Can cashless technology prevent money laundering and consumer harm from gambling?

Updated: Apr 29


By Connuil McEvedy - 22 Feb 2022 Connuil McEvedy is Chief Risk Officer for Shaype. He is a passionate proponent of the benefits of innovation and technology, especially real-time capabilities, to improve regulatory compliance and consumer safety. Connuil is based in Sydney.



For our governments, balancing industry concerns is the challenge

Australians gamble some $250 billion every year and NSW has more poker machines than anywhere else in the world apart from Las Vegas.

Unsurprisingly, the gambling industry is targeted by criminals who use poker machines as washing machines to launder dirty money.

Money laundering means hiding illegally obtained funds through a complex sequence of transactions. Gambling venues are targeted because significant amounts of cash can flow in and out, in a largely unregulated way. 

Investigations by NSW’s Independent Liquor & Gaming Authority detected $5.5 million worth of suspicious poker machine transaction across 180 venues in Sydney in just two weeks after the city came out of lockdown in early October 2021 and that amount is growing at the rate of $1 million a week.

The simplest tactic is to load a poker machine with, say, $100 in cash, gamble just $1, and then take the refund ticket to the cashier to withdraw the remaining $99 credit.

In response to these financial crime risks, as well as the problems faced by gambling addicts seeking to self-exclude plus lobbying by gambling charities, there have been many proposals to remove cash in favour of digital money. Most recently in NSW, it has been a proposal to pre-load money onto a government regulated, cashless card linked to the gambler’s identity. The theory this will stem money laundering in gambling venues and help to curb the activities of self-nominated problem gamblers.


Balancing concerns and benefits

Poker machines are a form of electronic gaming. More technically known as Fixed Odds Betting Terminals, in Australia, they must pay out at least 87%.

As far back as 2010, the Australian Productivity Commission estimated that 40% of Australian gaming machine losses came from problem gamblers. The increased use of electronic gaming machines is associated with an increased risk of gambling harm, which can affect individuals, families and the broader community, magnified by social, financial or health inequity.

Additionally, negative impacts are magnified when there is co-location with alcohol consumption or the presence of children, for example, in neighbourhood pubs and clubs.

For many reasons, a cashless gambling card may not be popular with the hospitality industry, nor with consumers. Pokies are revenue-earners for neighbourhood pubs and clubs who have close ties to their local communities. Australians have a strong cultural connection to “the pokies” – or “one armed bandits” - and privacy is also a concern.

Moreover, despite all the trends toward a cash-light economy, accelerated by the pandemic, a minority of Australians will always rely on cash.


Financial regulation, technology and prioritising the right outcomes

As Chief Risk Officer for Shaype it’s my job to lead our assurance and governance programs for risk and compliance, including financial crime.

A lot of financial regulation has the same core underlying goals, for example, preserving the integrity of the financial system and preventing consumer harm.

Secure, transparent, timely and accountable involvement by all participants, under fair and appropriate regulatory systems – and effective oversight by regulators – is crucial to the functioning of the financial system. Increasingly, financial regulatory compliance and supervision involves real-time technology enabled by data and artificial intelligence.

In a world where people can move money faster than ever before, a potential downside is the ability to use faster payments to magnify gaming problems with individuals and criminal activities or money laundering.

Shaype is aware of its regulatory responsibilities and wants to give people control and transparency over their financial decisions. As a financial technology company, our experience is that technology is vital to achieve these positive consumer outcomes and improved regulatory compliance in the areas of fraud and financial crime.


Electronic gaming machines and money laundering

There is no doubt that electronic gaming machines provide an easy method to launder money. This was attempted to be addressed by legislation nearly a decade ago in the federal government’s failed Anti-Money Laundering Amendment (Gaming Machine Venues) Bill 2012.

There are unfortunately many recent examples across Australia that local pubs and clubs, as well as the larger casinos, are not adequately executing their responsibilities relating to consumer harm or money laundering due to a lack of controls and enforcement actions.

There are increasing anecdotal examples of bad actors taking advantage of regular or problem gamblers by paying them a percentage of wins or total value if they can prove funds have been gambled via the electronic machines. It is often the regular patrons with gaming issues, who have established trust and reputation with venues, who are the first individuals approached.


Digital controls and regulatory technology

The most recently proposed NSW government trial into cashless gaming attempts to leverage technology and implement digital controls to identify individuals and their sources of funds, maintain privacy, reduce harm from gaming, and allow community access and involvement with the local venue.

To meet all of these objectives, there needs to be a carefully designed and appropriately implemented set of controls. Considerations need to include simple Know Your Customer validation and tiered digital wallets to support purchases of food, beverages and community involvement, while segregating a specific gaming wallet.

The ability for technology to implement a range of restrictions has clear benefits, for example: time limits for gaming, loss limits, number of bets, number of transfers from social wallet to gaming wallet, removal of credit access to gaming wallet, geolocation limits, number of venues, ability to deposit or withdraw cash at venues or within a defined distance, and time delays on release of funds between wallets.

Restrictions could be imposed externally by regulation, or self-imposed by a gambler to set limits to mitigate harmful outcomes.


A case study in “technology for good”

Shaype supports openly an individual’s right to transparent control over their financial decisions while providing financial technology services in a manner that supports the integrity of Australia’s financial system and prevents consumer harm, including unintended consequences.

Where established and overseen correctly, the proposed cashless trial could establish a valuable case study in “technology for good.”

For more information, please visit Shaype.com and reach out using the contact form.

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