How Digital Payments Can Curb Money Laundering, Increase Trackability In The RMG Sector?

Money laundering and mechanisms to fund illegal activities using gambling and other backchannel activities organised informally or illegally have been a story for films since times immemorial. 

Over the decades, it has become a part of reality, thereby increasing the possibility of ‘games of chance’ becoming an instrument in manipulating winners wherein the sources of money betted cannot be determined. It is such an impression, which remains stuck in the minds of regulators of online gaming spaces today as well.  

However, rapid technological innovations have brought forth a plethora of mediums to transact payments digitally (UPI, QR Codes, mobile wallets, credit/debit cards etc.) that have enabled an automated recording of these transactions through the mechanism of blockchain technology. 

Similarly, the shift of interest in ‘iGaming’ to that of the digital world of esports and fantasy games has brought in another category of iGaming and that is Games of Skill. In iGaming the expected mandate is that the platforms or game developers cannot and should not manipulate the outcome of the game and that stands apart the game of skill from that of game of chance. 

The shift to iGaming has provided increased access and more participation as it does not require a console or visiting a physical place but can be played on their mobile sets or tab.

iGaming has also shifted to e-payments or digital payments ensuring the tracking of money movement. That is the beauty of iGaming and for regulators to catch the red flags in the shortest possible time. 

Need For Regulatory Intervention

There is a need for SROs (Self Regulating Organisations) of iGamers to develop a code of conduct for their members and identify by the peer group if any of the members is not abiding by the same. 

The mandatory digital payments with the KYC (Know Your Customer) are a mechanism to know the origin and destination of the payment. The TDS (Tax deduction at source) for the winner is another digital mechanism to know the winner as tax identity (PAN Card) is available. 

The regulator should encourage iGaming as that enables access to data and analytics for early detection of any suspicious or illegal activity on the platform. The way forward is KYC, TDS, and the insistence on transacting digital payments from accounts that have been linked to the users’ KYC documents. 

The data on the blockchain cannot be tampered with and is permanently recorded, for not just easy traceability but also easy access and analytics to get the trail. Furthermore, instead of taking a stern approach such as banning online gaming or gambling that is skill-based, adequate regulations and policy framework must be established to prioritise the protection of Indian players, which cannot be overstated, given the prevalence of exploitation by numerous malicious entities. 

The absence of market regulation and detrimental policies have already caused international iGaming companies to avoid India, thereby sending discouraging signals to potential foreign investors. 

The concerns of the regulator of gaming platforms thus have brought in more transparency in the tracking of the money trail that players are betting, the platforms are receiving and the money that is being transferred to winners as each of the transactions is recorded digitally and permanently for better analytics and early detection.  

Digital Payments Is The Necessity

The insistence on digital payments in Real money gaming (RMG) within the iGaming sector and even in traditional licensed gaming spaces will ensure a clear identity of the player’s funding source, the amount put on the table and the returns of the winners. 

Such an improved mechanism will ensure a faster investigation while curbing or restricting the use of the platform for money laundering or funding unlawful activities. 

Digital payments have addressed various loopholes in transacting payments employing technological advancements and reduced the possibility of unknown or illegal deals or payments from taking place. In fact, across the globe, the insistence on KYC by each of the financial institutions (even virtual digital assets or cryptos) payments are mandatorily linked to these licensed financial institutions by the central regulatory bank of the country, or RBI, in the case of India. 

The mandatory KYC norms have largely nullified the faceless players or payers in the RMG segment and the mandatory deduction of tax at source (TDS) also identifies the winner and amount won thus ensuring the trackability of money transferred from the different players across the globe to that in the winner’s account. 

The tracking is real-time and thus, enables quick deduction of any illegal transfer from one doubtful account to the other. Thus, the outcome of the game cannot be manipulated and that is another reason to use the platform and digital payments for such transfers. 

With the insistence on digital payments, keeping records on blockchain and having real-time data of transactions readily available the platform operators can quickly detect if any account is being misused. 

Additionally, if the denomination of money betted and won seems to be exorbitantly high or abnormal then such a scenario can be flagged to the authorities. The solutions brought forth using digital payments have proven to be extremely efficient and used in curbing or detecting illegal or dubious activities when compared to the non-digital age wherein these were time-consuming. Thereby, investigators should build their analytics and data on this wonderful digital data available to further curb these nefarious activities, a concern across the globe.

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