By NEIL HARTNELL
Tribune Business Editor
WEB shops yesterday slammed claims they are open to financial abuse and responsible for the Bahamas' recent 'blacklisting', saying: "No one can point to any red flags."
Gershan Major, the Bahamas Gaming Operators Association's (BGOA) chief executive, told Tribune Business it was "virtually impossible" to suggest the sector represented a money laundering/terror financing risk given the strict regulatory and operating standards it is subjected to.
The Association, which represents the Bahamas' licensed domestic gaming operators, yesterday said it was becoming "increasingly concerned" about claims it was responsible for the European Union's (EU) March 9 decision to brand this nation 'non-cooperative' in the fight against tax avoidance.
Mr Major emphasised that the rationale for this 'blacklisting', which is based on 'economic substance' and 'ring fencing', was effectively a different world from that inhabited by a domestic gaming industry which creates no tax-related concerns for the EU's 28 member states.
And he also reiterated the sector's compliance with strict regulatory conditions in response to a recent US State Department report, which identified "gaming" as a popular money laundering mechanism in the Bahamas.
The annual US International Narcotics Control Strategy Report (INCSR) did not distinguish between whether it was referring to casino or web shop-based gaming, or both, thus allowing a negative perception to hang over both sectors even though no specific evidence was produced to back up the allegations.
"We are very concerned given that a lot of the comments and overtures are not based on fact at all," Mr Major told Tribune Business.
"If one was to take their time and recognise the tremendous amount of oversight by the Gaming Board, and what the industry is complying with, they would realise it would be virtually impossible to have such concerns regarding anti-money laundering and terrorism financing issues."
Praising the Gaming Board for "doing a fantastic job", Mr Major said the regulator had access to web shop servers; is able to carry out daily monitoring of gaming activities through its inspectors' presence at the industry's locations; and received regular Suspicious Transactions Reports (STRs) from operators.
"The level of oversight by regulators is quite significant, and the level of compliance and standards adhered to by operators is significantly high," the Association's chief executive reiterated.
"I think the actual business and industry itself has been operating in accordance with its required regulations since it was regularised in 2014. The Association recognises that approved operators, and I emphasise the word 'approved', are doing their part to ensure they operate in a world-class manner, complying with audit and regulatory requirements.
"We have had no issues, nothing has been raised, and there are no red flags anyone can point to with regard to the industry operating in accordance with its regulatory requirements. Absolutely none."
The Association and its members are thus pushing back hard against those seeking to blame the industry for the Bahamas' recent regulatory woes, with Mr Major questioning why so few were failing to check the facts before speaking out.
Still, the US State Department's INCSR report described the web shop sector as "flourishing", and called on the Bahamas to enforce the "full implementation of appropriate safeguards" on the gaming industry.
"Money is laundered through the purchase of property, businesses created for money laundering purposes, and gaming," the report said. "The Bahamas has three large casinos, including the Caribbean's largest casino (the $3.5 billion Chinese Export-Import Bank-funded Baha Mar mega resort) which partially opened in April 2017. Gaming operations based on US lottery results, locally known as 'web shops', flourish."
No evidence was supplied to support the US government's assertion about the gaming industry's abuse by money launderers, and the report acknowledged the strict regulatory requirements imposed on both hotel casinos and web shops to counter such crimes.
"Casinos and web shops are licensed by the Gaming Board, and are required to maintain strict internal controls and accounting, comply with AML/CFT (anti-money laundering/counter terror financing) requirements, and submit STRs (suspicious transactions reports)," the US government report said.
"Geo-fencing protections built into gaming software ensure online gaming activities are inaccessible outside the country. The Gaming Board vets all online gaming platforms (software) and retains the ability to log into the programs remotely to observe operations in real time."
Dionisio D'Aguilar, the Cabinet minister responsible for gaming, generated significant controversy and web shop 'push back' last year when he suggested the industry was vulnerable to money laundering, and could damage the Bahamas' reputation, by allowing its accounts to be used for money transfer purposes.
He argued that the industry was not verifying the source of customers' funds, but the web shops hit back by arguing they had implemented stricter anti-money laundering (AML) regulations and standards than 'mainstream' financial services providers. Island Luck, recognised as the market leader, moved to close down accounts not being used for gaming purposes.
Mr Major, meanwhile, said he had "no idea" why some observers were blaming the web shop industry for the Bahamas' EU 'blacklisting' when there was not even the remotest link between the two.
He added that all Government ministers addressing the issue had confirmed it related to tax matters, especially the issue of 'economic substance' and physical presence, and the Bahamas' failure to satisfactorily address the EU's concerns in a manner the latter deemed satisfactory.