Betfair stops accepting players from India

Leading international betting exchange Betfair has stopped accepting players from India effective 28th January, 2019.

In an email sent to its Indian users, the online betting behemoth informed that it would stop taking bets from Indian users and closing down access their website to users from India from 28th January.

The company further asked users to manage any open positions and withdraw any funds in advance of 28th January. Betfair in its communique to users did not specify the reasons as to why it was suddenly ceasing all India operations.

Currently, the website when accessed from India does not allow bets to be placed and gives the following message on its homepage: ‘Our Software detects that you may be accessing the Betfair website from a country that Betfair does not accept bets from. If you believe that this detection has occurred in error, please Contact us for further assistance.’

In November 2018, the All India Gaming Federation (AIGF), had written a letter to Prime Minister Narendra Modi stating that several offshore betting websites, including Betfair, are illegally accepting players and deposits from India in contravention of the Foreign Exchange Management Act, Prevention of Money Laundering Act and other laws.

AIGF had urged the PM to take action against the websites that are not complying with Indian laws and stated that an Enforcement Directorate (ED) probe is required to investigate the matter.

The gaming federation had further asked the central government should favourably consider licensing and regulating online sports betting within the country in light of the Law Commission’s recommendations and suggestions by other jurists.

Related Posts:
– June 25, 2019, Will a 2010 CERT decision to not block Betfair aid Delhi HC in the anti-betting PIL?
May 7, 2019, Jaipur police arrests bookies facilitating bets through Betfair

Gaming Legal & Regulatory

AIGF writes to PM demanding action against offshore betting websites

Exclusive The All India Gaming Federation (AIGF) has written to Prime Minister Narendra Modi demanding that the Enforcement Directorate (ED) investigate and take action against offshore betting websites that are illegally luring Indian citizens and accepting bets from India, in contravention of the Foreign Exchange Management Rules and cyber laws.

AIGF in its missive to the Prime Minister has stated that many online gambling and betting websites are openly accepting players from India through e-wallets, agents and hawala transactions that is resulting in citizens being lured to the addiction of gambling.

Besides this, the gaming body has said that the online gambling websites also pose a national security threat as money from Indian citizens is being sent outside India through illegal means and may be used for financing undesirable and illegal activities.

AIGF has further asked the central government to take steps to block the foreign websites accepting deposits from Indian players under the Information Technology Act and Rules. It has further asked Prime Minister Modi to direct the Enforcement Directorate (ED) to conduct a comprehensive probe against the offshore gambling websites for violations of the Prevention of Money-Laundering Act, 2002; Foreign Exchange Management Act, 2000 and other laws.

Some of the websites listed by AIGF which are illegally soliciting and accepting players from India include 1xbet, Jeetwin, BetRally and Bet365.

The gaming federation while seeking a crackdown on offshore betting websites has clarified that the central government should favourably consider licensing and regulating online sports betting within the country in light of the Law Commission’s recommendations and suggestions by other jurists.

According to them, this move will prevent money-laundering and outflow of betting money abroad through illegitimate means and ensure that massive amounts of money that is spent on betting is taxed within India.

Gaming Legal & Regulatory

Understanding gaming companies' obligations under the Prevention of Money Laundering Act

Gambling and betting is a business that is traditionally associated with money laundering, tax evasion and use of illicit funds. From Macau to Las Vegas regulators of all jurisdictions where gambling is legal have shown concerns of black money being used in casinos and have imposed Know Your Customer (KYC) and other guidelines. In India, the Goa government amended the casino license conditions and issued guidelines to casinos which included collection of KYC documents, reporting of transactions above Rs. 10 lakhs to the Financial Intelligence Unit (FIU) and maintaining special checks on Politically Exposed Persons (PEPs).

The Supreme Court by its order dated 17th September 2014 in the Mahalakshmi Cultural Association (“rummy for stakes”) case wanted the Central government to give information about implications for online rummy companies under the Prevention of Money Laundering Act, 2002 (PMLA).

It is thus important to know the type of entities liable under the PMLA, mandatory compliances for such companies and penalties for non-compliance.

Type of entities covered under PMLA

In general, any person directly or indirectly involved in any activity or process concerned with the proceeds of crime, i.e use, concealment, possession, acquisition or projection it as untainted property is said to have committed the offence of money laundering under the PMLA. The term “proceeds of crime” is defined as property obtained directly or indirectly as a result of a scheduled criminal activity. The Schedule of the PMLA gives a list of offences which would constitute as ‘criminal activity’ under the Act. Offences pertaining to gambling are not specifically mentioned in the Act.

However the PMLA also requires “reporting entities” to maintain certain types of records and furnish information to the Director of Financial Intelligence Unit (FIU) as and when required.  Reporting entities is defined under Section 2(wa) to include a banking company, financial institution, institution, intermediary or a person carrying on a designated business or profession. Further under Section 2(sa) as amended in 2013, a person carrying out a designated business or profession inter alia  includes “a person carrying on activities for playing games of chance for cash or kind, and includes such activities associated with casino.”

