Russia battles illegal transactions between operators and its banks

Senior Reporter

Russia has a backward and forward history when it comes to gambling laws. Online casinos have been outlawed in Russia since 2017 due to an overwhelming amount of unlicensed operators. Internet service providers blocked gambling-related websites in the country, and the government shared plans of using the latest technologies to ensure that players have zero access to online casinos. As this went on, another major issue surfaced among Russia’s banks - payment pocketing from illegal gambling markets. 

Russia battles illegal transactions between operators and its banks
Image: pixabay.com

History of altering gambling laws in Russia

In 1928 all forms of gambling were banned in Russian territories, but in 1989 laws took a turn, legalizing casinos across the country. First casinos surfaced in Moscow, and by 2002 at least fifty gambling facilities in the city offered services to millions of residents and tourists.

The freedom was short-lived. Not even a decade after the first casino’s grand opening, Putin backtracked on gambling laws due to Georgian organized crimes linked to gambling facilities. Most parts of Russia went back under the blanket ban, and only Altai, Krasnodar, Kaliningrad, and Primorsky regions were permitted to carry on with casino operations. There were over 6,000 at that point, the majority of which had no choice but to permanently close.

The new limitations resulted in high demand for online gambling sites, which were already introduced by offshore sites to Russia’s residents prior to new restrictions. Illegal operators pushed their limits until the government outlawed online betting activities altogether in 2017.

It wasn’t long until offshore casinos welcomed Russian players onto their sites, and soon enough Internet service providers blocked gambling-related websites in the country. Government officials shared plans on using the latest technologies to ensure that players have no access to online casinos. All facts considered, it’s evident that there is a zero-tolerance policy for unlawful gambling operations in Russia.

Russia's banks double up on gambling-related issues

Online casino operators (local and offshore) carried on offering services to Russian players despite the ban. And even as they got blocked, they would return using mirror sites and continued operating. A multitude of Russia’s financial markets joined in on unlawful activities in order to benefit from online casino transactions. More specifically, banks began miscoding, and processing payments from offshore online casinos. In other words, “mislabeling” illegal transactions in order to fly under the radar.

Managers were in on it too and played their part by approving the mislabeled transactions. Major banks, as well as smaller financial companies helped get rid of the evidence, were receiving approximately 0.1% per each set of processed funds. The scheme involved bank workers utilizing payment portals that allowed for 'unproblematic' international money transfers. Foreign banks, overseas casino operators, Sportsbooks, and other gambling services would receive the illegal processed payments, which amounted to at least 60% of total electronic transactions during the time.

The sneaky foreign exchanges came as a surprise to Russia’s payment services, as they had no idea of what was happening until audits brought the miscoded transactions to light. Qiwi and YooMoney were also used among numerous banks for unlawful fund transfers.

Last year, three small banks got their licenses revoked, and three more were busted since the month of April. Regulators took action again operators as well - online casinos and illegal Sportsbooks without a Russian gaming license could no longer accept cards or electronic payments, which resulted in massive losses for many of the sites. Additionally, operators will owe 1.5% of every bet to the state. Payment systems will also be closely regulated in order to prevent further miscoded transactions.

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