iPredict closing down due to money laundering risk

See also: iPredict decision the work of 'officious aliens' – Crampton

Online prediction market iPredict will be closed down because it as been deemed a “money laundering risk” by the government.

The economic and political forecasting website has been running for seven years and was started by Victoria University’s commercial arm, Victoria Link. It is one of only three "commercial" prediction markets operating globally.

The website says it applied for an exemption from the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT) but Associate Justice Minister Simon Bridges denied it on the basis that iPredict was “a legitimate money laundering risk.”

Mr Bridges says the decision was taken on the recommendation of the AML/CFT National Coordination Committee, which is established to consider the policy.

He added the main reason for denial was that iPredict does not identify its customers, "which creates an opportunity to use the iPredict market to launder illicit funds.

“Deposit restrictions apply but these can be circumvented by setting up multiple user accounts as the customers’ identities are not verified,” the minister (who iPredict says only has a 4% chance to become the next prime minister) says.

Mr Bridges says he recommended iPredict discuss with the FMA how to meet its obligations under the AML/CFT Act such as requiring users to provide their full name, date of birth and address.

However, iPredict says Mr Bridges formed the view without any discussions with its team.

“We are an academic not-for-profit organisation and our agreement with the FMA dictates we place caps on transactions. For example, over the past seven years, we have handled a total of 3,782 withdrawals, with an average trader net worth of $41. Our withdrawal process is lengthy and we are a low risk of money laundering,” iPredict says.

The prediction tool says the cost of compliance is too high so it will wind up operations.

The 5000 users of the site will be able to withdraw their funds. No further deposits, sign ups or new stocks will be taken but existing stocks can continue to be traded.

iPredict says it will look into transferring prediction activities to sister website PredictIt in the US but it will take months to work through regulatory requirements.

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