Betting is an ancient activity that has always attracted customers of good and bad faith. In an ever-evolving industry, a number of factors have contributed to a rapidly growing illegal betting market, such as the diversity of gaming products (online or land-based), advances in technology, including the Internet, blockchain, live betting where bets are placed after a game has begun, and the challenge of detecting market movement and possible manipulations in real-time. Additionally, different countries follow different regulatory systems – monopoly, licensing, prohibition – as already mentioned.
During the global pandemic lockdown, one reason for the growth suspicious betting activities has been attributed to a higher level of risk-taking and vulnerability of athletes and sport stakeholders, as a result of reduced playing and earning opportunities.
Additionally, an article by the Asian Racing Federation Council on Anti-Illegal Betting and Related Financial Crime looks at evolving technologies such as third-party betting software, anonymous website registration, cryptocurrencies, and “spam bots”, all of which have made it easier to become an illegal bookmaker, and an illegal bettor.
The article notes that since late 2019, spam advertising of illegal betting in Hong Kong through social media apps, such as Whatsapp, Telegram and Signal and via platforms including Facebook, Instagram and Twitter has grown and reaches smartphones directly, across Asia, including India, Mainland China, Malaysia, Singapore and South Korea.
The use of such advertising by illegal betting operators is of particular concern given that younger, new customers, who are prevalent users of major social media channels will inevitably be targeted. Some of these players may have issues with gaming addiction or may be otherwise vulnerable. This is another aspect of illegal betting that needs to be understood by governments and countered.
In line with these trends, the 2021 Global Report on Corruption in Sport, by UNODC4, estimates that global illegal sports bets total up to US 1.7 trillion each year and are often used by organized crime groups for money laundering.
In the case of Asia, where betting is very popular, most forms of sports betting are either illegal under national law, or heavily regulated. This has resulted in a substantial illegal betting market. In this region, legal sports betting services are often managed by the state or by licensed non-profit organizations that have heavy restrictions on the type and form of products they can offer. For instance, Singapore’s only legal sports betting option is the Singapore Pools, while the Hong Kong Jockey Club is the sole licensed operator for betting on football and horse racing in Hong Kong.
Often, illegal operators cater to demands that are not being met by the legal market, by providing a broader range of betting products and more attractive payouts. Given that illegal operators are not subject to the financial and regulatory controls of the jurisdiction, including taxes, their betting offers have diverse advertising options and are harder to trace.
Online gaming operators can take advantage of the globalized financial system and place their illegal profits in tax havens and investment funds without consideration for national legislation. Additionally, cryptocurrencies have made it easier for illegal betting operations to launder money at a low cost with a high payout.
The impact of illegal sports betting on the integrity of sports
Online sports betting has become a vast, transnational industry. The different regulations across jurisdictions mean that much of the activity takes place in jurisdictions where it may be illegal or unlawful. The use of online gambling for money laundering and the financing of terrorism has long been recognized. When illegal betting profits are funneled into “official” enterprises – whether a shell company, legitimate sports team, through the transfer of athletes, or by placing many legitimate, smaller bets, money laundering creates an organic link between legal and illicit economies, where the ultimate aim is to distance the dirty money from its illegitimate source.
Financial crime connected with sports betting and sports integrity is complex and can involve many people in global operations, who may be difficult to identify. Authorities must consider different aspects, including cross-border online gambling, eSports betting, foreign regulatory developments, and cryptocurrency gambling.
The Council of Europe’s MONEYVAL Research Report 2013 – The use of online gambling for money laundering and the financing of terrorism purposes, identifies different types of money laundering operations:
- A money launderer, in collusion with an operator of an offshore gambling website, deposits funds obtained from criminal activities in the gambling account and withdraws such funds as winnings. The website operator keeps a percentage of the proceeds as a commission while the launderer declares the winnings to the tax authorities and then uses the funds for legitimate purposes.
- A money launderer sets up a company in an offshore jurisdiction through various front men. The company then applies for an online gambling license in the offshore jurisdiction. Funds deriving from criminal activity are then laundered through the online gambling website which is controlled by the launderer.
- A criminal colludes with other persons
acting as beneficial owners of a company that is used to obtain an online gambling license. Illegally obtained funds are then mixed with the legitimate profits of the company and deposited in a bank account. - A money launderer sets up an online gambling website without registering the website or obtaining a license. The website is not made available to the public but is used to place funds obtained from criminal activities which are then distributed as winnings to various front men. The website is then disconnected citing failure to make a profit as the primary reason for the disconnection.
The report also offers restrictions that could be established to curb the use of online gambling for money laundering and the financing of terrorism purposes. These include:
- Limitations on the amount of money that can be gambled
- Limitations as to the amount of time that can be spent gambling
- Restrictions on the number of gambling accounts that can be held by a player (usually one per player)
- Prohibition to provide credit to a player
- Prohibition to accept stakes from a player if no funds stand to credit of the player
During the COVID-19 pandemic, operators globally, have seen a rise in online betting and the types of bets offered.
The work of ULIS has never been more relevant.
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Illegal operators may find themselves in a position of considerable power as sponsors of athletes, teams or aspects of sports events, if due diligence is not carried out on potential sports sponsors. This Macolin Convention covers this and specifies in Article 16.3 that authorities should consider including the manipulation of sports competitions in money laundering prevention frameworks by requiring sports betting operators to apply customer due diligence, record keeping and reporting requirements.
