South Africa’s Expanding Illegal Gambling Market Exposes Critical AML Gaps

Responsible gambling campaigns dominate sports sponsorships and social media messaging, yet South Africa’s vast informal gambling ecosystem continues to flourish with minimal oversight.

Research from RelyComply indicates that as gambling participation grows—spanning online betting, casino gaming, and horse racing—roughly 30% of South Africans are believed to have engaged with illegal gambling platforms. This activity may be costing the economy up to R10 million annually.

While the precise scale of the underground market remains elusive, the steady rise in gambling participation is undeniable. This expansion creates an ideal environment for illicit financial flows, allowing criminal proceeds to be disguised and recycled through gambling channels. The rapid digitisation of the sector has intensified the problem, with betting now easily accessible via smartphones and laptops, eliminating the need for traditional bookmakers and opening new avenues for financial crime.

Despite being a longstanding issue, gambling-related financial crime risks have historically received limited attention. However, the emergence of increasingly sophisticated money laundering typologies means anti-money laundering (AML) measures can no longer be treated as secondary concerns. Gambling operators, alongside banks and payment service providers, are being urged to adopt a far more proactive approach before criminal networks consistently outmaneuver regulatory safeguards.

South Africa’s Financial Intelligence Centre Act (FICA) acknowledges the gambling sector’s economic contributions, including job creation and financial inflows, and classifies gambling institutions as accountable entities. These institutions are required to identify and report suspicious transactions regardless of the source of funds. However, the legislative framework underpinning these obligations is outdated. Much of the regulatory structure still stems from the National Gambling Act, with a proposed 2008 amendment still unresolved—predating the rise of digital gambling entirely.

Complicating matters further, each of South Africa’s nine provinces enforces its own gambling legislation, resulting in a fragmented regulatory landscape. This patchwork system often leads to confusion among banks and media stakeholders. Meanwhile, the National Gambling Board lacks the necessary authority and technological capabilities to effectively regulate offshore operators.

In 2023, discussions involving the Financial Intelligence Centre, the State Security Agency, and the HM Treasury Technical Assistance Unit concluded that casinos present a relatively low risk for terrorist financing. Separate engagements with SABRIC explored limiting payment channels to illegal gambling sites. However, experts argue that regulators must intensify continuous monitoring of suspicious transactions. Oversight has been notably slow, with the National Gambling Policy Council reportedly meeting only twice in the past eight years.

Currently, more than 2,000 illegal gambling operators are actively targeting South African consumers. Many rely on affiliate marketing and clickbait tactics to drive traffic. A large portion of these operators are based in jurisdictions with weak AML and tax controls, including Curaçao, Malta, and the Philippines. This not only complicates cross-border payment tracking but also leaves South African users with little protection.

The challenge is compounded by the sheer scale of gambling activity. According to Daily Maverick, gambling turnover reached R1.5 trillion in the 2024/25 financial year, with 56% of bettors admitting they gamble out of financial necessity. Although the government has proposed a 20% tax on online gambling to generate revenue and mitigate harm, weak enforcement could simply drive users toward unregulated offshore platforms.

Traditional money laundering techniques remain widespread in the sector, thriving in regulatory grey areas and exploiting inconsistent provincial rules and weak transaction monitoring systems. The Financial Intelligence Centre has specifically highlighted the interconnected risks posed by online casinos, mobile applications, and site operators.

One prevalent method is structuring, or “smurfing,” where criminals divide deposits across multiple accounts to avoid detection thresholds on both legal and illegal platforms. Rapid cycling of funds—moving money between gambling operators and legitimate business accounts—is another commonly observed tactic.

Screening for politically exposed persons (PEPs) and sanctioned individuals remains essential, yet effective identity verification (IDV) is hindered by fragmented AML systems. Some users resist providing identification altogether, while others exploit stolen identities to transact through intermediaries.

Adding to the complexity, anonymity tools are becoming increasingly advanced, capable of bypassing biometric checks and know-your-customer (KYC) requirements. The use of virtual currencies introduces further opacity, particularly when funds are routed through crypto mixers to evade detection. Without robust ID verification at onboarding, criminal networks can scale laundering operations across digital gambling platforms with minimal resistance, exposing financial institutions to regulatory penalties.

To counter these risks, South Africa’s financial ecosystem must adopt enhanced due diligence practices and advanced monitoring technologies capable of detecting unusual betting and transactional patterns early. Increased collaboration with RegTech firms could help close existing compliance gaps, enabling institutions to remain agile in the face of evolving threats such as crypto-based laundering, deepfake identities, and decentralised finance.

Despite the growing influx of illicit gambling proceeds into the financial system, the national response has been sluggish. Whether due to weak collaboration frameworks or reliance on outdated financial crime reporting tools, the sector continues to expand its vulnerability to criminal exploitation.

Addressing these risks requires coordinated action among financial institutions, fintech companies, and gambling operators. By developing a shared understanding of emerging laundering typologies and implementing advanced AML systems, stakeholders can meet the heightened scrutiny of the Financial Intelligence Centre while safeguarding both consumers and the integrity of the financial system.

Ultimately, aligning robust regulation with advanced AML intelligence offers a pathway to confront online laundering threats effectively—creating a secure environment where legitimate economic opportunities in the gambling sector can continue to grow without compromising financial stability.

By fLEXI tEAM