An international financial watchdog has warned that casinos in the Republic could be used for money laundering unless they are regulated.

The Cabinet is set to consider proposals to regulate casinos, which currently operate in a legal limbo as private members' clubs.

In a recent report, the Financial Action Task Force (FATF), an international body set up by the G7 group of leading industrial nations to combat money laundering, warns that the current regime leaves casinos open to this activity.

The Criminal Justice Act, 1994, bans money laundering, and sets rules for organisations, such as banks, that could be targeted for the purpose. However, the FATF report points out that casinos fall outside the scope of the law, and says this leaves open the risk that they will be used for money laundering.

It adds that the Irish authorities should consider whether the current system "mitigates against" this risk.

A report prepared for former minister for justice Michael McDowell has yet to go to the Cabinet, even though it was completed a year ago.

It is understood the report recommends licensing and regulating medium-sized casinos.

At the weekend, a Government spokesman said the Cabinet was due to consider the report in "the coming weeks". It is then likely to go to a Dáil select committee.

According to David Hickson, director of a representative body, the Gaming and Leisure Association of Ireland (GLAI), and manager of the Fitzwilliam card club in Dublin, the group wanted a proper licensing and regulatory regime. He pointed out that casinos operated their own monitoring systems to preclude players using them for money laundering, and said they operated within the guidelines of a self-imposed code of practice.

The GLAI represents 12 of the Republic's casino clubs, many of which have membership numbers that run into the tens of thousands. The market is valued at over €1 billion a year.