The Isle of Man Government has published its Virtual Assets and Virtual Asset Service Providers Sector Risk Assessment, identifying online gambling as one of the sectors requiring closer supervisory attention where virtual assets are used.
The assessment reviews money laundering, terrorist financing and proliferation financing risks linked to virtual assets and VASPs operating in or from the Isle of Man.
Overall money laundering risk for the VA and VASP sector is assessed as medium. Terrorist financing and proliferation financing risks are both assessed as very low, with no evidence of terrorist financing exposure through domestic VASPs and no evidence of proliferation financing-related virtual asset activity on the Island.
Within gambling, 10 online gaming operators with virtual asset exposure have been categorised as medium-high risk.
Operators with exposure to virtual assets are treated as medium-high to high risk for supervisory purposes, although the assessment states that controls reduce residual risk.
Online gambling operators may accept virtual assets only under controlled models that require conversion into fiat through regulated VASPs. Enhanced supervision applies to those arrangements.
The report identifies several money laundering threats linked to virtual assets, including investment fraud, romance scams, rug-pulls, pump-and-dump schemes, ransomware attacks on VASPs, illicit online gambling and the use of USDT to move illicit funds.
It also flags overseas predicate crimes, particularly UK-linked cases, and organised crime groups exploiting the speed and anonymity of virtual asset transfers.
For terrorist financing, identified threats include crowdfunding, social media fundraising, decentralised platforms, unregistered VASPs and anonymity tools. Proliferation financing threats include DPRK cyber-attacks, virtual asset theft and the use of virtual assets by sanctioned actors.
The assessment tells VASPs, gaming operators, financial institutions and designated non-financial businesses to integrate the findings into business, customer and technology risk assessments.
The release comes shortly after the Isle of Man’s gambling money laundering risk assessment kept the sector at medium-high risk, with online gambling identified as the primary driver due to international customer bases, transaction volumes and cross-border exposure.
The report states that interaction between VASPs and banks, insurers and other financial institutions remains very low
