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Whitepaper addresses nexus between illegal gambling and national security threats in India

A comprehensive whitepaper on illegal gambling and betting in India has underscored the alarming connection between illegal gambling operations and national security threats, while advocating for a regulated domestic e-gaming market as a possible solution.

The whitepaper, titled ‘Illegal Gambling and Betting in India: Risks, Challenges, and Responses’, was co-authored by Lt. General Vinod G. Khandare and Vinit Goenka, and reveals the staggering impact of illegal gambling on India’s economy, national security, and data sovereignty.

The report, highlighting a burgeoning underground industry, calls for urgent regulatory measures, and estimates the illegal betting market in India attracts around $100 billion annually.

The authors highlight the intricate methods used by offshore entities to siphon funds abroad, often through the use of benami (money mule) accounts and complex financial networks.

The report underscores the threat these illicit activities pose to India’s economy, national security, and data sovereignty, with the involvement of offshore servers, cryptocurrencies, and the exploitation of vulnerabilities, particularly among minors.

Economic impact and regulatory evasion

According to the report, offshore betting companies were described as often operating in the grey market, flouting laws with impunity and posing significant challenges to regulatory authorities.

‘These entities use offshore servers to circumvent legal oversight and conduct transactions through individual accounts rather than legitimate businesses, complicating tracking efforts,’ the report adds.

The Indian Financial Intelligence Unit (FIU) reported to a Parliamentary Standing Committee on Finance in July 2023 about suspicious transactions tied to offshore gambling entities exploiting Unified Payments Interface – an Indian instant payment system – IDs linked to Indian bank accounts.

These entities, initially registered in jurisdictions like Curacao, Malta, and Cyprus, divert funds collected through false inducements to select individuals and entities domestically and abroad.

‘Funds collected by this network of foreign-registered websites were not disbursed to investors or players as expected but were diverted to bank accounts of select individuals and entities,’ the whitepaper explains.

Indian central agencies, including the Intelligence Bureau (IB) and Research and Analysis Wing (R&AW), have also conducted technical analyses of certain betting apps, uncovering ‘alarming features’.

These apps, operating on Android and iOS platforms, were found to steal and transmit user data and monitor real-time activities covertly to servers outside India.

‘These upgraded apps seek extensive permissions, enabling them to record user movements, transfer backup data to their servers, erase data, and access the camera for video recording. Such capabilities raise serious concerns regarding national security, particularly amid the current tense border situation,’ the report adds.

Several investigations were said to have revealed that offshore entities use “Benami” accounts to route and layer illicit funds, ultimately transferring them abroad under the guise of bogus entities, illustrating the elaborate schemes that evade detection and enforcement.

The term “Benami” in Hindi translates to “no name” or “without name”. Benami transactions or Benami property would be one where a person’s own name is not used but the name of another person or a fictitious person is used instead.

A threat to cybersecurity

Whitepaper addresses nexus between illegal gambling and national security threats in India

Illegal gambling platforms were then described as posing a severe threat to cybersecurity, given the volume of sensitive data and financial transactions they handle. The report underscores the use of cryptocurrencies and instant peer-to-peer payment systems, which facilitate anonymous transactions and complicate law enforcement efforts.

‘Cryptocurrencies have become a favored medium for transactions in the realm of illegal betting and gambling, promoting anonymity and enabling illicit activities on a global scale,’ the whitepaper notes.

The research also sheds light on the exploitation of vulnerable consumers, particularly minors, by illegal operators, with many offshore websites bypass essential KYC and age verification checks, making it easy for minors to access gambling platforms, lead to significant ‘financial and psychological harm’ among young users.

‘Offshore websites like Parimatch offer payment options such as cash on delivery, allowing gaming platform agents to collect cash payments from consumers to top up their gaming wallets, thus simplifying the exploitation of minors,’ the report details​.

Fomenting a domestic e-market

In addressing the multifaceted challenges posed by illegal gambling, the whitepaper authors recommend a three-pronged approach by authorities, namely: recognizing illegal, offshore gambling operators as a national security threat; accepting the deep-rooted propensity for gambling and the limitations of outright bans; and developing a transparent and regulated domestic e-gaming market to provide a legal alternative and ensure consumer protection.

‘A regulated, domestic e-gaming market can offer oversight and transparency, safeguarding citizens’ interests and curbing the outflow of funds,’ the report advocates​.

Whitepaper addresses nexus between illegal gambling and national security threats in India

The authors called for law enforcement agencies to intensify efforts to track and prosecute offshore operators, leveraging technology and international cooperation, while encouraging the domestic gaming industry was also seen as a viable strategy with both economic and strategic benefits.

‘The gaming industry is a rapidly growing sector globally, with the potential to surpass the movies and music industries. India should take an assertive and ambitious stance to capture this emerging market by providing platforms, subsidies, and tax breaks, as well as developing a skilled workforce in the sector,’ the report underscores.

‘Promoting domestic pay-to-play game alternatives is not just a viable option, but one that can yield significant rewards’.

The authors concluded by saying that they hope the findings and recommendations of the whitepaper could prompt significant policy discussions and legislative actions to combat the growing menace of illegal gambling and betting in India.

Nelson Moura
Nelson Mourahttp://agbrief.com
Editor and reporter with 10 years of experience in Greater China, namely Taiwan and Macau, in printed and online media, with a focus on finance, gaming, politics, crime, business and social issues.

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