The brief history of laundering
You’re probably familiar with the term “money laundering”, and probably first heard about it thanks to Hollywood or some big scandal you read about in the papers. Don’t worry, we’ve all been there. In that case, you’re probably not far off if you simply say that money laundering is the “washing of dirty money to make it clean”.
To be a little more academic, money laundering is the informal and legal term for the transformation of illegitimate funds into legitimate funds. While the process itself has been around for centuries, as long as income has always been taxable, anyway, infamous gang boss “Al” Capone was credited for being one of its early adopters, so to speak, when his operations were raking in untold millions of US dollars from the sale of alcohol during the US Prohibition era of the 1920’s.
Since the sale of alcohol was banned by the government, Capone had to find a way to report his massive income. As the story goes, he purchased “Laundromats” – shops where people used coin-operated washing machines – and mixed his ill-gotten gains in the book-keepings, hence “washing” or “laundering” the money.
If you’ve ever been to a casino or played at one online, you’ll quickly realize deposits at online casinos aren’t questioned (or even at a physical one, for that matter!). This very important feature is one of the reasons that casinos are highly vulnerable to money laundering.
Even if checks are performed for source of deposits, the financial structure of online casinos means that multiple sources of deposits or false identities can mask illegitimate income. This is all the more possible with Bitcoin or cryptocasinos – or even a guaranteed feature of anonymous Bitcoin casinos.
Wait… so if I have dirty Bitcoins, I could deposit them into a casino and they wouldn’t know?
Theoretically speaking, they would be able to know if they employed a series of forensic measures to investigate the origins of your Bitcoin deposit. But we’re saying here is that they won’t ask! We’ve gone through a lot of Bitcoin casinos and not one seems to be interested in the origins of your Bitcoin – even the ones that need you to verify your identity.
Combing through the terms and conditions of several crypto-only casinos, we also failed to find anything to prevent you from playing with Bitcoins earned from, say, illegal drug trade on Alphabay (yes, we know it’s just been shut down).
You might find some legal wording that would obligate you to report or pay taxes on your winnings, but that’s where we’re going next…
OK, so I’ve deposited my very dirty Bitcoins. I still don’t see how casino laundering works.
It’s really quite simple. Most money laundering understands that the money they’ve reintroduced back into the economy (laundered money) will likely be less than the amount put in. Mobsters like “Al” Capone probably took hits of 20 to 30%.
A casino launderer would be quite happy to lose many bets and win some, cashing out after losing a bit of their bankroll. In theory, even if you do declare all your casino winnings, it will be reported to your tax authorities as income from gambling winnings. Since the casino’s also made a profit from your deposit, there’s unlikely to be any questions from their end.
As it appears on paper, you’ve reported on your winnings and paid tax on it like a good citizen. Now remember if the site turns into a Bitcoin Casino Scam then you might lose everything!
Hey… my country doesn’t charge tax on gambling winnings.
And you’ve arrived at precisely one reason why casino laundering can be very popular. Some countries like the UK don’t levy any tax on winnings from gambling. In cases like this, your tax savings could even offset your gambling losses. In a country like the UK, where income tax starts at 20% and goes as high as 45%, it’s easy to see how losing 10% through casino laundering can be very lucrative.
Last but not least, our disclaimer
We’re certainly not promoting casino laundering! What we’re doing here is educating you on how it’s possible. This may be important not only to gamblers but also to casino operators who may unwittingly be facilitating financial crime.
Most states that allow gambling, such as the US, UK and Philippines, are cracking down on casino laundering in a big way, especially since the financial crisis of 2007/2008. While launderers may still be elusive, especially with the anonymous nature of Bitcoin casinos, law enforcement is quickly adjusting, with increasingly sophisticated software developed to detect Bitcoin origins.
Don’t be fooled into thinking you’ve found an easy way to clean your money with casino laundering. As Alphabay and Hansa dark market traders have found out, your Bitcoin taints aren’t invisible to the authorities.