Money Laundering: Implications for Lottery Organizations

a publication of the Issue no. 17, June 2005 World Lottery Association

Money Laundering: Implications for lottery organizations

wwla_17_UG.inddla_17_UG.indd 1 66.6.2005.6.2005 13:12:5513:12:55 UhrUhr INTRALOT?!COPYPDF

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wwla_17_UG.inddla_17_UG.indd 2 66.6.2005.6.2005 13:13:0213:13:02 UhrUhr Choosing one’s learning experiences

Lottery professionals have a full program of seminars and 4 President’s page conferences to attend over the year. Some are focused The language of persuasion: the importance of communicating on specific regional issues. Others are designed to enable lottery effectively with our economic and social environment. executives from every region to exchange their experiences 7 Beyond the horizon: Cancún 2005 and learn from “thought leaders” and subject-matter experts The WLA’s second World Lottery Forum will be hosted by from outside our sector. Mexico’s Lotería Nacional para la Asistencia Pública in November. Outline of the business program for a successful We are well aware that the WLA Academy is catering for lottery new conference format. managers with busy schedules and member organizations with strict constraints in terms of time and resources. 12 The case continues As a result, we coordinate our program of events with the Legal advisor Philippe Vlaemminck discusses the legal regional lottery associations as far as possible. A number of implications of the WTO ruling and the latest developments in WLA Academy seminars are organized jointly with EL, Europe as debate over the Services Directive continues. for example, while the regional associations regularly provide 16 Money Laundering practical support for our seminars in different parts of the An overview of some of the practices used to “clean” dirty world. Above all, we need to meet members’ needs by ensur- money, and the national and international bodies fighting ing all our events are of the highest quality in terms of content, to stop them. The WLA’s Security and Risk Management speakers and logistics. Committee recommends heightened vigilance on the part of lottery organizations. Preparations are well underway for the second edition of the WLA’s World Lottery Forum in November. With a format 24 Legality, interactivity and thought leadership designed to maximize participation by delegates and a choice of Reports from recent WLA Academy seminars and an update topics intended to stretch members’ line of sight “beyond the on the pilot Frontier Program. horizon”, it promises to be a memorable event. Lottery leaders 24 Coming events and executives should consider Cancún 2005 a priority! Brief notes on the coming season’s seminars and events, with topics ranging from Corporate Social Responsibility to Delegates invited to attend the annual Directors’ Summit on the cyber-crime. third and final day of the Cancún business program will try to identify critical areas of knowledge for lottery leaders tomorrow. 26 WLA contributors Their input will shape the future Frontier Program for senior lottery management, now being developed by the WLA Academy with the Stockholm School of Economics.

The WLA magazine Editor-in-chief: WLA General The quality of the input is the key to the success of any learning is published by WLA, Secretary Yvonne Schnyder process. With input of this caliber, and the continued support of the World Lottery Association Editor, advertising manager: WLA members and sister associations around the world, Lange Gasse 20, P.O. Box Doris Stöcklin I am confident that the WLA Academy will successfully fulfill its CH-4002 Basel, Switzerland Copy editor/writer: John Smellie role as the profession’s chief educator and knowledge leader. Phone +41 61 284 1111 fax +41 61 284 1350 Design, layout, prepress e-mail: ys@world-lotteries.org production: Stöcklin Associates, www.world-lotteries.org Basel, Switzerland Printed by: BDV, Basler Druck+ Verlag AG, Basel, Switzerland

June 2005 3

bdv_wla_17.indd 3 6.6.2005 11:37:10 Uhr The language of persuasion

Our position on the outcome of the WTO What’s in a word? The truth is that we are not an industry dispute is one of guarded satisfaction: like any other – we are engaged in an the United States successfully argued The WTO dispute panel spent a long activity with serious, identifi able risks, that certain restrictions to free trade are time debating the defi nition of “sporting” an activity that requires careful regula- necessary to protect the broader inter- as it applies to the United States’ com- tion and control to mitigate those risks ests of society as perceived by member mitments to free trade in services. And and protect the public good. states themselves. the Appellate Body’s decision to reverse some of the dispute panel’s key fi ndings Nor is the lottery market a global market This public order defense was ultimately came after lengthy interpretation of the in the sense that state borders hamper accepted by the World Trade Organization, word “necessary”. the overall performance of the system. but it would be a mistake to consider Overall performance must be measured the battle over. The free marketeers are Legal discussions apart, even a seem- against multiple criteria – and public regrouping and will continue to chal- ingly neutral expression like “the global order and morality are surely as valid lenge our position wherever and when- lottery industry” can help to perpetu- yardsticks as private profi t and eco- ever they have the opportunity. ate the perception that gaming is the nomic effi ciency. In the gaming sector, same as any other economic activity and territorial integrity is indissociable from The WLA and its members are clear in should therefore be subject to the same the rights and responsibilities of govern- their own minds as to what that position rules – or lack of them. ments to protect the interests of their is. But one of the lessons to be learned societies. from the WTO dispute is the impor- As we know, this is not the case. Lotteries tance of the language we use to convey do not make sense in macro-economic While globalization is clearly inap- our convictions to the rest of the world. terms. Normal rules of competition do propriate in the gaming sector, recent Nothing can be taken for granted. not apply to gaming because more com- developments have shown just how petition does not lead to better alloca- interconnected our national and regional tion of resources – the underlying aim of environments are. Legal and regulatory competition – but to an overheated mar- rulings in one jurisdiction or region may ket. In an area where such fundamental well have an impact on decisions made concerns as public order and the gen- in another. The WLA has an important eral interest of society are at stake, it is role to play in keeping the channels unreasonable to expect market forces of communication open and promoting alone to fi nd the ideal balance. Especially cooperation among the regional lottery without a level playing fi eld for all the associations and legal experts who are players involved. monitoring these developments.

bdv_wla_17.indd 4 6.6.2005 11:37:28 Uhr Consensus, cooperation The World Lottery Forum in Cancún (see and it was an integral part of the pub- and communication page 7) will be an opportunity to get back lic order argument acknowledged by the to basics on these questions. How can we WTO in the remote gambling dispute. Economist Adam Smith contended in the communicate in a simple, understand- 18th century that the “invisible hand” of able way to multiple stakeholders – regu- Over and above lotteries’ legal responsi- market forces would naturally establish lators, the general public, employees, the bility to manage risks and comply with an equilibrium that benefi ts the whole media and other gaming operators? national and international regulations, society. Much more recently, Nobel-prize- the money laundering issue is an oppor- winner John Forbes Nash added an im- The WLA Strategic Development Com- tunity for the state-controlled sector to portant new dimension to that argument, mittee will be building on input from demonstrate responsible leadership in reasoning that society as a whole will the membership and from the special- the broader gaming economy. benefi t most if each player looks for per- ists we have invited to join us in Cancún sonal and collective interest – in other to develop a communication strategy Proactive self-regulation, cooperation words if players cooperate with each for the WLA that is both coherent and with government regulators and inter- other. There is no doubt in my mind that compelling. governmental bodies, and above all our cooperation between operators, suppli- powers of persuasion within our econom- ers, regulators and the general public is Leadership opportunities ic and social environment, are critical to the best way to establish the delicate bal- our credibility as effective instruments ance that is needed in an area as emotive As well as more detailed coverage of the of public policy as gaming. And the key to cooperation is WTO ruling and EU developments by effective communication. gaming attorney Philippe Vlaemminck, this issue of the WLA Magazine includes a special report on money laundering Reidar Nordby, Jr. (see page 16). The fi ght against money WLA President laundering and terrorist fi nancing is a priority for governments everywhere,

