Online casino, crypto pain for National Gambling Board
Online casinos are still giving the National Gambling Board (NGB) a lot of headaches, with the emergence of crypto-currencies worsening the situation.
This is according to Caroline Kongwa, accounting authority of the NGB, in an interview with ITWeb ahead of the NGB’s two-day conference on 18 and 19 July, in Pretoria.
The problem has seen the NGB engaging with the South African Police Services to raid the illegal online casinos imminently.
In 2017, the Department of Trade and Industry confiscated R1.25 million worth of online gambling winnings.
The board says revenue generated by the legal gambling industry is slowly being eroded by online and illegal gambling.
It notes these operators create games that compete with traditional gambling operators, which has a detrimental impact on formal gambling revenue.
“This ultimately impacts tax revenue for government, while further consequences include loss of employment opportunities, loss of local economic activity, and an erosion of consumer rights and protection,” says Kongwa.
Online gambling (or Internet gambling) includes poker, casinos and sports betting. The first online casino was opened in 1994.
Many countries restrict or ban online gambling, but it is legal in some provinces in Canada, most countries of the European Union and several nations in the Caribbean.
“Online casinos continue to be offered in South Africa despite it not being legal, except for online betting through bookmakers licensed in South Africa for online betting, such as sports events and horse racing,” says Kongwa.
“South Africans cannot gamble with international betting operators who are not licensed in South Africa whilst within the republic,” she adds.
At present, the gambling industry – excluding the National Lottery – other lotteries, including society lotteries, promotional competitions and sports pools, is regulated by the NGB and is subject to the National Gambling Act, 2004.
As online casino gambling is illegal in SA, Kongwa says the penalties on operators are severe and gamblers can have their winnings confiscated.
“They can also be prosecuted for participating in an illegal activity. The Department of Trade and Industry presented the National Gambling Amendment Bill to Parliament in 2018, which proposed that no new forms of gambling are to be allowed and included improved provisions in the legislation to deal effectively with illegal gambling.”
The proposed Bill suggests provisions must be included to prohibit illegal winnings, with amendments to prohibit Internet service providers (which must not knowingly host an illegal gambling site), banks and other payment facilitators from facilitating illegal gambling, transferring, paying or facilitating payment of illegal winnings to persons in SA.
The prohibition will require the NGB to be vigilant in terms of alerting the institutions above of such illegal operators.
If the notification by NGB is not implemented, the affected institution or facilitating body will be criminally liable in terms of the Act. Such winnings should be paid over to the Unlawful Winnings Trust.
Says Kongwa: “The challenge presented to the NGB, as a national regulator, is that as these online operators are based outside the borders of SA, enforcement becomes very difficult. Also, as this form of gambling is technology-driven; it is not easy to obtain the necessary evidence to successfully arrest and prosecute offenders.”
Responding to some punters who allege SA is losing billions of potential revenue because of outlawing online gambling, Kongwa says it is difficult to estimate the losses when one is dealing with an illegal and, thus unregulated activity, but the revenue generated by the legal gambling industry is certainly being eroded by online and illegal gambling.
“Although the activity is illegal and punters may be prosecuted, the NGB’s approach was to first focus on awareness-raising, as we have found that given the brazen manner in which online gambling is offered to the public, through smartphones and so on, many people become misled into thinking it is a legitimate activity.
“The NGB’s focus is to encourage greater awareness of what is right and wrong, and to promote responsible gambling. However, this does not alter the fact that participating in a criminal act would require prosecution, and that is the next step for the NGB.”
In terms of the National Gambling Act, contraventions can attract fines up to R10 million or imprisonment of up to 10 years.
Punishment for both illegal operators and punters participating in an illegal activity is severe, and punters will also have their winnings confiscated, Kongwa notes.
She adds the NGB has launched a joint project with the South African Police Services to make illegal gambling a priority crime nationally, and they are expecting a number of raids to be conducted nationally soon.
“We are also communicating with Internet service providers to restrict the ability to offer online gambling illegally.”
On how crypto-currencies are further complicating the matter, Kongwa says: “The challenge that crypto-currency presents is that it is not regulated by the financial services prescripts, so banks are unable to invoke Section 16 because the winnings do not pass through the control of banks, it goes directly to the punters.
“Crypto-currency is also a serious risk in terms of money laundering, as such currency is not subject to the regulatory control and scrutiny of banks.”
She points out the NGB works in collaboration with various other organisations that have a role to play in curbing illegal gambling.
“We have entered into memoranda of understanding with such entities, in order for enforcement to be effective.
“You will appreciate that as we are talking about an activity that is against the law, it is not only the responsibility of the NGB to prevent such activities from taking place. We are confident that nationally, with the co-operation and joint efforts of all key role-players, sufficient capacity exists to monitor and combat illegal online gambling sites,” Kangwa concludes.