Additionally,  financial institution has been defined to include inter alia those companies defined under Section 45I (c) of the Reserve Bank of India Act  and payment system operators (those companies settling payments between a payer and beneficiary including through credit cards, debit cards, money transfer etc.) Under the RBI Act, financial institutions includes non-banking companies which collect monies under any scheme or arrangement for the purpose of distributing prizes in cash or kind.

Thus under the PMLA potentially all gaming companies including online gaming or skill games websites, lottery operators, casinos, payment gateways etc. are reporting entities and are required to maintain various records and customer identity documents.

Records that have to be maintained by reporting entities under the PMLA and Rules

Section 12 of the PMLA imposes obligations on reporting entities to maintain records of all transactions and provide it to the Director FIU as and when demanded. Further, the reporting entity is also required to maintain a record of documents regarding identity of clients and business correspondence etc. The records have to be maintained for a minimum period of five years from the date of transaction.

Apart from the records to be maintained under Section 12, onerous set of obligations are also imposed on reporting entities under the Prevention of Money Laundering (Maintenance of Records)  Rules, 2005 which inter alia include maintenance of records of all cash transactions or series of inter-connected cash transactions of the value of more than ten lakh rupees, maintenance of records of all suspicious transactions (i.e. transactions that have no economic rationale or bona fide purpose, transactions that may involve proceeds of a Scheduled offence and transactions involving financing of terror-related activities)  and client due diligence.

Client due diligence involves collection of identity of the client at the commencement of an account-based relationship and verification of identity in transactions above fifty thousand rupees.

All records that are maintained by the reporting entity have to be supplied to the Director FIU every month by the 15th day of the succeeding month. Further a monthly report on the measures taken under the PMLA and Rules has to be sent to the FIU by the designated director of the reporting entity by the 10th day of the succeeding month.

Penalty for non-compliance

Section 13 of the PMLA authorises the FIU to call for records of reporting entities and ask for its audit by a Central government auditor and after inquiry issue a warning to a reporting entity, designated director or employee, issue directions for compliance or by an order impose a monetary penalty of not less than ten thousand rupees but up to one lakh rupees.

Business Gaming

Income Tax officials raid Goa casinos over money-laundering, tax evasion allegations

In a surprise move coming in the middle of election season, Income Tax officials raided casinos and other properties of two biggest gaming companies, Delta Corp and Pride Group reported Times of India. The raids were carried out by the IT department over allegations of money-laundering and tax evasion by the two companies.

As per media reports, Deltin JAQK, Deltin Royale and Pride 1 & 2 offshore casinos as well as Hotel Neo Majestic premises were raided by tax authorities yesterday. Apart from casino properties, other properties owned by Pride and Delta Group companies in Mumbai and Delhi were also raided by tax officials. More than 25 residential and office premises of Delta Corp offices in Mumbai and Goa (including offices of real-estate company Peninsula Land Limited) were raided by the authorities. Residences of Pride Group Directors Ashok Kumar Khetrapal, Ashok Wadia and BR Arora were also raided in Mumbai and Delhi.

The raids were carried out by tax authorities on a tip-off by unnamed informants indicating that large unaccounted cash transactions were carried out by casinos and that high rollers used casinos to transact in black money. Income tax authorities indicated that more details about the probe would be revealed in the next couple of days while casinos remained shut yesterday. It remains to be seen whether the casinos are found to be violating provisions of the Goa government Anti-Money laundering Guidelines of 2013 (which mandate cash transactions of over ten lakh rupees and transactions by politically exposed persons to be reported to the Financial Intelligence Unit) or the Income Tax Act.

It must be noted that the Income Tax Act also mandates deduction of 30.90% Tax Deduction at Source (TDS) on gambling winnings of over ten thousand rupees. However, it is not clear whether the tax authorities would look only at the money-laundering angle or also investigate into TDS deductions and other suspicious transactions. However, the timing of the raids indicate that political conspiracy could also be the reason behind the swift action by Income Tax authorities as Delta Corp Promoter and Chairman Jaydev Mody is said to be close to top BJP leaders including Goa Chief Minister Manohar Parrikar.

Update: Delta Corp issued a press statement to the NSE on 30th April 2014 about the raid. The statement reads as follows: “With reference to the new item appearing in the Media titled ‘IT department raids the premises of the company’, Delta Corp Ltd has Clarified to BSE that the Income Tax Authorities had carried out search and seizure proceedings at the premises of the Company and certain officials on April 29, 2014. The Company is in the process of collating & responding to all the queries raised by the Income Tax Authorities and the responsible officers of the company have been extending all co-operation in this regard.”