bdv_wla_17.indd 5 6.6.2005 11:37:30 Uhr bdv_wla_17.indd 6 6.6.2005 11:37:31 Uhr Members of the lottery community are invited to travel “beyond the horizon” to Cancún on Mexico’s Caribbean coast in November to experience a lottery event with a difference – the 2005 World Lottery Forum. We are particularly honored that President Vicente Fox is planning to be present in person to officially open the proceedings. The World Lottery Forum will include an intensive business program with a focus on the bigger picture – the lottery sector in its socio-economic context now and in the future – as well as the WLA General Meeting and the annual Directors’ Summit. Rounding out the Cancún experience, our hosts from the Mexican National Lottery are organizing a lively social program and a networking day, and plenty of scope for companions to explore the Yucatan’s history and culture – or just relax by the pool!

Business program topics (provisional) The 2005 World Lottery Forum will bring major international events. In Cancún, • Communicating to the heart of the con- together the leaders of the regulated he will lend his talents again, working sumer lottery sector with top speakers pre- with speakers and participants through- • The invisible hand and the lottery sector pared to provide insight and perspective out the entire event to maintain the • Forging a partnership with employees, in an environment designed to stimulate thread of communication. customers and governments creativity, discussion and debate. • Legal issues – a front-line perspective Modeled on the successful format The World Lottery Forum alternates • Global demographics related to the developed for ﬁ rst World Lottery Forum with the WLA Convention and does lottery business in Granada, Spain, in 2002, the Cancún not include a Trade Show. The sup- • Rigging the game/fixing the odds business program includes keynote ses- plier industry will nonetheless be well • 50 years of lotto sions, parallel sessions and workshops represented at Cancún. In particular, • Anti-gaming on the rise? and is intended to be as participative as the business program will include a • Revitalization of a lottery possible. Platinum Contributors Forum, a Gold • CSR – what are the next steps? Contributors Session and a Silver Con- • The brains behind the games Those who attended the 2004 Convention tributors Workshop, each moderated by • The rising stars – the sky’s the limit! and Trade Show in Durban will remem- a prominent member of the state-con- • Finding the recipe for the optimum inno- ber keynote speaker Kjell Nordström’s trolled lottery community. vation mix vision of a new socio-economic land- • Cyber-laundering and sports betting scape as one of the highlights of the Travel beyond the horizon – and make business program. Kjell Nordström is Cancún your destination this November! the acclaimed author of Funky Business Online registration and the latest details and Karaoke Capitalism, a professor at about the business program are avail- the Stockholm School of Economics, and able at www.wla2005.com. a much sought-after keynote speaker at

June 2005 7

bdv_wla_17.indd 7 6.6.2005 11:37:35 Uhr Monday, November 7

The social value The Invisible Hand of gaming Business Program Day 1

In 1776, the economist Adam Smith described a mechanism known as the Invisible Hand that would naturally guide structured economic systems to a free market economy, maximizing human happiness and satisfaction through competition and liberalization. Two centuries later, Nobel prizewinner John Nash pointed to the ﬂ aws in that system, arguing that self-interest alone would ultimately lead to disaster. Self- interest combined with a concern for the good of society, he said, is more likely to be of beneﬁ t to all.

Day 1 of the Business Program will examine the external forces that affect lottery operations. What are these forces, who controls them and how can Key questions lottery organizations gain the under- • How do morality, ethics and religion standing necessary to succeed consis- affect long-term cycles in society? tently now and in the future? • What motivates people to participate in gaming activities? Keynote, parallel and workshop sessions • What is the inherent cultural and will address the challenging relation- social value of gaming? ship between lottery organizations and • Is gaming an integral part of human be- a ‘new-world’ environment that doesn’t havior and what are the implications? necessarily understand the subject mat- • How does society perceive integrity ter and the roles of regulated lotteries. and transparency and how should lotteries factor these perceptions into their This day will focus on the challenges operations? of an external environment where eco- • What are the trends with respect to nomic, social, political and technologi- globalization, liberalization and regula- cal forces are constantly changing the tion? ground rules. • What will tomorrow bring and how will it affect us? Day 2 of the Business Program will examine how individual lottery operators can become more successful in tackling challenges and restrictions that the external environment places upon

bdv_wla_17.indd 8 6.6.2005 11:37:41 Uhr Tuesday, November 8

Investing in The Human Touch people Business Program Day 2

their organizations. This may involve a combination of ‘old-school’ techniques relating to human resource management, marketing and sales strategies, communication and public relations, and a critical examination of the ‘new-world’ tools that are now available.

One of the keys to success within any organization is to win and maintain the confi dence of stakeholders. The government defi nes the legal environment; the needs of the customers dictate the services required; and leadership must secure employees with the right profi le, skills and training to get the job done. Communicating effectively with all these stakeholders is of paramount importance. Key questions All organizations face the challenge of • How can modern customers be not only creating the spirit of innovation, reached and retained under decreased but being able to lay the groundwork for regulation? developing this innovation into a viable • How can lottery organizations product. In many ways, managing in- communicate in a simple, understand- novation is as important as innovation able way to multiple stakeholders itself. In other words, as Kjell Nordström (governments, customers and has put it, “technology doesn’t make you employees)? less stupid – it just makes you stupid • How can operators define the right em- faster.” ployee profiles, skills and training? • Have interactive technologies and Day 2 will also include a security session global media created a global culture? focusing on sports betting and cyber- • How can the innovation process be crime. Sports betting is an immensely promoted within an existing framework popular form of gaming that at times has to achieve a viable product that is been associated with illegal activities accepted by regulators, the media and including money laundering. The session the consumers? will look at diverse aspects of an emerg- • Does regulation paralyze innovation? ing area of technological crime, with a • Is sports betting different from special emphasis on sports betting. other forms of gaming?

