The Model for Combatting Illegal Betting

By Martin Purbrick, Chairperson, ARF Council on Anti-Illegal Betting and Related Financial Crime

The ARF Council has talked about the scale and impact of illegal betting for many years and the threat from illegal betting has consequently become better understood. With greater understanding of the threat from illegal betting, stakeholders need a model to combat the problem. This article outlines the components of this model.

There remain strong reasons for the development of national models to combat illegal betting due to the increasing negative impact of the issue. Illegal betting markets are huge and expanding globally from a strong base in Asia. Criminal groups control illegal betting operations in Asia. Illegal betting has consequently become a transnational organised criminal problem that involves diverse financial crime and lost tax revenue due to the scale of this ‘black economy’. Illegal betting is the major threat to racing and sports integrity, and if not combatted can completely undermine public confidence in racing and sports.

Combatting illegal betting requires collaboration between government agencies, private sector entities in the technology and finance sectors, racing and sports operators as well as regulators. This is a diverse set of stakeholders and persuasion is required to bring them together with a model that shows benefit to all of those involved. However, this can be done and there is a national model that is an example to other countries.

The Australia Model

Australia’s national model has been well planned, implemented, and is an example to other countries of a successful approach to combat illegal betting. The strategy in Australia is not focussed on “illegal betting” per se, but the wider national strategy to safeguard the integrity of sport includes recognition of the impact of betting and addresses this to mitigate the threat. The national strategy in Australia has evolved in the past decade and been influenced by several major pieces of research work.

In 2017, Michael Andrew presented the final report of the ‘Black Economy Task Force’ which reported that “Based on the earlier studies and the Taskforce’s consultations with relevant agencies, illegal gambling activity could be between $1.3 and $2 billion today, with about 60 per cent relating to the racing industry.”^[1]The work of the Black Economy Task Force documented illegal betting and gambling as a major part of the ‘black economy’ that “provides Australian users with higher returns that reflect Australian taxes not paid.”^[2]

In 2018, ‘The Review of Australia’s Sports Integrity Arrangements’, known as the ‘Wood Review’ after the Honourable James Wood AO QC who led the review, reported that “Our inquiries have shown that, at the international level, there has been a huge growth in sports wagering, particularly in Asia, which because it is in a similar time zone, makes wagering on Australian sports convenient. This has created a low-risk, high-profit environment for the manipulation of sports competitions (match-fixing) at all levels, but particularly at sub-elite levels where there is less monitoring and visibility, and also an attractive avenue for organised crime to engage in money laundering.”^[3]

These reviews positioned Australia as a leading nation with the understanding of why and how to safeguard sports integrity, and in particular highlighted the significant threat from illegal betting on racing and other sports. The ‘Black Economy Task Force’ made the following recommendations^[4]to combat illegal betting and gambling:

1.   The government should enforce existing laws.
2.   The government should require ISPs to block offshore sites that are offering illegal gambling services to Australians
3.   The government should encourage banks to prevent transactions to and from offshore wagering websites.
4.   Prevent regulated gambling sites from accepting bets sourced from unregulated sites.
5.   Racing regulators should publicly warn off people from attending racetracks and prosecute them if they are found to be using unregulated gambling sites.
6.   Australian law enforcement agencies should exchange information about unregulated gambling with their international counterparts.
7.   Better use should be made of information contained in stored value cards and betting vouchers should be analysed to seek out potential criminal networks.
8.   The government should prevent gambling from being used to shelter tax evasion.

The Wood Review proposed the formation of a single body to address sports integrity matters at a national level (a national sports integrity commission), and also addressed the threat from illegal betting to integrity in sports and made the following recommendation:

“[That] the Australian Government, as a matter of urgency, formalise and expand the work of the Sports Betting Integrity Unit by establishing a ‘National Platform’ type entity with the powers and capabilities required to address the threat of match-fixing as outlined in Article 13 of the Macolin Convention (including the national regulation of sports wagering, administering the Australian Sports Wagering Scheme, and for information and data sharing).”^[5]

The reviews in Australia paved the way for the creation in 2020 of Sport Integrity Australia, which has led to the creation of the National Integrity Framework, “a world-first process to deal with integrity issues in sport” that is “essentially a set of rules that all members of a sport need to follow when it comes to their behaviour and conduct in sport.”^[6] In addition, in 2019, the Australian government became a party to the Macolin Convention, the Council of Europe multi-lateral treaty aimed at combating match-fixing and other related corruption in sport.

