Online gambling provides cover for money laundering, study says

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Miscreants infected a poker player's laptop malware that monitored his every online gambling move.
Cyber criminals can hide their ill-gotten gains from authorities by exploiting unlicensed gambling sites.

As online gambling sites soar in popularity — and unlicensed sites proliferate, criminals are finding it easier to launder their ill-gotten gains made through ransomware and other methods of cyber theft by using Bitcoins and the Tor network to further ensure anonymity, according to a report from McAfee.

In “Jackpot! Money Laundering Through Online Gambling,” McAfee researchers note that greater collaboration between law enforcement agencies to cut off the means for criminals to cash out would stem the crime but can't completely eliminate it because of the anonymity currently possible online and the rise of unlicensed sites.

According to market research firm H2 Gambling Capital, gross winnings for online gambling grew from 9.1 billion dollars in 2003 to 32.7 billion dollars in 2013 and is expected to increase to 39 billion dollars in 2015, with betting still accounting for the bulk of the winnings. The McAfee report acknowledges that the number of gambling sites is fluid, but is in excess of 25,000. Raj Samani, EMEA CTO of McAfee, in an email correspondence to SCMagazine.com, said he was surprised at “the sheer size in number of unlicensed online gaming operators, which is about ten times the size of the legal ones.”

It's not just the numbers that make gambling sites are ripe for crime. Online gambling generates huge volumes of transactions, moving rapidly through the internet. And both playing and paying are completely virtual. What's more, in many jurisdictions, gamblers are not required to pay taxes on their winnings.

Virtual payment systems are under less scrutiny and make laundering that much easier. Add the Tor network, which has been used by hackers to commit crime, to the mix and the level of anonymity increases.

“By directing Internet traffic through a series of relays, users can conceal their locations and usage from surveillance, thus defeating any attempt to monitor online activities,” the report says. Proxy server access, too, “could help bypass restrictions that licensed sites have in place to block players from countries where the site owner does not have a proper license.”

Virtual private networks (VPNs), which encrypt gambling traffic, also contribute to keeping laundering out of law enforcement's sight.

“Certain providers give users a multitude of VPN connections—for example, torguard.net advertises 300 servers across 23 countries,” the report says. “A number of VPN providers offer their customers the ability to hide their IP addresses and appear to come from a particular city. Some are already advertising VPN servers located in New Jersey and many other cities in the world.”

To counter money laundering through online gaming, Samani contends that “consumers and businesses need to make security a key priority. By not succumbing to clicking on suspicious links, apps or giving into ransomware demands means the bad guys will have nothing to launder.”

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