Will the Australian government crackdown on illegal offshore operators?

Published in: Latest Intelligence There have been suggestions lately that the Australian owned providers of online gaming services may actually be prepared to lobby government to crack down on illegal offshore operators. 
There are also tangible signs that the Federal government might work with the State governments to actually do so.
A proposed crackdown on illegal downloads of copyright material could provide a policy footing on which to enforce the Interactive Gambling Act 2011 (IGA) or to side-step the IGA. However, don’t hold your breath. Unfortunately history and some recent events mean that not a lot may happen … again.

Tabcorp Limited, one of Australia’s leading terrestrial and online gambling service providers, has been in talks with the Federal government about banning offshore, unregulated online bookmakers from taking bets from Australians.
The nature and extent of the problem is not well known or defined, however estimates are that as much as 14 percent of betting by Australian based gamblers is conducted with operators who are not licensed in Australia; and that the dollar values range from “hundreds of millions” of dollars to A$1.2billion.
Whatever the value, the reality is that these betting funds flow offshore. None are returned to Australia’s sports and racing industries via product fees now payable by Australian licensed gambling operators, nor does the Federal government have the opportunity to income tax any profits made on the betting that leaks offshore.
The broader policy issues are twofold. First, offshore operators are not regulated and thereby represent a threat to integrity, particularly in sports, due to the lack of official oversight and accountability. Second, this is said to provide a conduit for organised criminals and corrupt sportspeople to profit from match fixing. This second policy issue is recognised internationally and is said to warrant an international response.
Why is the illegal online gaming market thriving in Australia?
There are several possible reasons for Australian gamblers heading to offshore sites.
Bet types - are unregulated, more extensive in nature and type, and are freely available. For example, in-play betting. If online in-play betting were legal in Australia many (albeit operators) say it will mean Australian punters will bet with on-shore operators.
Choice - Australians like to have the choice that comes with variety and are fast adopters of new technology. Offshore sites, without having to comply with auditing and regulatory controls and standards, can offer quicker and hassle free access to betting.
Pricing - offshore operators don’t pay product fees, so better pricing can be delivered.
Responsible gaming - offshore operators are not subject to the same laws that limit incentives to open accounts and to bet.
Tax advantages - offshore operators don’t pay local/domestic income or other taxes. Profit margins are better and, as a result, better pricing can be offered.
Anonymity - offshore operators are less likely to apply the same high standards of “know your customer” applied by Australia’s AML/CTF legislation. Some people mistakenly think this provides them with a degree of anonymity.
What is the Australian Federal government proposing to do?
In October 2014, the then Federal Minister for Social Services, together with the then Premier of the State of Victoria, announced that a new national working group would be established to tackle the increasing impact of illegal offshore wagering on Australian racing and sports.
The new group, to be known as the Illegal Offshore Wagering Working Group, will be established under the Australian government’s Gambling Industry Advisory Council. The Working Group is to include representatives from the racing industry, professional sports and wagering organisations.
The Minister said that the Working Group will be asked to provide recommendations through which the Australian government, State governments and/or racing and sports bodies can minimise the threats of unauthorised offshore wagering.
The Working Group will be calling for public submissions for its consideration and is likely to start work in 2015, with a final report to be provided to the Federal government “through” the Gambling Industry Advisory Council in 2015.
Since the announcement there have been some relevant developments:
the Federal Minister has changed, after a Ministerial re-shuffle;
the Victorian State Premier has changed, after an election which saw the previous government lose power;
the Working Party has not yet been formed; and
any change to Federal legislation must still be supported by both major Federal political parties or, alternatively, the LNP government and a host of disparate and largely hostile senators who hold the balance of power in Australia’s senate
These factors signal against an early outcome from the Working Group. Also, history has shown that inquiries and reports on the gambling sector have resulted in sensible recommendations, but no material reform. If these factors are overcome, how might the crackdown work?
First, the current provisions of the IGA could be utilised, coupled with resources supporting and facilitating enforcement. This would be in two principal areas: One - charging the Australian Federal Police (AFP) with the task of chasing down illegal offshore operators who advertise and supply their services to Australians. Two - by the issue of access prevention notices to internet service providers (ISPs) directing the ISPs to take all reasonable actions to prevent punters being able to access the sites.
A second means is by making changes to the IGA to strengthen it. One suggestion is to change the IGA to make it illegal for offshore bookmakers to accept Australian bets. Another change could follow the Singapore model and make it a criminal offence for a person to play on an illegal offshore site.
Thirdly, the Federal government could take an approach similar to that it intends to take in prohibiting access to sites which breach Australian copyright laws. There are some policy parallels and it would not be too difficult to approach both issues together.
Additionally, the Australian government could adopt the US model to change banking laws to prohibit payment providers facilitating payment to and from the operators of illegal offshore sites.
Finally, the government could look to existing telecommunication laws to control ISPs.
The point is that there are a number of ways and means by which the Federal government could take action in this area, with or without legislative change. What appears to be lacking is a compelling political landscape.
Should more be done to protect Australian punters?
Australian gamblers manage their exposure to unregulated offshore sites, for example, by limiting the amounts transferred and thereby limiting potential losses via fraud or theft by the offshore operator.
A well regulated and vibrant onshore market, where licensed Australian operators are permitted to offer competing bet types and products, will act as a natural hedge to Australian gamblers looking to offshore sites.
The real exposure is integrity of the product. Illegal offshore sites are part of a global problem that is generally accepted as a major part of the threat against the integrity of sports. Anything the Australian government does to choke the flow of cash to them will help, if not kick start, the necessary international effort.
Bill Brown is Principal of Orange Advisory Pty Ltd, and an AGB Advisor.
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