June 2005 9

bdv_wla_17.indd 9 6.6.2005 11:37:44 Uhr Wednesday, November 9

The challenges Directors’ Summit & of the future General Meeting

Day 3 of the Business Program will begin with a keynote session followed by the WLA’s 3rd annual Directors’ Summit. There will be a presentation by Singapore Pools, the hosts of the 2006 WLA Convention, at the end of the morn- ing. The WLA General Meeting as well as short reports from the ﬁ ve regional lottery associations will be held in the Key questions afternoon. • What will consumer behavior patterns be like next year, or even five or ten For the Directors’ Summit, selected lead- years down the line? ers of lottery organizations have been • Which new technologies will be invited to debate central lottery issues center stage? among themselves and with the audience. • How will leaders of the lottery sector The Directors’ Summit will build on the tackle these challenges? key topics being addressed in the pilot • What are the critical areas of Frontier Program. The long-term goal of knowledge for lottery leaders the Frontier Program is to bring together tomorrow? the best minds in the lottery community with planners and strategists from the academic, business and governmental sectors, to provide the leadership of WLA member organizations with a deeper understanding of the gaming economy now and in the future.

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bdv_wla_17.indd 11 6.6.2005 11:37:53 Uhr The case continues

Both sides in the WTO cross- WTO: US claims victory Who won? but the war goes on border gambling dispute have The Appellate Body report will give rise to welcomed the Appellate Body’s In June 2003, the government of Antigua a huge volume of legal wrangling, since report, which reversed some of the & Barbuda requested the establishment both Antigua and the United States inter- of a WTO dispute panel to consider its pret the fi ndings of the Appellate Body to dispute panel’s key findings. claims that US measures affecting the their advantage. Philippe Vlaemminck offers his cross-border supply of gambling and betting services are inconsistent with the Antigua has expressed concerns with interpretation of a ruling that could United States’ obligations under the GATS some of the Appellate Body’s statements have wide-ranging implications for and its schedule of specifi c commitments. and decisions but indicated that it was The EC, Mexico, Canada and Taiwan generally satisfi ed. The United States has remote gambling worldwide – requested to be third parties in the said it was pleased that the Appellate and monitors the regulatory ebb and dispute. Antigua & Barbuda asserted Body reversed or modifi ed some of the that the United States had made a GATS WTO dispute panel’s key fi ndings, which flow in Brussels as debate on the commitment in relation to gambling and it had called “deeply fl awed”. Services Directive continues. betting services on its schedule of specifi c commitments and that prohibition of Country of origin gambling and betting services provided from outside the United States therefore The Appellate Body confi rmed that the violates US obligations under GATS. United States’ schedule includes specifi c commitments on gambling and betting In November 2004, the WTO dispute services and that the US prohibition on panel handed down a ruling in favor of the remote supply of gambling and bet- Antigua & Barbuda, rejecting the public ting services is inconsistent with its mar- order defense of the United States. The ket access obligations under GATS. US appealed this ruling. Importantly, however, the WTO Appellate In April 2005, the WTO Appellate Body Body confi rmed that Internet gambling is released its fi ndings, fundamentally supplied from Antigua into the US rather changing the WTO Panel’s ruling on the than supplied in Antigua to a US con- public order exception. sumer.

The Appellate Body conﬁ rmed that remote gambling is a distribution method of gambling (comparable to telephone) under Mode 1 (cross-border supply) which is different from Mode 2 (consump- tion abroad).

This approach does not seem at odds with the approach taken by the UK government, for example in the 2003 position paper by the Department for Culture, Media and Sport, which supports the view that gambling takes place where the gaming operator is located.

bdv_wla_17.indd 12 6.6.2005 11:37:55 Uhr Philippe Vlaemminck is advisor to the WLA and EL on European and international legal questions.

Regardless of its source or the national Implications What next? origin of the supplier, the Appellate Body found, the nexus of the relevant concerns The Appellate Body’s fi ndings have very The United States is now required to is with the remote supply of gambling far-reaching implications as they mean implement the fi ndings of the Appellate services. that a state decides independently about Body. It has a “reasonable period of time” its own public order concerns regardless (which should not exceed 15 months from It therefore agreed with the dispute pan- of the regulatory frameworks that may be the date of adoption of an Appellate Body el’s ruling that specifi c factual evidence in place in other states. report) to bring its measures into confor- about Antiguan gambling and betting mity with WTO rules. A new WTO dispute services did not need to be taken into procedure could begin if Antigua dis- account when evaluating whether US The United States has agrees as to the consistency of US mea- restrictions on remote supply are “neces- demonstrated that the Wire sures taken to comply with the Appellate sary” to meet public moral and public or- Body ruling. der interests under Article XIV. Act, the Travel Act, and the Illegal Gambling Business The United States Trade Representative Public order (USTR) has indicated that the US only Act are measures necessary needs “to clarify one narrow issue con- In relation to the Article XIV GATS public to protect public morals or cerning Internet gambling on horserac- order defense, the Appellate Body sub- ing” for the Article XIV exception to apply stantially modifi ed the dispute panel’s maintain public order. to the US prohibition. USTR has stated fi ndings. that it would explore possible avenues for addressing this fi nding. This could include “Although there is a signifi cant restrictive amending the Interstate Horseracing Act trade impact, the Appellate Body noted, so that US operators would also be pro- this is expressly tempered by a detailed hibited from offering remote betting on explanation of certain distinctive charac- By implication, therefore, the fact that the horseracing. USTR also declared that it teristics of, and concerns specifi c to, the UK has a strong regulatory framework would not ask Congress to weaken US remote supply of gambling, including: and a serious gaming board does not restrictions on Internet gambling. • the volume, speed and international oblige any other EU jurisdiction to abstain reach of remote gambling transactions from invoking its own public order con- It is clear that the next stage of the battle • the virtual anonymity of such transac- cerns to restrict the cross-border supply is going to take place in the US Congress. tions by UK remote gambling operators. US lotteries and NASPL should therefore • the low barriers to entry in the context concentrate on defending and reinforcing of remote supply of gambling services Alternative interpretations their legal environment. The WLA will • the isolated and anonymous environ- provide support when appropriate. ment in which such gambling takes According to the lawyers representing place. Antigua, the US is obliged to enter into Judicial and regulatory negotiations and even has to consider battles continue in Europe Domestic horseracing withdrawing certain, if not all restrictions. Although one cannot read this in the European bookmakers’ associations have The Appellate Body considered that the Appellate Body report, remote gambling taken pains to emphasize that several United States has not suffi ciently dem- operators are clearly not ready to give up lower courts have decided in favor of lib- onstrated, in the light of the Interstate their trade war against the US. One must eralization. As already reported in this Horseracing Act, that the prohibition is assume that they will use all means, both column, however, the Supreme Courts of applied to both foreign and domestic political and legal, to continue to threaten at least four EU Member States (Belgium, suppliers of remote betting services for the US market. Finland, the Netherlands and Sweden) horseracing. The United States has there- have had the opportunity to interpret the fore not established that the prohibition latest case law of the European Court of satisfi es the requirements of the Article XIV chapeau. continued on next page

