Report: India online gaming at risk for financial crime

In a new report, “Combating Money Laundering in the Online Gaming Ecosystem,” the Digital India Foundation (DIF) warned against fraud, money laundering and terrorism financing in the country’s online gaming industry.

Legal real-money gaming, with an estimated daily player base of 90 million, grew 28% from 2020 to 2023, according to the report. It’s on pace to generate $7.5 billion (£5.8 billion/€6.9 billion) by 2029. But “vulnerabilities within India’s online gaming ecosystem … pose significant challenges to financial integrity.”

The think tank called for “enhanced oversight, stronger KYC practices and improved [anti-money laundering] systems by financial institutions.”

Illegal operators use trickery to lure patrons

DIF co-founder Arvind Gupta expressed special concern about the explosion of illegal online betting sites.

“Despite ongoing regulatory efforts,” he said, according to the Hans India, “many platforms circumvent restrictions” using VPNs, mirror sites, geo-blockers and other workarounds.

In addition, they trick unwitting players with “illegal branding and disproportionate promises,” the report added. The use of cryptocurrencies or cash for payments facilitates money laundering, as virtual assets can make ill-gotten gains seem legitimate.

“The enhanced ability to transfer and convert gaming assets into fiat currency or crypto-assets has resulted in a rise in money laundering and fraud,” the report stated.

The DIF recommends:

• A dedicated task force to combat illegal igaming
• A whitelist of approved operators, domestic and offshore
• A commitment by the government to identify and block illegal operators
• A public awareness campaign to warn players about potentially fraudulent operations

A threat to ‘digital nagriks’

A July report from Rashtriya Raksha University echoed these warnings. The university’s Security and Scientific Technical Research Association (SASTRA) also recommended whitelisting legitimate iGaming platforms that comply with India law.

Illegal sites expose internet users, known in India as “digital nagriks,” to “cybersecurity attacks and unsafe online environments,” said SASTRA. “They have emerged as a threat to India’s national security … [acting] as channels for money laundering and terrorist financing.”

Illegal online betting generates an estimated $100 billion per year, far outstripping the legal take.

“These rogue players siphon money out of our economy, leaving a trail of financial instability, thereby fuelling criminal activity,” SASTRA said, as reported by the New Delhi Business Standard.

The online gaming sector is vital to India’s future and warrants additional safeguards, noted Gupta.

“With over 400 home-grown start-ups,” he said, “the sector employs directly and indirectly approximately [100,000] individuals, with the potential to create 2.5 million jobs by 2025.”