectors such as gaming, there’s no question operators and businesses must stay vigilant.
Regulated firms are required by law to submit a suspicious activity report if they know or suspect that a person is trying to clean money earned from criminal activity. Given the high volume of rapid, potentially high-value transactions seen in the sector, it’s no wonder gaming is at arget for criminals.
Indeed, regulators have placed increasing emphasis on supporting operators in submitting quality reports and raising standards across the industry.
Firms such as casinos continue to contribute to the rise in reports –up by 3.6% in the UK on the previous year, while remote gaming firms made up more than half of reporting in Malta. A recent survey by my firm SmartSearch found that SARs are still increasing. More than a third of firms (38%) across the gaming sector had seen a rise in the number of SARs submitted in the last 12 months. Across all sectors surveyed (banking, property development, gaming and crypto) it was 36%.
The survey found that high-street betting shops submitted the most reports, with two thirds (60%) reaching out to law enforcement, compared to 32% of online betting firms and 38% of casinos.
An increase in SARs could be seen on one hand as encouraging, as it suggests greater vigilance and response to regulatory requirements. On the other hand, it also helps demonstrate the size and scale of the problem. Firms reporting a reduction in reports is arguably just as alarming, especially as the NCA estimates as much as £90bn ($109.25bn) is laundered through the UK every year, and cross-sector reporting of SARs only moves in one direction.
More worrying is the small minority of firms surveyed that have never submitted a SAR. Clearly, this highlights potential shortcomings in identifying potential red flags and, more broadly, in their approach to verifying the identify of customers. In both instances, it is very easy for operators to become enablers for financial crime and subject to severe regulatory action.
As part of its mission to raise standards, the Gambling Commission in the UK shared just some of the SARs success stories. In one example, the regulator explained how one helped bring down an organised crime group – identifying that its members had no legitimate means of income, and its leader had deposited around £1.8 million into a casino account over four years. As a result, nine people were arrested with funds recovered and returned to victims.
In another case, a gambling sector SAR was the ‘final piece in the jigsaw’ to bring a fraudster to justice, having stolen around £1m from his victims. Concerns were raised when he was placing significant funds in and out of gambling accounts.
It’s very clear that the threat level is high – and only exacerbated in recent years by the pandemic, the ongoing sanction regime and the continued shift into the online space. Our survey also found that a third of gaming firms had fallen foul of financial crime in just the last six months – with casinos the biggest victims.
The use of SARs is critical in mitigating the risk of operators becoming involved in financial crime and avoiding potential fines, reputational damage and time-consuming investigations. Just as important is the potential to provide much needed data to support the authorities in corroborating criminal activity and protect the wider public. As the FIAU report finds, SARs are also an important tool in international cooperation, with UK regulated firms a key ally in providing intelligence to support regulators in overseas territories such as Malta.
As regulators rightly point out, accurate intelligence generated through robust Know Your Customer (KYC) checks and enhanced Customer Due Diligence are fundamental to the quality of SARs. They are a regulatory requirement too. After all, how can you properly report suspicious activity or assess the threat posed if you do not have a complete picture of the client.
In response, many firms have moved to a digital compliance model, utilising platforms and tools like electronic verification (EV) and real-time monitoring to build a single customer view. By its very nature, digital compliance increases visibility and accuracy, modernises processes and establishes consistent checks and controls.
As more follow suit, it is right to expect SARS to increase in number. However, operators will have greater intelligence at their fingertips to make informed decisions and provide the necessary detail. This is not just important for suspicious activity reports, but in proving compliance in the event of an investigation or even an audit.