June 2005 13

bdv_wla_17.indd 13 6.6.2005 11:37:56 Uhr The case continues continued from previous page

Justice. In all four cases, the Supreme policies. That could have unacceptable North Carolina may OK lottery Courts have concluded that an exclusive repercussions on the incidence of prob- right system in the games of chance sec- lem gambling. From a purely legal point In April, the North Carolina House of tor does not infringe the EC Treaty pro- of view, it would contradict earlier rulings Representatives approved a state lottery visions. At the end of the day, Supreme that have defi ned the current contours by a narrow margin (61-59). The state Court decisions will be considered as the of the regulatory landscape by prevent- Senate has yet to approve the bill, but only valid interpretation of law. Senate budget proposals announced in A liberalized, pan- early May already included lottery fund- In the course of 2004, the European ing for education – as well as a state- Court of Justice received four new re- European sports betting wide ban on video gaming machines quests for preliminary rulings originat- market would distort the except those operated by Indian tribes. ing from Italian courts. In the Placanica, Lottery supporters fear that if the Senate Sorricchio, Palazzese and D’Antonio cas- delicate equilibrium in the makes too many changes to the bill, it es, the compatibility of Italian law with gaming sector and make will not pass when it goes back to the the EC Treaty is again at stake. It remains House. The lottery is a hot issue in North to be seen whether the European Court it impossible for member Carolina politics, and it was unclear as will modify or confi rm its previous ju- states to maintain consis- we went to press which version of which risprudence. In the D’Antonio case, the bill, if any, would ultimately become law. European Court has declared the request tent gambling policies. for a preliminary ruling manifestly inad- If North Carolina does become the last missible. A judgment in the other cases is East Coast state to offer a lottery, it is expected in the course of 2006. likely to impose some form of advertising ing member states from maintaining a restrictions on gaming products. The lot- The Services Directive consistent and systematic policy on gam- tery bill that the House passed would limit bling. Liberalizing sports betting would lottery advertising to outlets where tick- At regulatory level, debates are currently run contrary to one of the key elements ets are actually sold. The use of cartoon under way in the European Parliament of Gambelli case law, namely the require- characters would be prohibited, and all and the EU Council of Ministers. The rap- ment for member states to maintain a promotions would have to clearly indicate porteur of the Committee on Internal consistent and systematic policy regard- the odds of winning. Market and Consumer Protection (IMCO), ing gambling restrictions. German MEP Evelyne Gebhardt, has pro- Wyoming ponders next move posed that gambling services be exclud- All eyes on Germany ed from the scope of the EU Services In Wyoming, the House passed a lottery Directive. The rapporteur thereby fully Where all of this will go is not yet clear. EL bill in 2004, but the measure was killed in supports the EL position – a position also and its members will need to continue to the Senate. Before that, lottery legislation echoed in an April 2005 declaration by defend their legal environment, and can had never been passed by either chamber. EU sports ministers. That approach is count on support from the WLA if appro- During the 2005 legislative session, the vigorously contested by British MEPs like priate. The next milestone decision is ex- state House, on a tie vote, defeated legis- Malcolm Harbour who intends to pro- pected in the summer, when the German lation allowing Wyoming residents to play pose that at least sports betting should Supreme Court will decide about the reg- the Powerball lottery, already available in be liberalized – a position that has also ulatory environment of gambling in the fi ve of Wyoming’s six surrounding states. been defended by the UK government in German Länder. Now lawmakers may push for a refer- Council of Ministers meetings. endum to get people’s views fi rst before deciding whether to sponsor a lottery bill Singling out sports betting from other Lotteries remain on the agenda in during next year’s legislative session. types of gambling services makes lit- several US state legislatures tle sense. A liberalized, pan-European US lotteries explore Internet sales sports betting market would distort the The legislative procedure is no less com- delicate equilibrium in the gaming sec- plex in the United States, where new The Georgia House of Representatives has tor and make it impossible for member measures need to be passed by both leg- passed a bill by a large majority (98-48) states to maintain restrictive gambling islative chambers at the state level, and at that would allow Georgians to play the the same time comply with federal laws state lottery online. Registered players and regulations. could establish an online debit account and play lottery games from home com- puters or other electronic devices, according to proposed legislation. The bill will now will go to the state Senate.

bdv_wla_17.indd 14 6.6.2005 11:37:56 Uhr Several other states are also consider- Internet Gaming Law Internet Gaming Law covers many of the ing Internet gaming. The Illinois Senate I. Nelson Rose, Professor, new challenges to government and regu- approved online sales on April 14 and Whittier Law School latory agencies that deal with gambling sent the bill to the House. New Hampshire, Martin D. Owens, legislation, with sections on US feder- whose lottery was the nation’s fi rst when Attorney at Law al legislation, US law on advertising for it began in 1964, is also reported to be Published by Mary Ann online gaming services, bank instru- looking at Internet sales. And Oklahoma, Liebert, Inc. ments and Internet gambling, wagers which will launch the newest state lottery ISBN 0-913113-36-0 via phone lines, the latest developments in North America in October, may later in legislative, regulatory and judicial explore the possibilities of online gaming This new work is a comprehensive decisions affecting the gaming industry for state residents. resource for legal professionals and lot- internationally, as well as tax and intellec- tery executives. Professor Rose, one of the tual property issues. The 300-page book But US lotteries see legal hurdles ahead leading experts in the fi eld of gaming law, includes chapters on US jurisdiction over even if state legislatures sign bills and Martin Owens, a California-based online gambling headquartered abroad, into law. Lottery commissions across attorney specializing in online gaming an overview of internet gambling law out- the country have been following federal (and a guest speaker at the WLA legal side the United States, and an extensive legislation that may confl ict with state seminar in Québec in April 2005), discuss US case index. laws permitting online gaming. In par- the impact of state, federal and interna- ticular, the Wire Act, passed in 1961, tional laws on traditional forms of gam- prohibited gambling via wire communi- bling played online. cations. Under current law, lottery tickets must be purchased with cash to ensure that players can afford to play.

