Illegal online betting, gambling firms act as channels for money laundering and terror financing, says report

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New Delhi: Illegal online betting and gambling companies act as channels for money laundering and terrorist financing, said a report by Rashtriya Raksha Universty's The Security and Scientific Technical Research Association.

IT Rules 2021 differentiates between permissible online real money gaming and illegal betting and gambling practices. Yet, the report suggested the need for a registration mechanism to whitelist legitimate online real money gaming platforms that operate in compliance with laws of India.

"Illegal online gambling and betting applications expose Indian digital nagriks to several security risks like cybersecurity attacks and unsafe online environments. They have also emerged as a threat to India's national security because illegal online betting and gambling websites act as channels for money laundering and terrorist financing," The Security and Scientific Technical Research Association (SASTRA) report said.

It said that the current legal and regulatory framework doesn't adequately distinguish between legitimate and illegitimate activities because of which illegal platforms frequently facilitate additional illicit activities, including money laundering.

The report said while there is no official estimate on the size of the betting and gambling market in India or the revenue generated by these activities, a 2017 report by the International Center for Sports Security estimated the illegal betting and gambling market in India to be worth USD 150 billion, or nearly Rs 10 lakh crore.

"These rogue players syphon money out of our economy, leaving a trail of financial instability, thereby fuelling criminal activity," the report said.

The report has recommended the government to implement the IT Rules, 2021 for online gaming intermediaries to create distinction in law between legitimate online real money gaming and betting and gambling.

It has suggested setting up an inter-ministerial committee to evaluate enforcement and legislative measures and introducing a comprehensive regulatory framework to prohibit online betting and gambling.

According to IT Rules 2021, betting and gambling are unlawful in most parts of the country and online gaming platforms are treated as illegal when game of chance is involved in those platforms.

Citing examples to differentiate between game of skills and game of chance, former additional solicitor general N Venkataraman had said that the Supreme Court cited horse racing as a skill-based game despite the result of the race being unknown before it actually begins. In the same vein, he added that putting money on a horse race eventually leads to betting under the prevailing laws related thereto.

The Ministry of Electronics and IT has firmed up the guidelines to regulate online gaming but it is yet to implement them.

The report mentions the 59th report of the Parliamentary Standing Committee on Finance, which noted that illegal gambling applications pose a threat to security.

The Parliamentary report noted that suspicious transactions from UPI IDs are linked to websites in Curacao, Malta, Cyprus and other countries from where illegal betting and gambling websites operate.

According to the SASTRA report, illegal platforms are misusing the Liberalised Remittance Scheme (LRS) provided by the Reserve Bank of India, which allows resident individuals to remit a certain amount of money abroad every financial year, for specific purposes.

The report mentioned instances where illegal online platforms are disguising themselves as grocery platforms and are also using surrogate advertising to bypass existing rules.

"Surrogate advertising has emerged as a significant trend among online illegal betting and gambling websites offering services in India. Due to legal restrictions surrounding advertisement of gambling and betting services, operators employ alternative strategies to solicit users," the report said.

As per the Annual Complaints report for the fiscal year 2023-24 published by Advertising Standards Council of India (ASCI), illegal betting ads have become one of the most problematic categories, ranking second with 17 per cent, the report said.

It has also recommended collaborations with advertising standards bodies like ASCI to develop and enforce guidelines specifically against online betting and gambling advertisements.

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