Other issues that may arise with illegal operators include the abuse of inside knowledge when offering betting products, conflicts of interest and their ability to negatively influence sports competitions.
United States and Central America
The American Gaming Association (AGA), notes in its 2020 article entitled, Illegal betting – How offshore operators and those who support them break US laws, that illegal bookies have taken advantage of lax or non-existent laws in places like Antigua, Costa Rica, Latvia, and Panama to set up online sportsbooks that target American consumers. Though there are claims in these countries of regulation and licensure, these sportsbooks are illegal in the United States. Following the Supreme Court decision in Murphy vs. NCAA and nearly half of the states legalizing sports betting, these operators continue to take advantage of the unsuspecting public.
Sports betting is highly regulated at state level, with rigorous licensing regimes to ensure game integrity and consumer safety. Sportsbooks and operators that offer sports betting outside of these licensing regimes – whether in person or online – are illegal. This is in line with the Macolin Convention definition of illegal sports betting.
Federal law makes it a crime to participate in the business of illegal gambling. The AGA article remarks that several statutes stipulate that it is illegal to operate or participate in financial transactions related to an unlicensed sportsbook in the United States, including the Wire Act, the Illegal Gambling Business Act, the Travel Act, and the Unlawful Internet Gambling Enforcement Act. Beyond federal statutes aimed specifically at gambling, a variety of broader criminal laws targeting organized crime have also been the basis for the prosecution of offshore gambling rings.
It highlights a number of cases which illustrate the far-reaching nature of illegal betting. In one such example, the US federal government indicted 34 individuals and 23 entities in 2013 for operating an illegal gambling business, racketeering, and money laundering in connection with their Panama-based sports bookmaking operation. The trials continued many years, resulting in fines, convictions, and other sanctions.
Macao and Hong Kong
In an example of transnational collaboration, press reports described how Macau police busted a bookmaking racket that allegedly took HKD 5 billion (USD 645 million) in illegal bets on World Cup football matches in a week – including a single bet of HKD 40 million. Authorities in Macau, Hong Kong and the neighboring province of Guangdong collaborated in the effort to crack down on illegal soccer betting in southern China during the 2014 World Cup in Brazil, via a dedicated task force set up by the Hong Kong Police.
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International and regional efforts
The importance of effective intelligence broadens the reach, understanding and visibility of sports integrity units.
It also increases the potential for identifying cases that originate from other non-sport sources and might be relevant for tackling criminal acts. Often law enforcement agencies lack time and resources, however, they can benefit from involvement in cross-sectorial projects specifically addressing intelligence gathering.
The INTERPOL Financial Crimes and Anti-Corruption units worked with the Asia-Pacific Expert Group on Organized Crime and the INTERPOL Match Fixing Task Force on Operation Soccer Gambling (SOGA) VIII. During the 2021 UEFA Men’s European Football Championship, hundreds of specialized officers across 28 countries targeted organized crime groups looking to earn millions from illegal gambling and related money laundering activities. This resulted in thousands of raids and the arrest of approximately 1,400 suspects across Asia and Europe. Authorities seized USD 7.9 million in cash, as well as computers and mobile phones associated with nearly USD 465 million in bets.
An EU financed project under Integrisport Erasmus, known as the Integrisport Next project aims to enhance law enforcement and prosecution activities of sport-manipulation-related crime. It involves ULIS and the lotteries of the jurisdictions within the participating countries. In 2020, Finnish law enforcement authorities exchanged information with the Finnish lottery Veikkaus and learned about the threats that legal betting operations face in the context of sports manipulations. Thanks to this project, further-specialized units have been established.
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Cryptocurrencies in online betting
As the online betting market grows, so does the number of operators that accept cryptocurrency.
The FATF defines virtual currencies as “a digital representation of value that can be digitally traded and functions as (1) a medium of exchange ; and/or (2) a unit of account ; and/or (3) a store of value, but does not have legal tender status (i.e., when tendered to a creditor, is a valid and legal offer of payment) in any jurisdiction”.
Virtual currencies are not issued, nor are they guaranteed by any jurisdiction. They are distinguished from the real or national currency, or coin and paper money of a country, designated as its legal tender. It is also distinct from e-money, which is a digital representation of a national currency used to electronically transfer the value of the national, legal currency.
Cryptocurrency uses blockchain technologies, which enable anonymous, simple, fast, cross-border payments. This entices people who want to place corrupt bets on fixed sporting events, and poses a great threat to the online gaming and betting industry.
According to Good practices in addressing illegal betting – A handbook for horse racing and other sports to uphold integrity, by the Asian Racing Federation (ARF), cryptocurrency betting operators may not be licensed and often operate in unregulated areas. In many cases there is no Know Your Customer process and accounts can be set up very quickly without the wait for fees to be deposited or the amounts to be traced and intercepted by authorities.
With less overhead, these operators can offer better betting odds than regulated ones. The report also notes a shift from the use of bitcoin to cryptocurrencies that can provide a higher level of privacy, such as Monero, Zcash and Dash.
The ARF also notes that nearly one-fifth of over 4,000 betting websites accept one or more cryptocurrencies, which does not include unlicensed websites. A growing number of bettors use them to access betting agents such as Citibet, cryptocurrencies facilitate race-fixing or match-fixing. In unregulated marketplaces, betting agents have no obligation to report suspicious activities, which enables illicit gaming to flourish.
