Money laundering fears in betting shops

  • Under review: David Burt may look to strengthen regulation (Photograph by Blaire Simmons)

    Under review: David Burt may look to strengthen regulation (Photograph by Blaire Simmons)

A lack of regulation for betting shops could raise red flags when the island’s anti-money laundering measures are investigated by overseas experts next year.

Correspondence shared with The Royal Gazette reveals that warnings about the absence of controls to prevent dirty-money transactions within the betting industry have been made to Bermuda’s leaders, including David Burt, the Premier, as well as to the Government’s National Anti-Money Laundering Committee.

Mr Burt told this newspaper in response to questions that “Bermuda must assess the money-laundering risks within the betting sector to determine if anti-money laundering and anti-terrorist funding laws need to be put in place.”

He admitted legislation governing betting shops was “outdated” and under review, adding that the Government would “update the framework for the licensing of bookmakers and betting agents, taking into account the risks presented by this sector”.

A source claimed the Government should have heeded the warnings sooner, and now appeared to be scrambling to ensure the Caribbean Financial Action Task Force is satisfied with betting shop regulation when it assesses the island’s progress in implementing counter measures to money laundering and terrorism financing in the spring.

Mr Burt last week defended Bermuda’s “vigorous regulatory framework” when it comes to international business, as he sought to counter the fallout from the Paradise Papers hack.

However, the source claimed the Premier may struggle to convince CFATF representatives that the betting shop industry, which falls under his brief as finance minister, is safe from money laundering.

The documents seen by this newspaper include a letter from Bermuda Casino Gaming Commission executive director Richard Schuetz to former premier Michael Dunkley, in which he flags up concerns. The letter was later shared with Mr Burt when he was Opposition leader.

The gaming commission is not responsible for betting shops, whose licences are issued by the Betting Licensing Authority.

Mr Schuetz warns in his correspondence that activities within the betting shop industry could hamper the island’s efforts to set up a casino industry and “damage many sectors of the economy” by “negatively affecting” CFATF’s assessment.

In one letter, Mr Schuetz wrote: “I believe that essentially all gambling products being delivered on the island are taking place without meaningful regulation. Bermuda has developed the unfortunate tendency of legalising a gambling activity, monetising it for the Government through fees and taxes, and then failing to regulate it.

“There is an absence of suitability checks, few consumer protections, an absence of meaningful controls on game integrity, no protections for the vulnerable, an open-door route to evade taxes and, of particular concern, no anti-money laundering controls.

“I believe that this abject neglect of controls over these different forms of gambling is to play Russian roulette with the banking system of Bermuda.”

The source, who has attended NAMLC meetings, said Mr Schuetz raised his concerns repeatedly at meetings of the committee. A second source, also a meeting attendee, agreed that was the case.

NAMLC chairwoman Cheryl-Ann Lister referred a request for comment to the Ministry of Finance.

Mr Schuetz also brought up inadequate regulation when he gave a talk to the Annual General Meeting of the Association of Bermuda International Companies a year ago. This newspaper attended that meeting but didn’t report his remarks on the subject at the time.

The Caribbean Financial Action Task Force, an associate member of the global Financial Action Task Force, is a collection of countries which have agreed to implement counter measures against money laundering and terrorism financing, and carry out mutual evaluations.

The organisation’s assessment of Bermuda is viewed as critically important, with Mr Burt stating in July: “I cannot emphasise too strongly to everyone on our island the necessity for Bermuda to pass this international examination.”

Expert David Harper, formerly of KPMG, claimed last year that “a lot of international business would consider leaving the island if we don’t get a good report”.

Mr Burt told this newspaper that the Betting Act 1975, which governs how bookies are licensed and regulated, was “outdated and is being reviewed”.

He added: “The Financial Action Task Force does not identify betting as a sector that must be subject to anti-money laundering and anti-terrorist funding obligations and supervision. Only casino gaming is named.

“It is widely acknowledged that the FATF standards are the minimum standards and that the FATF also mandates countries to implement a risk-based anti-money laundering and anti-terrorist funding framework. Bermuda must assess the money-laundering risks within the betting sector to determine if AML/ATF laws need to be put in place.”

He said NAMLC had analysed the betting sector as part of a national risk assessment on money laundering earlier this year and the law would be updated based on that assessment.

The first source told this newspaper that improved regulation was long overdue.

“The regulation — actually absence of regulation — for the betting shops is becoming a big deal. The Government of Bermuda has ignored the betting shops for ever.

“NAMLC is now trying to throw something together to pass the [CFATF] evaluation. It appears that the concern is not about good regulation but about trying to pass a test.”

At last check, six establishments had bookmaker’s licences under the Betting Act 1975: Sea Horses, Paradise Games, Gametime and Triple Crown Racing in Hamilton, and Gametime in Somerset and St George.

Customers can place bets at all six shops and buy tickets for overseas lotteries at Paradise Games and Triple Crown Racing.

Andrea Joseph, manager of Triple Crown Racing, said she felt the industry was sufficiently regulated and was “positive” that all transactions conducted at her establishment were clean.

“The customers that I have are workers, regular workers, and they work hard for their money.

“I know them. They place a bet and are paid if they win. I don’t do any drafts for anyone. It’s a straightforward process and I only have law-abiding customers.”

Betting Licensing Authority chairman Juan Wolffe did not respond to an e-mailed request for comment by press time. Mr Schuetz declined to comment.

* This article has been amended to include the fact that David Harper is no longer with KPMG.

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Published Nov 14, 2017 at 8:00 am (Updated Nov 22, 2017 at 12:11 pm)

Money laundering fears in betting shops

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