I read they will turn over the money to the authorities.
if the money is proven to have come from an illegal source, yes, it is part of AML regulation(as far as I know), as members have already mentioned, the casino doesn't keep the money, they must report if they believe the funds from an account came from an illegal source. also, if casinos don't report incidents like this, they will most likely lose their license and face penalties.
That's correct, once it is proven that the money enters in your account is came from illegal sources then your account will be freeze or banned and the money from your account will be reported to the authorities, Casino will not take your money because they are not allowed and every cases like this will be reported to the authorities for reviews and actions. there's a corresponding team or people who's assigned to process this type of cases.