6ISITOURSTANDAT THE%,CONGRESSIN2OME *UNE

June 2005 15

bdv_wla_17.indd 15 6.6.2005 11:37:59 Uhr Special Report: Money Laundering

Understanding the wash cycle: housekeeping for lottery organizations

Whenever large sums of money The basics of How does money laundering take place? change hands, criminals and terror- money laundering ists may attempt to manipulate the There are three basic steps in the money system to disguise their illegal activi- laundering process: placement, layering and integration. Placement involves mov- ties. Lottery organizations should be What is money laundering? ing dirty money into the global fi nancial aware that their operations could system and converting it into other assets, Money laundering is the process by which or into a fi nancial instrument or bank be targeted by money launderers. criminal monetary profi ts are cycled account. Layering is a complex web of Whether that risk is real or perceived, through fi nancial transactions to disguise fi nancial transactions designed to disguise their illegal origins and provide a source the audit trail and to disassociate the dirty the cost of inaction could be unac- of apparent legal income. money placed in the wash cycle from the ceptably high. Today, the state-con- original source of the crime or criminal Who engages in money laundering? act. Integration is the reinvestment of trolled sector of the gaming economy dirty money that has been successfully has the opportunity to demonstrate Organized criminal gangs, drug traffi ck- layered and is ready to be assimilated ers, tax evaders, insider dealers and ter- back into the legitimate global fi nancial responsible leadership in the fight rorist groups. But also dishonest bankers, system with a new pedigree that makes against money laundering, differenti- lawyers, accountants, businessmen and the money appear to be legally earned. politicians. ating itself as a force for public good Placement How extensive is money laundering? at the same time as limiting its legal The initial challenge in the cash-intensive liability. Money laundering is a global phenom- business of money laundering is to place enon, and its transnational nature has the profi ts from the criminal activity into been well documented by many national a bank or some other fi nancial institu- and international organizations. The IMF tion, in order to more easily manipulate estimates that money laundering activi- the funds. As the placement of large sums ties account for more than $600 billion of cash into commercial banks typical- annually, or the equivalent of up to 5% ly triggers formal reporting mechanisms, of the world’s GDP. The systematic use elaborate steps are employed to avoid of electronic fund transfers continues to detection. present growth opportunities to this illicit fi nancial market. Possibly the most common method is called structuring or “smurfi ng”, in which many individuals deposit cash or buy bank drafts in amounts under $10,000.

bdv_wla_17.indd 16 6.6.2005 11:38:01 Uhr Special Report: Money Laundering

A typical money laundering scheme

Integration Offshore bank Loan to company ‘Y’

Layering Wire transfer Purchase of luxury Y A N assets, financial B K investments, commercial/ Payment by ‘Y’ industrial investments Placement X of false invoice to company ‘X’ Transfer on the bank account of company ‘X’

Dirty money integrates into the financial system Collection of dirty money

Smurfing and high-payoff Layering Integration gaming products Money launderers seek out nations, Popular methods of integration, following Smurfing techniques have been used jurisdictions, and fi nancial markets which a layering step, include the establish- in the gaming sector for the initial provide legally protected anonymous ment of shell or anonymous companies banking, less transparent accounting and in countries which provide the greatest placement step of money laundering, transnational business processes, and protection of secrecy. Funds can then with some notable successes. places that provide a business climate be transferred electronically to legitimate Numerous deposits of cash amounts which allows shell companies to operate banks and fi nancial institutions from small enough to avoid triggering formal with some impunity. banks either owned or infl uenced by money launderers. reporting mechanisms, and which When some of these favorable layering also avoid general commerce-based conditions align with legitimate business- By the time laundered money has suspicion, are “placed” on high-payoff es that encourage cash transaction and/or successfully reached the integration step, gambling products. electronic fund transfers, and which also it is exceedingly diffi cult to distinguish generate large daily volumes of business legal and illegal profi ts and income. transactions, layering opportunities are Depending on the illicit market and ripe for exploitation. continued on next page other risk and reward factors, the cost to launder money is between 15-25%. High-payout casino games and any other

gaming products with a payoff rate This feature is based on a presentation higher than 0.75 (particularly sport- by security consultant Michael Gresalﬁ based games) are especially attractive. at the WLA Convention and Trade Show in Durban in November 2004, as well as Financial Action Task Force (FATF) publications, and input from the WLA Security and Risk Management Committee.

June 2005 17

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Preventing money laundering

Nationally and internationally, steps International initiatives ing (…) provide ample opportunities for are being taken to make financial trans- laundering, given the amount of cash that 2 actions more transparent and help pre- Various major international organizations changes hands there. ” and bodies have taken initiatives to com- vent money laundering and terrorist bat money laundering, including the Bank In its 2003-2004 typology exercise on financing. Heightened vigilance since for International Settlements, the Council gatekeepers, the FATF came to the follow- September 11, 2001 has focused even of Europe, the European Union and the ing conclusions: “Many FATF members more attention on the risks inherent in in- United Nations. Possibly the most wide- have begun implementing measures that ly recognized government-level initiative would bring gatekeepers under the same ternational financial systems – and is the Financial Action Task Force (FATF), obligations as currently held by fi nancial any other system where large amounts an inter-governmental body established institutions with regard to customer due of money change hands. by the G7 summit in 1989 to devel- diligence, record keeping and suspicious op standards and promote policies to transaction reporting.” combat money laundering and terrorist Large numbers of countries operate fi nancing. “This should be performed on a risk-sen- Financial Intelligence Units (FIUs). These sitive basis,” the organization continued are central, national agencies responsible Originally generated in 1990 and revised “by a government authority or by an for receiving (and as permitted, request- in 1996, the FATF recommendations have appropriate self-regulatory organization, ing), analyzing and disclosing fi nancial been recognized by both the IMF and the provided that such an organization can information about suspected proceeds of World Bank as the international standards ensure that its members comply with crime and money laundering operations. for combating money laundering and the their obligations to combat money laun- fi nancing of terrorism. They have been dering and terrorist fi nancing.” FIUs are independent agencies operat- endorsed by more than 130 countries to ing at arm’s length from law enforcement date. The FATF standards defi ne “suspi- Many FATF members have since begun and other agencies in an effort to strike cious” transactions that must be reported implementing measures that would bring a balance between privacy rights and by fi nancial institutions, and, increasingly, these potential gatekeepers under the enforcement needs. In each country, they by other professionals that could become same obligations as currently held by maintain relations with a whole range of involved in money laundering. fi nancial institutions with regard to organizations and professionals to ensure customer due diligence, record keeping compliance with suspicious transaction Gatekeepers and self-regulation and suspicious transaction reporting. reporting and other anti-money laundering rules. The FIUs of more than 80 In 2001, the FATF identifi ed the ten- Annual typology exercises countries have formed an international dency for additional fi nancial services network (the Egmont Group) to encour- or other entities to fall under anti-mon- The FATF uses its annual typology age the development of FIUs and facilitate ey laundering rules and procedures. exercise to monitor changes and better cooperation between them. FATF experts already believed that understand the underlying mechanisms applying such measures to categories of of money laundering and terrorist fi nanc- businesses or individuals that facilitate ing. As early as 1997-98, the FATF recog- money laundering would further enhance nized in its annual typologies report that its members’ efforts, making specifi c “casinos, gaming businesses and various mention in its published literature of lotteries, including horse-racing (...) pro- “non-fi nancial professionals, casinos and vide ample opportunities for laundering, other gaming ventures.” given the amount of cash that changes hands there.” Each year, the organization “Increasingly, money launderers seek out agrees to a series of topics or themes for the advice or services of specialized pro- the next year’s exercise. Typology topic- fessionals to help facilitate their fi nancial shave included non-profi t organizations, operations,” the FATF reported again in the securities sector, and the precious 2003-2004. “Casinos, gaming businesses metals sector. and various lotteries, including horse-rac-

