Malta must review its online gaming legislation to counter the mafia

August 06, 2015

As Italian authorities continue their investigations following the arrests of organized crime suspects involved in the gaming industry, many questions arise about the effectiveness of legislation in Malta, one of the most welcoming countries for gaming operators in line.

Considered an ideal destination for setting up a business in the online gaming business in Europe, thanks to an attractive tax regime and appropriate legislation, Malta has seen the number of companies in the sector skyrocket in its territory in recent years.

The island now has 283 duly registered companies operating in the field of online games. With a total of 419 licenses in 2014, the gaming industry represents a considerable windfall for the finances of this small country with an income of 25.8 million euros (up 21.7% compared to 2012).

The image of Malta is now damaged. The island must act and correct what is not working, otherwise it could damage the Maltese economy on a large scale.

While part of the industry believes that this growth can continue in future years, many believe that the Maltese system must reform and put in place the resources for serious control of online gaming players.

Bas Jongmans, international lawyer and founder of Gaming Legal Group, claims that the system has reached its maximum capacity. The arrest by the police of 41 individuals and the closure of numerous companies demonstrate that controls are not as rigorous as necessary.

“To open a business in the gaming sector in Malta, you need to provide a lot of information, including where your income comes from,” Jongmans told PokerNews. “The problem is that this information is often not processed by the companies that need to do so, usually because they have too many customers.”

For Jongmans, the limits of the Maltese system have been exposed by the Italian police’s anti-mafia operation, which now risks harming the work carried out by the Maltese authorities to attract foreign investors to the island.

“Malta’s image is now damaged. The island must act and correct what is not working, otherwise it could damage the Maltese economy on a large scale. Particularly if it changes the way businesses choose to do business. ‘install.”

“People believe that Malta has harsh legislation when it comes to gambling, with many procedures in place, but the truth is that things are not as strict as they seem,” continues Jongmans. “The online gaming business has grown so much that it is impossible for auditing companies to ask all the questions they should and track the answers they get. These companies, which accept hundreds of clients, have no not able to do their job.”

Although some Malta-based firms disagree with Jongmans’ assessment, the failure of controls is real, which is what convinced Italy to take an interest in the Maltese company. GVM Holdings and to the son of the island’s prime minister, David Gonziin his investigations into the mafia and gambling.

As a shareholder and director of GVM Holdings, Gonzi is responsible for the company that provided monitoring and control services to the company Uniq Group Limitedaffiliated with a reliable source to the mafia.

“The role of David Gonzi, the son of Prime Minister Lawrence Gonzi, must be strongly condemned, with responsibility that has been incurred on several occasions, even if additional investigations are necessary” indicates the investigators’ report.

“David Gonzi is believed to be at the top of the pyramid of international companies operating from the territory with a Maltese license, acting as a front for recently uncovered criminal activities. Ongoing investigations may well reveal a major international organized crime network.”

Despite these accusations, Gonzi quickly denied any involvement in possible illegal activities by his clients, stating that “it would have been preferable if the assertions about my involvement at the center of this network had been accompanied by evidence, which is not In any case, the report itself recognizes that “further investigations are necessary.”

In Gonzi’s opinion, GVM Holdings has ensured all legally required controls over its clients; Uniq Group provided all the elements guaranteeing that it was in compliance with the law when applying for the license from the Maltese authorities. Gonzi said GVM could not be held responsible for Uniq Group’s actions after obtaining the license.

To complicate Gonzi’s position, there are at the same time the special relationships he maintains with Betsolutions4U Limitedone of the other companies involved in the transalpine police raid on July 22.

Questioned about his links with this firm, Gonzi admitted to having provided legal services to this company between 2014 and 2015, until “GVM terminated all contracts with the companies involved.”

“With more modern and efficient legislation, Malta would still be an excellent place to do business,” commented Jongmans. “The tax rate is low, it’s easy to set up a company and there are many skills on the island. We just need better laws, more transparency, stricter regulation, so that the legal business works.”

To improve the system, the lawyer considers that the Maltese authorities should not necessarily adopt stricter checks of operators, but rather consider changing the conditions for setting up companies on the island and the way in which the companies in charge work. of surveillance.

“We just have a few big auditing firms that take on every client they can, even though it’s obvious that it undermines their ability to fulfill their auditing mission,” Jongmans explains. “If we want more transparency in the industry, we need to make it harder for some people to hide behind complex structures and adopt stricter rules for the companies responsible for controls.”

A more transparent and better adapted environment could also provide a springboard for activity and attract new investors and businesses. Still according to Jongmans, “many companies I spoke with are hesitant to get into the gaming business because they are not sure that we can guarantee them an operation that guarantees that certain unwanted people do not invite themselves in the game.”

Jongmans explains that a good way to avoid situations similar to those involving GVM and companies like Uniq Group and Betsolutions4U is to force operators to adopt a transparent structure.

A global European approach to the gaming business is the only solution

A reform of Maltese gambling legislation may not be enough to prohibit access to online gambling for criminal organizations, because in the long term it will just push these people to look elsewhere for more flexible legislation.

“The solution is the harmonization of gaming laws across Europe. This alone could create an effective system on a continent-wide scale,” assures Jongmans.

“The fact that we do not currently have a European system in place invites some people to choose the least careful countries. When the mafia was confronted with anti-money laundering and anti-mafia laws, it moved elsewhere, there where we weren’t paying enough attention to what was going on.”

The online gaming industry is going to become more and more complex in the future, with many operators offering services aimed at professionals and many operators sharing their business with other companies, and that’s why I believe “It is imperative that legislators are prepared to face such a challenge and do what is necessary to minimize the risk of illegal activities,” adds Jongmans.

By keeping things as they are, with different national legislations under the same roof, the legislator favors the existence of places favorable to criminal activity. Jongmans then draws a parallel between the tragedy of migrants between Africa and Italy, when criminal organizations try to exploit the differences in laws between European countries.

The MGA recognizes: “A 100% reliably controlled environment is unrealistic”

Jongmans says the failings of Maltese legislation were indirectly recognized in a note on the Italian police raid written by the M.G.A. (the Maltese equivalent of ARJEL) on July 25.

“Certain gambling-related activities or certain business structures could present a higher risk than others with the involvement of certain categories of people likely to contravene the legislation” wrote the MGA

“As an experienced regulator of online gaming, it is our duty to minimize these risks as much as possible and to put in place within the MGA all the elements to combat these risks. But as all regulators will confirm, despite legislation, control mechanisms and other monitoring protocols, guaranteeing a 100% reliably controlled environment is unrealistic.”

“While the risk to the reputation of the gaming sector in Malta is critical, and even if we consider that the facts are to be blamed only on the incriminated operators, the Maltese Regulatory Authority will strongly strengthen its rules and controls to preserve its reputation and put in place all useful measures to combat this type of violation of gaming licensing laws.”

In conclusion of this letter, the MGA assures that it will face this important challenge to ensure the smooth running of the gaming industry and become the reference authority in the matter.

_{photo credit The Telegraph}