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Preventing Sporting Corruption through Collaboration: the role of the online wagering industry Address by Australian Wagering Council Chief Executive Officer, Mr Chris Downy, to Victorian Police Sporting Integrity Symposium, 12 May 2015 Presentation agenda: v Overview of the AWC v Digital Engagement of Australians v Licensed online wagering operators – friend or foe in the fight against sports corruption? v Regulation of the licensed online wagering market in Australia v Regulatory threats Gambling policies Economic policies v Illegal offshore wagering operators Size and scope of the problem Moves to fight the threats The online wagering industry Many members of the audience will be familiar with the Australian Wagering Council but for those who are not, a brief introduction: The Australian Wagering Council is the peak industry body representing Australia's online wagering and sports betting industry. Current membership includes: betfair, bet365, Ladbrokes, Sportsbet, Unibet and the William Hill Group, including Tom Waterhouse.com and Centrebet. Online wagering companies are in the e-‐commerce business. AWC members provide recreational online wagering services on thoroughbred, harness and greyhound races and sports events to over 2 million Australians. They don’t offer online gaming, poker machines, casino table games, lotto, bingo or keno. Most importantly, all AWC members are licensed and regulated in Australia. As governments, industry and the public start to understand and talk more about illegal offshore operators, it’s becoming important to emphasize that foreign owned companies – such as Sportsbet and William Hill – are not illegal offshore operators. You can be foreign owned and still be licensed and regulated in Australia. All AWC members are licensed and regulated here. Whilst there is a perception that gambling, particularly sports betting in Australia, has exploded in the last few years, the breakdown of Australia’s official gambling statistics demonstrates that is not the case. What has changed is: • What product people are choosing to gamble on: with racing losing some of its share to sports betting; and • How they choose to gamble: with people changing from having a bet at their local racetrack, pub or club to betting online, either on their home computer or mobile device. Whilst growing, sports betting accounts for only 2.3% of Australia’s total gambling expenditure, with betting on horse racing, harness and greyhounds at 13.3%. Digital Engagement of Australians It is hardly surprising that wagering in Australia is experiencing a platform shift. This is merely reflective of what is happening across the wider economy. Australians are early adopters of technology and have some of the highest rates of digital connectivity in the world. The Australian Communications and Media Authority released a report in March 2015 on Australians’ Digital Lives. They drew on information from the Australian Bureau of Statistics and commissioned their own survey, conducted by Roy Morgan Research, on our habits of digital consumption. 92% of Australians use the Internet, with 100% of people aged 18-‐44 going online in the survey period. Despite what some people may believe, older Australians aren’t far behind, with 68 per cent of those aged 65 or older also going online during this period. 2 The way Australians access the Internet is also changing—70 per cent go online with a mobile phone and 50 per cent with a tablet. But laptop and desktop computers are still the devices we most often use for this purpose. Australians are active participants in the online economy. In the three months to June 2014, 9.1 Million Australians (62 per cent of internet users) made a purchase online. In the four weeks to June 2014, 10.85 million Australians completed an E-‐commerce transaction. And, Australians spend on a range of goods and services; clearly demonstrating that E-‐commerce, in all its forms, is here is stay. Highest to lowest spend: • Entertainment and Leisure • Fashion, • Reading material • Food and beverage • Electronics • Travel • Health and beauty. Online wagering operators – Friend or foe? The arrival of corporate, online bookmakers coinciding, as it has, with this growth in digital engagement in Australia, has led some people to question whether these factors pose an increased risk to the corruption of sport? With betting available on the click of a mouse, is it all too easy for people to do the wrong thing? Researchers have identified a number of risk factors as increasing the opportunity for corruption in sport, including: • The increased options available for betting and wagering; (betting on a defeat or on a specific play); and • The ascendency of online gambling. One academic considered, ‘the evolving sophistication of the betting market’ as a critical risk factor. Whilst it is appropriate to identify and assess potential risk factors, it is also appropriate to explain the advantages online wagering operators can offer in the fight against sports corruption. 3 •
Compared to cash based retail or cash based on-‐course operations, account betting promotes transparency and enables the identification of customers and the nature and extent of their betting activities, no matter how big or small the wager or where it is transacted. •
Risk Traders are trained to identify unusual or suspicious betting activity. •
Members conduct regular audits of their customer databases to determine if prohibited participants (such as officials, administrators, coaching staff and players) have placed bets. •
Online operators implement significant anti money-‐laundering and anti-‐
fraud measures, including deposit and withdrawal reviews and duplicate account reviews. Members are compliant with all AML/CFT requirements. The account-‐based nature of online wagering plays an important role in enhancing the integrity of sport. AWC members: • Exchange information with sports, governments and law enforcement agencies about unusual bets and suspicious betting patterns. • Enter into national integrity agreements with sports controlling bodies to ensure binding agreement about the type of bets permitted by the sport and any other integrity requirements as specified by that sporting body. • Enter into similar information sharing agreements with racing bodies around Australia; and • Contribute a direct financial return by way of product fees to respective sporting bodies to fund measures to strengthen the fight against corruption, fraud, match-‐fixing and the manipulation of sports events. These aren’t theoretical measures: the co-‐operation and collaboration between parties yields results. Two examples that you’ll remember from last year: • David Williams and several NRL officials were sanctioned over betting on rugby league games; and • Australian Turf Club Officials were suspended for betting on races at which they officiated. Given the tools employed by AWC members, their commitment to information sharing and the zero tolerance approach to sports corruption, it’s reasonable to conclude that licensed online operators are definitely a friend, not a foe, in the fight against sports corruption. 4 If an Australian licensed online operator is the wagering friend, who is the wagering foe? There is no doubt the greatest risk wagering poses to sports corruption is the scale and extent to which Australians choose to place bets with illegal offshore operators. There are other people here today better placed to speak to the latest data on size and scope of global sports corruption. But it is worth noting that Patrick Jay, who spoke at this symposium last year, now estimates the global sports betting market may be, conservatively, worth over $1 Trillion. With the vast majority of that generated by illegal gambling. In 2014, a major study by the International Centre of Sports Security into sports corruption and match-‐fixing revealed: • 80% of global sports betting is transacted illegally (making it invisible to regulators and investigators) and • $US140 Billion is laundered annually through sports betting The scale of the problem is immense and does seem likely to abate. The extent to which Australians do bet with these illegal offshore operators is directly attributable to how the wagering industry is regulated in Australia. Before examining the extent of illegal offshore wagering, it is useful to provide a brief overview of the regulation of online wagering and explain why poor regulation drives Australians to illegal offshore operators in search of better wagering products and prices. Regulatory framework AWC members operate in accordance with an extensive regulatory framework: including: • Federal legislation and regulations • Licensing under applicable state and territory laws • State based obligations to pay product fees – in effect, a form of direct taxation • Broadcast and advertising codes • Self regulatory industry codes It is possible the industry faces strangulation by regulation. 5 Why is it imperative to understand, and to reassess, how online wagering is regulated in Australia? Online wagering is a global industry and Australian policy decisions and regulations must take into account how Australians interact in this global marketplace. Decisions must be evidenced-‐based and must support and foster competition in the domestic marketplace. If an online wagering product is prohibited or become unviable in Australia, Australians are still able to easily switch to illegal offshore operators in search of products and better pricing. Illegal offshore operators demonstrate no interest in protecting Australian sport from corruption. They provide no security for customers’ personal and financial information and have no interest in providing harm minimisation and responsible gambling measures. Two examples of poor regulation – one current and one proposed – demonstrate what we are speaking about: • Interactive Gambling Act 2001 (Cth) The IGA currently prohibits Australians from placing ‘in-‐play’ or ‘live’ bets using the internet but it permits this type of wagering when customers contact an operator by telephone or in land based retail outlets; the TABS, pubs and clubs. The IGA’s existing provisions are confusing to consumers, inconsistent in their coverage, obsolete given technological changes, and result in substantial harm to Australian sports. Put simply, regulation by prohibition does not work in the global online environment and Australians have been driven to wager offshore in large numbers as a result of this product not being available online. The need to reform the IGA is now well recognised. • 2015 Harper Competition Policy Review The government’s Competition review report, released in March 2015, noted the AWC’s arguments in relation to the anti-‐competitive nature of the IGA and agreed that gambling regulations should be included in a new round of regulation reviews to ensure that they are not unduly restricting competition. • 2014 ‘Interactive Gambling’ report, commissioned by Gambling Research Australia, agreed the IGA lacks effectiveness, illustrated in particular by 6 •
high participation rates by Australians on prohibited overseas-‐based online services. Productivity Commission Inquiry Report into Gambling, way back in 2010, recommended that Australian licensed operators be allowed to offer online in-‐play betting to Australian customers. When the IGA was introduced in 2001, a key policy driver was consumer protection. It was thought that the “quantum leap in the accessibility of gambling services could exacerbate problem gambling in Australia”. Even today, much of the opposition to reform of the IGA stems from this assumption. However, no evidence-‐based research has proven that an increase in the availability of online gambling will increase rates of problem gambling. In her recent paper, Online Gambling Addiction: the Relationship Between Internet Gambling and Disordered Gambling, Dr Sally Gainsbury notes that despite rates of Internet gambling increasing in several jurisdictions, little evidence has been found to suggest that the prevalence of problem gambling has increased. Whilst stating more research is necessary, Dr Gainsbury concludes that “internet gambling does not cause gambling problems in, and of, itself,” and suggests “Evidence is emerging that Internet gambling is not only not predictive of gambling problems, but that online may have lower rates of gambling problems.” Another study this year, by the Asser Institute, challenged claims about the alleged risks generated by certain types of sports bets (like online in-‐play) and also questions the appropriateness of imposing such limitations on regulated sports betting. The research dismisses the claim that live betting would pose a specific or greater match fixing risk in comparison to traditional pre-‐match betting as ‘lacking empirical support’. Turning to our second example: • South Australian State Tax Review How gambling is taxed is an issue that may impact heavily on the number of Australians gambling offshore. In its State Tax Review Discussion Paper released in February, the South Australian government included a proposal to tax online gambling at the point of consumption. 7 Whilst, on the surface, a government may view a point of consumption tax as a simple and effective way of increasing its revenue, such a decision would have many unintended consequences for the residents of South Australia. Given licensed wagering operators already pay: •
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Federal taxes – GST, income, payroll and fringe benefits tax State licensing fees; and Product fees – effectively a form of direct tax -‐ to racing and sporting bodies, a Point of Consumption tax represents double taxation. An increased tax burden could lead to: •
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Unviable operators & the contraction in the size of domestic market Operators refusing to offer products to South Australian residents; or Operators passing on costs by offering less competitive odds Once Australian licensed online operators become uncompetitive in the global online wagering marketplace, South Australian will place more bets with illegal offshore operators. And, any tax that drives consumers to offshore operators will necessarily reduce the efficacy of the integrity and information sharing programs and increase risks of sports corruption. There’s a raft of other unintended consequences, including: • Impacts on the quality of responsible gambling and consumer protection measures • Lower product fee returns • Lower federal taxation returns • The Loss of Australian jobs The story is similar with product fees. Whilst AWC members are committed to paying a fair price for the right to wager on racing and sport in Australia, the rate at which these fees are set will impact on the ability of online wagering service providers to remain competitive with illegal offshore operators. Collaboration between racing and sporting bodies and wagering providers and an understanding by all parties of the commercial realities of the global wagering environment, will help ensure a strong domestic market for Australian customers. Whilst not directly relevant to fighting sports corruption, there are other surprising regulatory hurdles for online wagering operators to climb. 8 Both Competition and Privacy laws come to mind, with both impacting on the ability of licensed operators to respond proactively to community concerns surrounding problem gambling. Illegal Offshore Wagering – size and scope Historically, it has been difficult to measure exactly how many illegal offshore operators exist, how many Australians are wagering with these operators and how much they spending. Many stakeholders are undertaking more research into the size and scope of the illegal marketplace. The one thing all estimates clearly demonstrate is the significant size of the illegal marketplace and its growth potential. • The 2010 Productivity Commission Report estimated $1 Billion was lost annually to illegal offshore operators. • The 2012 Review of the Interactive Gambling Act, conducted by Federal Department of Communications, estimated Australia’s interactive gambling spend was $1.6 Billion, with 60% spent with illegal offshore operators. • In 2014, H2 Gambling Capital estimated in excess of 20% of Australian expenditure on interactive wagering goes to offshore providers. Estimates stand at $400M (representing $4 Billion of economic activity) and $100M in lost taxation revenue and product fees. Growth predictions for illegal offshore wagering include: • A 2012 industry report, compiled independently by KPMG and assuming no changes to the current legislative and regulatory environments, estimated that the illegal online gambling market is expected to grow at an average annual rate of 6.3 per cent to $2.4 billion in Australian in 2021-‐22. • In 2014, Global Betting and Gaming Consultants estimated, internationally, the online gambling market is expected to reach US$50 billion by 2017. And Australians are spoilt for choice when it comes to gambling with illegal offshore operators. In 2011, the Joint Select Committee on Gambling Reform suggested more than 2000 gambling websites were available to Australians, figures backed up by the 2014 Interactive Gambling Report, which indicated a figure in excess of 2300 illegal operators. 