Special Report: Government making strides in fight against illegal gambling

“Sparrow” is an avid online gambler. For him, it’s the “rush” and his “lucky streak” that keep him going back to bet.

The Sandton resident, 30, who declined to be identified by his real name, is among millions of punters who do online gambling across the world.

“You can easily get addicted and you can lose a lot of money. Once you start losing, you get bored. What works for me is that I keep changing the game and finding another interesting one,” says Sparrow in a sit-down interview with TimesLIVE.

Gamblinginsider.com says online gambling has expanded globally in the past decade. By the end of 2016, the industry was worth $41.78bn, and that is set to increase to $80bn by the end of 2020.

“Just to put it into perspective, 11% of total internet traffic now comes from online casino players. The UK's remote gambling sector has seen a 300% increase since 2014's new legislation,” Gambling insider.com shows.

The challenge for countries like SA, where online gambling is illegal and not regulated, is that the country is losing millions that could be going to the fiscus.

Gauteng Gambling Board CEO Steven Ngubeni says the online gambling industry in the country is “spiralling out of control”.

“We've got this form of illegal gambling that has spiralled out of control, but the companies that operate online gambling are not paying any tax to government and punters are not protected,” said Ngubeni in a sit-down interview.

Regulating the industry, Ngubeni says, will also prevent large sums of money leaving SA shores without being accounted for.

“When looking at the real money online gambling statistics for SA, it’s clear that this would enable government to earn billions more in tax every year, instead of losing out in an industry that is steadily growing, despite legislation preventing it from doing so,” Gambling.co.za says.

SA law currently prohibits gambling via internet sites that offer casino and poker-related games.

According to the department of trade & industry (DTI) website, the four modes of gambling that are legal and regulated are: casinos, bingo, limited-payout machines, and betting on horse racing and sporting events.

With technological advancements, punters do not have to go to internet cafes to bet, they can do so in the comfort of their homes as there are applications that can be downloaded on smartphones.

SA is set to introduce tougher laws to regulate and enforce online gambling in an effort to curb illicit financial flows (IFFs), especially money laundering, the DTI has revealed.

Sidwell Medupi, DTI spokesperson, said the draft National Gambling Amendment Bill published in September 2016 is going through final stages of parliamentary processes, stating “the bill is now in the NCOP [National Council of Provinces] process”.

He says the capacity to regulate online gambling currently is not adequate, but can be streamlined to prevent illegal operations.

“Provisions must be included in the legislation to prohibit illegal winnings, with amendments to prohibit internet service providers (who must not knowingly host an illegal gambling site), banks and other payment facilitators from facilitating illegal gambling by transferring, paying or facilitating payment of illegal winnings to people in SA.

“Currently the winnings are illegal and will be confiscated and paid over to the state,” Medupi says.

It appears that the government’s effort to introduce stricter laws has merit as a 2016 World Development Report, titled Do Digital Technologies Facilitate Illicit Financial Flows, states that though there are not enough case studies and investigations to prove that online gambling and betting services can be used for illegal transfers, especially when they are combined with online payment systems and digital currencies, the phenomenon can allow money to be distanced from the illicit source for the criminal enterprise of any size, both by gambling or by establishing an online casino in an offshore jurisdiction.

The Centre for Financial Regulation and Inclusion (Cenfri), a non-profit think-tank that supports financial sector development and financial inclusion in Africa, describes IFFs as financial flows that involve capital that is illegal in nature, either by the way it is earned, how the transfer happens or what the money is used for.

IFFs are widely understood to have a negative affect on countries, as they drain them of resources that could be used by governments for social spending and other important functions, states the think-tank website.

Besticasinosites.net, a website that ‘evaluates every aspect of on an online casino’, states that whether online or traditional, casinos are susceptible to money laundering and are believed to be attractive to organised crime because: “Huge cash flow is accepted as normal. Also, casinos can provide simple banking services with a decent level of anonymity.”

PWC's Gambling Outlook report for SA: 2016-2020, says gross gambling revenues will total an estimated R34.8bn in 2020, a 6% compound annual increase on the R26bn in 2015.

“And since it’s all legalised, regulated and controlled, the tax man gets paid a healthy sum of R2.1bn through levies and taxes,” says Gambling.co.za.

*This story was produced by TimesLIVE. It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation in partnership with the Institute for the Advancement of Journalism. More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher.