Most gamblers believe that one day luck will smile on them and help them beat the odds stacked against them when they pour money into real or virtual casinos. Gaming operators rely on much more than chance and luck to make the kind of profits they believe are justified for the investment they make in the gaming industry.
When investment in the online gaming industry started to be encouraged aggressively in Malta more than a decade ago, many believed that we had just acquired a goose that laid golden eggs.
The number of those working in the industry today accounts for a significant part of the gainfully employed and the industry, according to some sources, accounts for over 10 per cent of GDP. Gaming employees rent properties in the top end of the market, pay taxes and spend good money for living expenses, travel and entertainment.
Malta offers various incentives for online gambling operators. Low taxation, a regulation-lite regime, and generally good living conditions, although cost competitiveness is steadily being eroded as renting costs have escalated, and locally available skilled staff are much scarcer.
The local gaming industry is now facing a “turbulent” period. Justin Psaila, the chief financial officer of one of the biggest gaming companies in Malta, attributes this turbulence partly to the tightening of anti-money laundering procedures by banks.
HSBC has decided not to service gaming companies in all the countries where it operates. Bank of Valletta has been told in no uncertain terms by international regulators that it needs to bring its anti-money laundering defences up to scratch. So, gaming companies face the ironic situation of encouragement by the government to invest more in their industry and local banks’ tightening of requirements to service them.
But the most dangerous winds are blowing from other directions. Sweden, for instance, introduced much tighter regulation in 2019 which make it necessary, for example, for offshore gaming companies to register with the Swedish gaming authority. Offshore gaming companies that register with the Swedish authority also have to adhere to the country’s tax regime which is more rigorous than that of Malta.
Even more challenging is the attitude of the US to look very negatively at the online gaming industry that is only allowed to operate in a few states.
Online gambling is generally perceived to be a means which enables criminals to launder dirty money. Unfortunately, in Malta, there have been some incidents where this perception has become a reality as a small number of online gambling companies were used to launder Italian organised crime money. International banks will not touch local banks that are complacent about the risks of money laundering. The backdrop to the current political crisis is certainly not helping Malta’s reputation internationally.
The government needs to bite the bullet and define a strategy for online gaming in Malta. The threats the industry faces will not disappear.
Arguing that the industry has become too important for the Maltese economy to be re-regulated is a dangerous delaying tactic that will lead to the death of the industry over time.
A plan B for the industry should include a strategy that encourages quality operations over quantity.
The industry also needs to understand that tax avoidance and money laundering are taboo for most countries and international institutions.