9 Last year, this symposium heard estimates of around 2500 illegal offshore operators, in Asia alone, offering online in-‐play wagering to Australian customers. An attitudinal assessment of Australians to illegal offshore wagering is also of concern. A recent report on interactive gambling, commissioned by Gambling Research Australia, found that at least one-‐third of Australian interactive gamblers were not concerned about gambling with offshore operators. Research in 2012 for the government review of the Interactive Gambling Act, prepared by Allen Consulting, noted that Australian gambling consumers aren’t well informed about what sites are regulated and, if so, how they are regulated. This lack of knowledge is exploited by canny and market savvy illegal operators. Many establish websites that look similar to the sites of well-‐known licensed operators and, in some instances, have also set up local sales offices within Australia. One of the reasons the alleged existence of a Gold Coast based call centre of an illegal operator is of concern, is that potential customers are more likely to view a wagering operation as legitimate if they see a local telephone number and speak with Australian operators. Fighting the threats of illegal wagering and sports corruption Across the globe, countries and organisations are stepping up the fight against illegal offshore operators in order to protect sport from corruption and match-‐
fixing. Australia: In October 2014, in a joint initiative with the Victorian State government, the Federal Government established the Illegal Offshore Wagering Working Group to assess the impact and devise solutions to this problem. In the 15 years since the introduction of the IGA, we understand there has not been one prosecution of an offshore operator offering bets online to Australian customers. Whilst the Australian Communications and Media Authority is responsible for investigating online gambling content, it has no enforcement powers. ACMA has conducted 23 investigations into overseas websites and referred 11 of those to the Australian Federal Police in 2013-‐14. It also referred 10 investigations of local operators. However, the police, too, are hamstrung with no power to take action in foreign jurisdictions. Interestingly, the New Zealand Government has also announced an 10 inquiry that will run from April to September this year into the impact of offshore betting by New Zealanders. USA: Last month the President of the American Gaming Association addressed the National Association of Attorneys General (NAAG) Presidential Initiative Summit on the problem of illegal gambling, calling on the nation’s Attorneys General to join the AGA in drawing a “bright line between these harmful, illegal activities and the highly regulated and mainstream, legal gaming industry.” The AGA also announced the launch of the “Stop Illegal Gambling – Play it Safe” initiative – an aggressive perception campaign aimed at clearly and definitively distinguishing the legal industry from the illegal, multi-‐billion dollar enterprises that fund underground, criminal activities. The Netherlands: Over 200 operators have expressed interest in obtaining a license to the Dutch
Games of Chance Authority ahead of the commencement of regulated online
gambling in the Netherlands. The Dutch Parliament is presently examining suitable taxation rates for
licensed online gambling with advisors warning the Dutch government against
setting the tax to stringent levels, which may put off international operators
from entering the market and drive down consumer value, which could lead to
an increase in customer play with illegal operators.
UN and ICSS: Only a few weeks ago, the United Nations Office on Drugs and Crime partnered with the International Centre for Sport Security to help strengthen cross-‐border investigations into match-‐fixing and manipulation of sports competitions, as well as bolstering measures to prosecute offenders. The UN says that illegal sports betting and match-‐fixing have grown into a huge transnational business worth billions of dollars that threaten the credibility of sport and creates dangerously close links with crime. They will also begin work to develop a special training resource aligned with the UN Convention against Transnational Organized Crime and the UN Convention against Corruption (UNCAC) that will identify key themes related to prosecutions and investigations into match-‐fixing which can be implemented by criminal justice and law enforcement authorities.
11 Collaboration Fighting sports corruption doesn’t simple mean more police powers and resources. It requires an understanding of how individual stakeholders operate and what each of them can bring to the fight. It means polices and regulations can’t be developed with singular goals. Without understanding, without collaboration, policies and regulations that looks a good idea on paper, can – and often do, – have unintended and dire consequences. The AWC cannot stress enough the dangers illegal offshore wagering operators pose to the integrity and funding of Australian racing and sport. We are committed to working collaboratively and would be pleased to work with participants here today in developing policies that help keep Australian racing and sport free from corruption and match-‐fixing. 12