Illegal Interactive Gambling
The role the banking industry
system can play in combating this
challenge
Presented by : Elijah
Mazibuko
Presentation Overview
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Historical background of exchange controls
Purpose of exchange controls
Impact of the current legislation in the unregulated
interactive gambling environment
Compliance and enforcement of the current
legislation
Monitoring and reporting of cross border flows
Challenges facing the banking industry in combating
illegal interactive gambling
The role the banking industry system can play in
combating this challenge
Historical background of exchange
controls
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1939:
Exchange control first introduced in South Africa
in the form of Emergency Finance Regulations
adopted in the Sterling Area to:
• Prevent large capital outflows
• Protect foreign reserves of member countries
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1961:
Current set of exchange controls introduced by
way of the Exchange Control Regulations issued
in terms of the Currency and Exchanges Act (No.
9 of 1933)
Purpose of exchange controls
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Prevent the loss of foreign currency resources through the
transfer abroad of real or financial capital assets held in SA
and
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Constitute an effective system of control over the
movement into and out of SA of financial and real assets,
whilst simultaneously avoiding interference with the
efficient operation of the commercial, industrial and
financial system of the country
Impact of the current legislation in the
unregulated interactive gambling
environment
 Current legislation prohibits gambling via Internet sites that offer
casinos and poker
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Waging on offshore and non-SA betting sites is also not allowed
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Section 11 of the National Gambling Act, No. 7 of 2004 states:
“A person must not engage or make available an interactive game
except as authorised in terms of this Act or any other national law”
 Also, in terms of the Lotteries Act, No. 57 of 1997, SA residents may not
participate in lotteries organised abroad
 SA residents may gamble with foreign operators while abroad
Compliance and enforcement of the
current legislation
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The problem with legislation of this nature is that it relies on
the exchange control system for compliance and enforcement
or to at least assist in enforcing
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Interactive gambling transactions are not permissible in terms
of the Exchange Control Regulations
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Regulation 10(1)(c) of the Exchange Control Regulation
states: “No person shall, except with a permission granted by
the Treasury and in accordance with said conditions as the
Treasury may impose, enter into any transactions whereby
capital or any right to capital is directly or indirectly exported
from the Republic”
Compliance and enforcement of the
current legislation (cont.)
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Current Exchange Control Rulings prohibit SA residents from
using their credit cards for any online cross border
transactions except for foreign sport betting, imports and
travel subject to a limit
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In terms of the national and provincial gambling legislations,
SA residents are allowed to bet or wager on any contingency
offered by a licensed operator in SA i.e. licensed bookmaker
or totalisator
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Within the racing and betting environment, there is a concept
of comingling, which effectively refers to combining of pools
with other jurisdictions, locally or internationally
Compliance and enforcement of the
current legislation (cont.)
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In terms of the comingling concept, punters are allowed to bet
on any other contingency whether local or international
provided such a contingency is offered by a licensed SA
bookmaker
For example; a punter can take a bet with a SA bookmaker on
a soccer match between Man United and Schalke, although
these are not SA teams, this foreign sport betting is allowed
provided the bookmaker operates and is licensed in SA
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Unlicensed bookmakers (local or international) are not
permitted to offer bets in an environment/country which they
are not licensed
Monitoring and reporting of cross border
flows
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All cross border flows are reported by Authorised Dealers
(ADs) and Authorised Dealers with Limited Authority and
monitored by the Financial Surveillance Department
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All cross border transactions are reported via BOPCUS and
outward payments (including credit cards) via BOPCARD
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The Cross Border Foreign Exchange Transaction Reporting
System (BOPCUS) and Credit/Debit Card transactions
Reporting System (BOPCARD) are electronic systems in
place between AD’s, Card Companies and Direct Reporting
entities and the SARB for the submission of reportable
transactions to the SARB
Challenges facing the banking industry in
combating illegal interactive gambling
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Compliance would require AD’s to monitor, report, identify or
block suspicious “illegal” transactions:
• Identification of certain transactions - AD’s claim their systems
are unable to identify “illegal” transactions through the current
Merchant Category Code (“MCC”)
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The real problem is when local card holders gamble on
international websites over which SA has no control
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Some merchants, knowing that they have a highly profitable but
illegal business, operate “under cover” and use merchant names
and category codes indicating a business completely different
from online gambling, making it impossible for the issuing bank to
identify and stop any illegal transactions
The role the banking industry system
can play in combating this challenge
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The AD’s and card companies need to investigate the
development of a unique MCC for gambling merchants that
would enable them to identify illegal transactions and to go to
an extent of blocking such transactions
The unique MCC should enable the AD’s to easily identify
illegal transactions and being able to block them at the point
of sale and/or “other”
Currently there is only one AD that is able to flag the MCC
that pertains to online gambling and block such transactions
The role the banking industry can play in
combating this challenge (cont.)
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Banks are required to report all suspicious transactions
to FICA
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The Gambling Act requires that banks identify foreign
winnings of local card holders and pay them to the NGB
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Individuals who have participated in illegal gambling are
penalised in terms of the Exchange Control Regulations
END