bdv_wla_17.indd 18 6.6.2005 11:38:04 Uhr Special Report: Money Laundering

Money laundering However, investigators discovered that Boston mob leader cashes and the gaming several of the checks were issued in the lottery ticket worth $14 million names of the armed robbers and their sector: some immediate families. The link between examples the money launderer and the original criminals was established. The former was convicted of money laundering and sentenced to 5 years imprisonment. Real-life case studies of criminal Source: FATF, 2001-2002 techniques rarely provide compelling Casinos alert authorities about arguments for regulation – once a loop- suspicious bank drafts hole has been exposed, after all, those specific risks tend to be addressed. Several casinos issued Suspicious As criminal schemes grow in sophistica- Transaction Reports after repeatedly tion, operators will need to deploy being asked to cash bank drafts for up to $28,000. These would be held by the a broader set of principles to ensure casinos for the suspect to bet against. that their countermeasures are effective. When the evening’s entertainment The examples selected here offer was over, any winnings as well as the well-documented evidence, if evidence remaining deposit would be withdrawn were needed, that money launderers have Mobsters purchased indeed succeeded in manipulating In July 1991, a Massachusetts Lottery gaming operations. shares in the winning player won $14 million (prior to taxes), payable in annual installments over a lottery ticket – after twenty-year period. Within a few days, Robbery proceeds laundered the prize was won. and before the fi rst disbursement of win- through bookmakers nings, papers were provided to the state lottery commission indicating that James Two serious armed robberies occurred “Whitey” Bulger and two associates were in which approximately $1.9 million was by prior agreement entitled to equal taken. Police investigations revealed parts of a one-half interest in the win- that an individual not directly suspected nings (i.e., one-sixth each), the other half of the robberies had been placing a vast belonging to the previously registered number of bets with a number of book- winner. According to information provid- makers in one city. While this in itself is ed by the government, shares of the win- not unusual or even suspicious, it was and placed into different bank and build- ning entry had been purchased by Whitey noted that he always followed a similar ing society accounts. Bulger and his associates only after the pattern whereby the stakes were high winning drawing. Whitey Bulger is said and the odds low. In other words, he bet The FATF had reported this method as to have purchased his one-sixth interest on “favorites” who were likely to win, early as 1997-98, adding that the system in the winnings for a lump-sum payment although this likelihood meant that the could be made more opaque by using a of $700,000, amounting to annual pay- sum received by the bet maker if he did chain of casinos with establishments in ments of $119,408 (prior to taxes) over a win was relatively small. Consequently, different countries. Rather than request period of twenty years. Each year, the prize he made a 7% net loss over a long period repayment by check in the casino where installment was deposited in the winner’s of time. This would be quite a serious the chips were purchased with cash, the account and the bank apportioned and loss for a professional gambler. Further gambler says that he will be traveling distributed the funds to all concerned. inquiries revealed that the individual to another country in which the casino After installments worth $1.9 million never received his winnings personally, chain has an establishment, asks for his had been paid, Whitey Bulger became a but had checks made out to a total of 14 credit to be made available there and fugitive from justice and his whereabouts different bank accounts in the names of withdraws it in the form of a check in are still unknown. The United States 10 third parties. This ensured that the due course. Attorney’s Offi ce defaulted all future receipt of money never raised suspicions Source: FATF, 2001-2002 payments from the lottery in 1996. within the banks and other fi nancial Source: US v Bulger, United States Court of institutions utilized. Appeals (First Circuit)

continued on next page

bdv_wla_17.indd 19 6.6.2005 11:38:04 Uhr Special Report: Money Laundering

Why should WLA members be concerned about money laundering?

The connections between “gray-area” Legal liability: lottery operators Reputation: money laundering remote gambling operators and money as gatekeepers is bad for business laundering schemes have been widely As the FATF and national authorities “Because they deal with other people’s exploited by advocates of restrictive broaden their focus to include not only money, banks and other fi nancial and gaming policies – including the state- fi nancial institutions but other categories professional institutions rely heavily on controlled lottery sector. But money of professionals, certain types of gaming a reputation for probity and integrity,” organizations have been singled out as says the United Nations Offi ce on Drugs laundering issues are just as critical for potential “gatekeepers” for money laun- and Crime (UNODC), which runs the state lottery operators and sports betting derers. UN’s Global Programme Against Money operations, although possibly not for Laundering. They need their good name exactly the same reasons. WLA members should remember that to build business. The prestige of any any organization that is aware of a risk organization that is revealed to have of money laundering inherent in its op- Awareness and effective management of erations could be held liable for failure money laundering issues are critical for Any organization to take appropriate measures to attenu- three main reasons. In addition to man- ate that risk. that is aware of a aging the risk of being manipulated by money launderers, WLA members are risk of money laundering Faced with possible legal action for crimi- advised to consider taking measurable nal negligence, lottery operators have inherent in its operations steps to address their legal liability and a vested interest in ensuring height- the potential damage to their reputations could be held liable for ened vigilance and adopting a proactive that money laundering connections could approach with respect to anti-money failure to take appropriate infl ict. laundering legislation and regulations at measures to attenuate both national and international levels. that risk. The need to fi ght money laundering has also been a central argument in recent legal cases. Indeed, the strength of the United States’ public order defense in the assisted in the laundering of money can landmark WTO dispute hinged to some be severely damaged. In short, says the extent on recognition of money launder- UNODC, “money laundering is bad for ing as a “genuine and suffi ciently serious business.” threat to one of the fundamental interests of society”. Gaming operators with motives other than the public good and a loose un- Anti-money laundering measures specifi c derstanding of social responsibility to the gambling sector, mainly for casinos, are progressively creating an image of have been enacted by some FATF mem- the gaming economy with which the bers. Other sections of the gaming econ- WLA and its membership in the state- omy now have compelling legal reasons controlled sector must not be associated. not just to stay abreast of developments but to anticipate and even instigate new Reputational risks include damage to regulatory regimens. the corporate image of the organization through adverse media reaction, mistrust “Many of the risks and vulnerabilities of the general public, decreased sales, identifi ed for gatekeepers could be erosion of shareholder confi dence, and reduced if anti-money laundering mea- more restrictive governmental controls. sures were consistently and thoroughly applied,” says the FATF.

bdv_wla_17.indd 20 6.6.2005 11:38:07 Uhr Special Report: Money Laundering

Over and above the legal implications of Lack of retailer awareness and the integ- failing to address the risks of money laun- rity of the winner identiﬁ cation and prize dering, a proactive stance on anti-money payment chain are therefore among the laundering measures by state lottery op- key vulnerabilities that lottery operators erators will generate goodwill and public must address. impact. Adopting a clear position on money laundering is a socially responsible There are a few well-documented cas- business decision, enhancing members’ es in which organized syndicates have reputations and helping to safeguard attempted to cover all the winning their long-term growth. combinations in a numbers game like lotto or keno, or at least to shorten Manipulation: addressing the odds of winning through mass play the vulnerabilities tactics. Even if they win the jackpot, of

Conventional numbers games are prob- Adopting a clear ably quite unattractive as a money laundering channel, given the long odds of position on money winning a major prize. Instant games and laundering is a socially bingo are also generally recognized as being low-risk. responsible business decision, enhancing However, an increasing number of WLA members are involved not only in num- members’ reputations and bers games but also have responsibil- helping to safeguard ity for harder-core gaming activities that are more open to manipulation by money their long-term growth. launderers, including casinos and certain forms of sports betting.

