A recent Federal Court case against several of Australia’s largest online betting operators has placed a spotlight on a growing regulatory risk across the gambling sector: the dangerous intersection of VIP loyalty programs, weak AML/CTF controls, and inadequate harm-minimisation frameworks.
At the centre of the case is a former financial planner who developed a severe gambling disorder and funded his betting through the misappropriation of client funds. While criminal responsibility for those actions is clear, the civil proceedings raise a critical question for regulators and industry alike: what obligations do betting operators have when red flags are visible, repeated, and ignored?
AML/CTF Is Not Just a Box-Ticking Exercise
Under Australia’s AML/CTF framework, wagering operators are required to understand their customers, monitor transactions, and make reasonable enquiries into the source of funds – particularly when gambling activity escalates rapidly or appears inconsistent with known income.
In this case, betting activity reportedly reached tens of millions of dollars while the customer’s declared income remained modest. Yet meaningful intervention was delayed or absent. Regulators had already found licence breaches for failing to identify problem gambling behaviours, reinforcing that KYC and ongoing customer due diligence must be dynamic, not static.
VIP Programs: High Revenue, High Risk
VIP loyalty programs are designed to retain high-value customers, but they also represent a concentrated AML/CTF and consumer harm risk. Evidence in the case suggests VIP managers offered inducements, bonuses and personalised incentives that encouraged continued gambling despite clear warning signs.
Where staff remuneration is linked to customer losses, the risk becomes structural. Commission-based incentives can undermine internal controls by discouraging intervention, escalation, or account restrictions—directly conflicting with AML/CTF and responsible gambling obligations.
Harm Minimisation and Financial Crime Are Interconnected
This case highlights a reality regulators increasingly recognise: financial crime risk and gambling harm are not separate issues. Excessive gambling, unexplained wealth, and compulsive behaviour often coexist, and effective compliance programs must address both simultaneously.
Failure to intervene does not just expose organisations to regulatory penalties – it creates legal, reputational and ethical risk, particularly where stolen or illicit funds are involved.
What Good Governance Looks Like
For gambling operators, this case serves as a clear warning. Effective frameworks should include:
- Robust source-of-funds and source-of-wealth verification for high-risk customers
- Independent review of VIP and loyalty program structures
- Clear escalation pathways when red flags emerge
- Separation of revenue incentives from compliance and harm-minimisation decisions
- Regular, independent AML/CTF and harm-minimisation audits
A Turning Point for the Industry
If successful, this legal action may reshape how loyalty programs operate across the sector and reinforce regulators’ expectations that profit cannot come at the expense of compliance or consumer protection.
For organisations operating in regulated environments, the message is clear: loyalty must never override responsibility. Strong AML/CTF controls, combined with genuine harm-minimisation practices, are no longer optional – they are essential.