Business Legal & Regulatory

Jolt to poker players as Goa casinos change their policy, deduct TDS on tourney winnings + Goa govt notifies Anti Money-Laundering Guidelines

Major Goa casinos have recently changed their in-house policy on tournament winnings and will now deduct a 30% Tax Deducted at Source (TDS) on tournament winnings in compliance with Section 194B of the Income Tax Act, 1961. (See our earlier report here.)

Tanmaya Nanda, Public Relations Officer of  Delta Corp, a public limited company which owns Casino Royale and Casino Caravela, two major offshore casinos in Goa confirmed that TDS is being deducted on poker and other tournaments.   Regular players at Casino Carnival, another major offshore casino in Goa also confirmed that TDS is now being deducted on winnings.

It still remains a mystery as to why TDS was not deducted on winnings on tournaments until recently and why cash games are still not subject to tax deductions. The complex secrecy surrounding this glaring omission by casinos and its implications will be dealt in a subsequent post; however poker enthusiasts and insiders familiar with the developments believe that such a move would drive away regular gamblers as it would severely dent the amount of winnings/prizes that casinos usually offer.

Thus, if a player wins Rs. 50 lakhs in a poker tournament with a buy-in of Rs. 1 lakh, it would mean that around Rs. 16.30 lakhs would be straight-away deducted as TDS and the winner would be awarded the remaining Rs. 34.70 lakhs (which would amount to a reduced incentive and greater scrutiny).

Casino Royale, Goa

Bharat Agarwalla, Director of India Poker Series and a regular organiser of poker events in Goa casinos believes that it is necessary to educate players about the importance of deducting taxes as per the laws in India. Agarwalla further adds, “Tournament organisers are merely complying with the applicable laws by deducting TDS. Such taxes have global precedence and are deducted at source even in USA (form WG-2 as per IRS guidelines in USA requires withholding of 28% taxes in case of winnings over $6,000 and this varies for different games) and other European nations on poker tournaments. The rate of tax is certainly high but we can only hope that the government changes the rules and allows set-offs for losses/expenses and reduces the rate of TDS (or abolishes TDS) especially for poker…we can only urge the government for reforms and reduction of taxes…”

In a similar but unconnected development the Goa government notified guidelines for preventing money-laundering and black money in casinos following an amendment in the license terms and conditions for casinos in 2012 . (See our earlier report here.)

The Anti Money Laundering and Financing of Terrorism Guidelines, 2013 introduced by the government require casinos to follow stringent Know-Your Customer (KYC) norms for gamblers and verify sources of funds of Politically Exposed Persons (PEP) such as senior bureaucrats, politicians, judges etc.

Further, cash transactions above ten lakh rupees would have to be reported to the Financial Intelligence Unit (FIU) and suspicious transactions to circumvent this threshold also have to be reported to the FIU.

These guidelines are important measures in curtailing black money and money from criminal activities and come amidst concerns raised by politicians and civil society organisations regarding the role of black money in Goa casinos. However, experts closely following the gaming industry believe that such stringent guidelines preventing large cash transactions may also have an adverse impact on the revenue flows and business done by casinos.

Business Gaming

Goa government amends casino license terms,makes it mandatory for casinos to follow anti-money laundering guidelines

The Goa government through a notification issued and published in the Gazette on 21st November 2012 has amended the license terms for casinos and issued a new provision to be followed by all casinos.

The Goa Home Department through its Under-Secretary Neetal Amonkar issued the notification inserting a new clause in the casino license terms and conditions. The new clause of the notification reads as follows:

(xiv) The licensee shall strictly follow the guidelines as may be issued by the Government for preventing money laundering and for combating financing of terrorism.

While the exact guidelines have not been announced by the Goa government as of now, there has been a global practice of issuing guidelines to prevent generation of black money. Apprehensions about use of casino winnings by terrorist organisations and other criminal syndicates resulted in issue of money-laundering guidelines by the United Kingdom Gambling Commission. The guidelines include collection of mandatory due diligence documents  from customers and cap on cash winnings that can be awarded to winners.

Similar guidelines have been issued by various governments across the globe. The notification came after concerns were raised by civil society regarding illegal use of casino winnings and anti-casino protests were raised by opposition party leaders.

The Manohar Parrikar led Goa government had earlier amended the Goa, Daman and Diu Gambling Act, 1976 banning entry of locals to casinos. Other regulatory measures such as capping the number of offshore and onshore casinos and increase in license fees were also undertaken as part of the government’s anti-casino stand.

Chief Minister Parrikar had vowed to impose stricter regulations and possibly ban casinos as part of his protests during election campaigns. This move can be seen as a reinforcement of the government’s stance against the growing influence of casinos. However, the impact of this notification on revenues will only be known when exact guidelines are issued to casinos.

PS- Readers can download a copy of this notification here. The Times of India story on the notification can be accessed here.