Even traditional numbers games have course, these schemes run the risk of their vulnerabilities. Winning tickets having to share the prize money with could be purchased prior to a claim, al- multiple fi rst-tier winners. though this would generally require collusion with a lottery operator or retailer The risk of manipulation is higher in and/or access to confi dential winner in- fi xed-odds gambling, where bets could be formation. Major prize tickets could also adjusted with odds so that the prize on be purchased after the claim, especially each winning coupon is below the limit when large wins are paid in installments, for identifying winners. Dishonest retail- as a way of integrating dirty money back ers could also sell low-value receipts, on into the legitimate economy or as a tax which identifi cation is not required, to evasion scheme. Many lottery operators criminal elements. still use real-life stories about winners as a promotional tool, arguably increasing the inherent risk of manipulation.

bdv_wla_17.indd 21 6.6.2005 11:38:10 Uhr Special Report: Money Laundering

Guidelines for lottery operators

The Security and Risk Management Know your customers Know your staff and retailers Committee is drafting a set of guidelines on money laundering that will be the As new distribution channels are adopt- Because most lottery operators limit ed, it is increasingly important for lottery the prizes that can be paid out by re- subject of detailed discussion at the organizations to know their customers – tailers, major wins are cashed at the WLA’s World Lottery Forum in Cancún, not only to verify compliance with age or lottery headquarters or prize payment Mexico, later this year. For the time territorial restrictions, for example, but centre, where strict procedures need to being, compliance with these recommen- also now to mitigate the potential risks of be in place to verify the winner’s identity. placement of dirty money. Player identifi - Indeed, rigorous procedures need to be dations is not intended to be included applied at every point in the operation as a condition for certification to the “The banking where the winner could be identifi ed and WLA Security Control Standards, but this intercepted before claiming a prize – at industry’s proactive will be discussed in Cancún. call centers, for example. Staff who deal efforts to self-regulate directly with winners need to be carefully vetted. And winner databases need to be The purpose of the guidelines is to are perhaps worthy monitored continuously so that the lottery assist lottery organizations in recognizing organization is alerted in a timely fashion the potential impact of money laundering of emulation by the to patterns of repeat wins that defy the activities directed against non-bank- WLA and its members.” laws of probability. ing institutions. The guidelines identify threats of money laundering, fraud, No lottery organization can rule out the theft and economic blackmail and lay out possibility of collusion between a money possible avenues of risk mitigation for Michael Gresalfi , Durban 2004 launderer and a retailer or lottery em- member lottery organizations. ployee in an attempt either to disclose winners’ identities or transfer paid-out Above all, they point to the importance of cation and registration procedures, and prizes to a money launderer at a premi- having a formal position on anti-money the possibility of including specifi c pro- um. Careful monitoring of retailer activity laundering measures, and written poli- visions in the rules and regulations of – excessive prize payments, for example, cies on matters such as due diligence, lottery games, all need to be taken into as well as excessive sales – can alert monitoring, reporting and training. account if lottery organizations are to the lottery operator to suspicious activ- protect themselves from money launder- ity, and appropriate procedures need to ing risks, real or perceived. be in place to ensure that this monitoring is effective.

In the current context of vigilance with respect to criminal and terrorist activities, lottery organization have a vested interest in knowing their retailers. The WLA draft guidelines cover retailer back- ground checks, monitoring of retailer activity, and ongoing training and awareness for lottery retailers.

bdv_wla_17.indd 22 6.6.2005 11:38:13 Uhr Special Report: Money Laundering

An example of self-regula- Training, awareness Other WLA initiatives tion: the Wolfsberg Group and compliance There could also be opportunities for The Wolfsberg Group is an association of The guidelines recommend training for all incorporating money laundering provi- global banks that aims to develop standards lottery staff who are in contact with cus- sions in other WLA initiatives. Defi ning for the fi nancial services industry on criti- tomers and winners, and for compliance a new coverage area under the Global cal issues. The Group came together in 2000, personnel, to ensure they can identify and Insurance Project, for example, might at the Château Wolfsberg in Switzerland, follow up on unusual or suspicious activi- provide members with an incentive to with representatives of the non-governmen- ties. Training programs should include enact many of the proposed guidelines, tal organization Transparency International, updates on major changes in anti-money while also protecting them from undue to work on drafting anti-money laundering laundering laws and regulations. fi nancial consequences. The Request guidelines for private banking. The banks For Proposals (RFP) standardization in the Group have agreed to the Wolfsberg Lottery organizations should liaise with efforts could also build compliance with Principles as important global guidance for anti-money laundering authorities as money laundering recommendations into sound business conduct in international a matter of routine. They should write the standard RFP templates for both private banking. Transparency International related legal requirements into their members and associate members. And and the international experts* invited by the contracts with suppliers and retailers. compliance with national and/or interna- Berlin-based group regard the principles as And compliance should be monitored by tional money laundering regulations and an important step in the fi ght against money external auditors. legislation clearly will be included, explic- laundering, corruption and other related itly or implicitly, in the WLA Principles of serious crimes. Examples include: Engaging the FATF Social Responsibility. • The bank will take reasonable measures to identify its clients. In his presentation at the Durban Members are invited to take part in the • Due diligence must be done on all Convention in November 2004, Michael discussions covering all of this in Cancún principal beneficial owners. Gresalfi , a strategic security management (see page 7). • The bank will satisfactorily establish the consultant, made a number of recom- identity of non face-to-face clients. mendations for the WLA and its members. Towards self-regulation • Numbered or alternate name accounts In particular, he suggested that the WLA must first establish the client’s identity. consider requesting of the FATF that the The main thrust of Michael Gresalfi ’s • The bank will have a written policy on worldwide lottery sector be selected as a presentation at Durban was that the the identification of suspicious activities. topical theme during an upcoming annual state-controlled lottery and sports betting • The bank will ensure a sufficient typology exercise. Dr. Gresalfi felt that sector should position itself as a self- monitoring program is in place. a greater understanding of the FATF’s regulating industry, proactively engaging • A written control policy will be estab- existing body of knowledge on money the relevant national and international lished to ensure audit and compliance. laundering risks and associated preven- bodies to embrace the challenges of money • Regular management reporting guide- tative strategies could be of strategic laundering. lines on money laundering will be issued. value to the WLA while enhancing the • The bank will establish a training reputation of its members. “WLA members should encourage the im- program to identify and to prevent money plementation of the Wolfsberg Principles laundering. Following on from Michael Gresalfi ’s by their banks and fi nancial institutions,” suggestion, the Security and Risk said Gresalfi . “But the lottery sector can Management Committee is in discussions go further. The banking industry’s pro- * Stanley E. Morris is an international Consultant on Anti-Money Laundering with the FATF, currently under French active efforts to self-regulate by defi ning issues. He was head of FinCEN, the presidency, to assess the pertinence of and promoting compliance with a clear United States Financial Intelligence Unit, this proposal. set of guidelines is perhaps worthy of and a member of the Financial Action Task Force on Money Laundering (FATF). emulation by the WLA and its members.” Prof. Mark Pieth is a law professor in Basel, Switzerland. He is Chairman of the OECD Working Group on Bribery and Corruption and a former member of the Financial Action Task Force on Money Laundering (FATF).