With these reviews and outcomes, Australia has become a leader in sports integrity, including the related combatting of illegal betting on racing and other sports.

The ARF Council Model

The ARF Council advocates the use of stakeholder engagement as a means of aligning key organisations to understand the threat from illegal betting and to act accordingly. The recommended stakeholder engagement model includes the following sectors:

Police and other government organisations, including regulators, are essential for enforcement action against illegal betting operators. Media organisations are necessary to educate the public as well as wider groups of stakeholders of the threat from illegal betting. Similarly, think tanks and NGOs have a strong education role. Financial institutions are essential to help cut off payment methods for illegal betting operators. Telecommunications companies and Internet Service Providers as well as related online services are needed to block illegal betting operators access to online services.

Stakeholder engagement is the step to bring organisations together to understand and combat illegal betting, but a national model requires a clear set of priorities that should be objectives for the national model to address. There has been much good work in this space from international organisations. The Council of Europe (Macolin Convention), INTERPOL, and the United Nations Organisation on Drugs & Crime (UNODC) have all engaged with racing and other sports stakeholders to highlight the threat from illegal betting and related financial crime.

Going beyond stakeholder engagement, the creation of national models, based on appropriate national platforms, is essential for long term success. To that end, some recommended priorities and objectives of a national model to combat illegal betting are as follows:

1. Gambling regulators should adopt the Macolin Convention definition in national gambling regulation.

The Council of Europe Convention on the Manipulation of Sports Competitions Article 3,5,a states that “Illegal sports betting’ means any sports betting activity whose type or operator is not allowed under the applicable law of the jurisdiction where the consumer is located.” It is an essential condition for the effective control of betting that betting operators must be licensed in the jurisdiction where they accept a bet from the consumer (i.e. at the point of sale).

2. Betting operators should be licensed and approved by the specific jurisdiction in which they operate, rather than by offshore jurisdictions.

Gambling regulators should publicly state which betting and gambling operators are accepting wagers in breach of local national laws and warn consumers that such operators should not be utilised for wagering. Law enforcement agencies should take prosecution action against betting and gambling operators that breach local laws by operating without a local national license.

3. Taxation authorities should prevent betting and gambling being used to shelter tax evasion.

The vast profits either go offshore or directly fund criminality, rather than supporting society through taxation in the jurisdictions in which consumers are based. Taxation laws relating to profits tax as well as betting duty (i.e. on wagers) should be strictly enforced. Sales taxes on wagering transactions by national residents should be strictly enforced and collected

4. Internet Service Providers (ISPs) should be required to block access to illegal betting websites.

Legislation is required to allow for blocking of illegal betting websites, which should be enforced by the national telecommunications authority. National law enforcement agencies should exchange information about unregulated gambling with their international counterparts.

5. Financial institutions should lobby operators to block transactions to and from illegal betting merchants.

National banking and financial sector regulators should issue clear written guidance to licensed banks in their national jurisdiction that they should NOT process payments or facilitate business for unlicensed betting and gambling operators as this would facilitate financial crime.

6. Licensed betting operators should commit to 100% of their revenues to come from regulated markets, and to exit markets in which there are no viable paths to regulation.

Licensed betting operators should commit as part of their license application process to take all reasonable steps to NOT accept wagers from customers in jurisdictions where they do not hold a local license.

Globally, sports, racing and the legal betting industry must work with governments and international organisations to bring pressure to bear on betting tax havens and jurisdictions which act irresponsibly and enable illegal betting. There are havens for illegal betting operators which provide the pretence of legality but are outside of national gambling regulatory systems.

The ARF Council will continue to work with stakeholders in racing and other sports to combat illegal betting, and build the national models that are an essential part of these efforts.

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_{[1] Black Economy TaskForce, Final Report, October 2017, P. 32.}

_{[2] Ibid.}

_{[3] James Wood AO QC, David Howman CNZM, Ray Murrihy, Report of the Review of Australia’s Sports Integrity Arrangements, 2018, P.7}

_{[4] Black Economy Task Force, Final Report, October 2017, PP.315-319.}

_{[5] James Wood AO QC, David Howman CNZM, Ray Murrihy, Report of the Review of Australia’s Sports Integrity Arrangements, 2018, P.14.}

_{[6] Sport Integrity Australia, National Integrity Framework (https://www.sportintegrity.gov.au/what-we-do/national-integrity-framework )}

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