June 2005 23

bdv_wla_17.indd 23 6.6.2005 11:38:14 Uhr Upcoming events Recent events

June 27-29 Corporate Social Responsibility Joint EL/WLA seminar Malmö, Sweden How will new gaming products affect players and society? Where is the latest research into problem gaming? How can at-risk players be detected? In-depth discussions about responsible gaming strategies and codes of conduct, just before the annual EASG Legality, interactivity and thought leadership conference at the same venue. The WLA Academy has been dicussing the Finland, lotto and keno in Iceland, online October 2-5 legality of cross-border gaming over the scratch tickets and probability games in Lottery Creativity and Product Internet, risks and benefits of interactive Sweden, pay-out hikes in Denmark to Development gaming, and terms of reference for the compete with private bookmakers, and WLA workshop supported by CIBELAE future Frontier Program. youth behaviors in Norway. Speakers from Mérida, Mexico Camelot, Chile’s Lotería de Concepción, This workshop will introduce Legal in Lac Leamy and two of Canada’s major lotteries creative aspects of gaming product Legal affairs specialists from three con- described their experiences with these development and services in short tinents met in Québec in April to discuss new delivery modes. Speakers from the presentations, followed by discussions the implications of the WTO ruling and supplier industry explained the phenom- in smaller groups and report-back the latest development in Europe, where ena of betting exchanges and Internet to plenary sessions. Creative exer- the aftermath of the Gambelli case has poker. The next interactive gaming semi- cises will be an important part of the sharpened European gaming operators’ nar is planned for 2006 in Vancouver. program, and a special report will be focus on responsible gaming strategies. prepared for the World Lottery Forum in California gaming attorney Martin D. Cancún a month later. Owens, co-author with Prof. Nelson Rose of a recent book on Internet legislation in October 18-21 the United States (see page 15), outlined Fraud, Scams and Business Continuity Internet gaming issues in North America Joint WLA/EL seminar from a legal standpoint and the potential Lisbon, Portugal long-term risk to territorial integrity. One Cyber-crime has added a new presentation focused on the new gambling dimension to lottery fraud and scams. legislation in the UK and its consequences This annual seminar will focus on for lottery organizations in other EU mem- the growing worldwide problem of ber states. Canadian specialists talked New frontiers for lottery leaders lottery fraud, and will include presenta- about class action suits against lotteries, Kjell Nordström and Sverre W. Hartmann tions on physical risks for staff and lottery scams and money laundering. The from the Stockholm School of Economics retailers, an update on the WLA seminar also covered problem gambling have worked with the WLA Academy Security Control Standards©, and input and legal liability, recent Supreme Court to develop a blueprint for the WLA’s from members who are already rulings in Europe, and continuing moves Frontier Program. A pilot program has certified and those who are planning by the Greek government to open up its been launched with the Nordic lotteries to certification in the future. state lottery to private capital. Secretary fine-tune this proposed program, which General Lynne Roiter also outlined the could provide a template for high-level WLA’s global legal network project. management training for the entire lottery community. Interactive in Iceland As the pioneer of Internet gaming, Iceland Four sessions totaling 19 days are planned was a fitting venue for the WLA seminar for this year, focusing on business mod- on interactive gaming in May. Internet, els and technology; fashion and design; November 6-10, 2005 mobile phones and digital TV open up legal, political and ethical frameworks; 2005 World Lottery Forum new opportunities for lottery operators, and entertainment. Kjell Nordström will Cancún, Mexico and expose them to new risks. More than take part in each session along with 20 The Mexican National Lottery, 90 delegates from 25 countries met in senior managers from lotteries in Lotería Nacional para la Asistencia Reykjavik for an update on trends and re- Denmark, Finland, Norway and Sweden. Pública, will host the WLA’s second cent developments. The Nordic countries World Lottery Forum in world- in general have the most experience of Recommendations for the future of the class conference facilities on the interactive gaming. The seminar included Frontier Program will be presented at the Yucután peninsula (see page 7). presentations on live sports betting in World Lottery Forum in Cancún.

bdv_wla_17.indd 24 6.6.2005 11:38:15 Uhr Invitation The 2005 World Lottery Forum November 6–10, Cancun, Mexico

The tradition that began in Granada continues at the 2005 World Lottery Forum in Cancun, Mexico – the most important lottery event of the year.

A joint effort between Lotería Nacional para la Asistencia Pública and the WLA, the 2005 World Lottery Forum will feature international keynotes, interactive parallel sessions and workshops, the Directors’ Summit as well as the WLA General Assembly.

Now it is time to reserve the dates for the World Lottery Forum in Cancun, Mexico November 6–10, 2005 as the global lottery business moves Beyond the Horizon.

BEYOND THE HORIZON www.wla2005.com

bdv_wla_17.indd 25 6.6.2005 11:38:20 Uhr WLA Contributors

Platinum Contributors Gold Contributors Silver Contributors

The World Lottery Association’s educa- tional and informational programs are supported by the Platinum, Gold and Silver Contributors.

bdv_wla_17.indd 26 6.6.2005 11:38:20 Uhr INTRALOT?!COPYPDF

When two-of-a-kind really pays off.

wwla_17_UG.inddla_17_UG.indd 2 66.6.2005.6.2005 13:13:0213:13:02 UhrUhr a publication of the Issue no. 17, June 2005 World Lottery Association

Money Laundering: Implications for lottery organizations

wwla_17_UG.inddla_17_UG.indd 1 66.6.2005.6.2005 13:12:5513:12:55 UhrUhr