From punts to euros

The Irish gambling industry is regulated by legislation more than half-a-century old – but that is set to change amid concerns over money laundering and state revenues.

From punts to eurosThe Irish minister for justice is under increasing pressure at home and in Europe to take steps to regulate the country’s gambling industry.

As Irish economic growth slows and traditional tax revenues diminish, the government’s strongest incentive to legislate could be trying to boost state revenue by taxing an industry believed to turn over in excess of e3bn (£2.36bn) every year.

It is curious that, in a country that experienced unprecedented growth during the 1990s, legislation regulating Ireland’s gambling industry dates back to 1931 and 1956. In tax terms, the only duty currently imposed is a 1 per cent betting duty for off-course betting with no specific gaming duty in place. The Irish government has failed to introduce modern legislation to deal with developments in the industry, particularly in relation to online gambling. By not imposing a gambling tax or taking steps to regulate gambling, the government has failed to capitalise on potentially significant tax revenue from the industry.

The reluctance of the government to regulate has been matched by the public’s newfound enthusiasm for casino clubs. As the number of casinos throughout Ireland has mushroomed, the former minister for justice, now minister for finance, Brian Lenihan, announced his intention of bringing draft legislation before the Irish parliament in spring 2008, with a view to enacting it before the end of this year. A prelude to that legislation is an attempt to get all party support for it. While Lenihan is now in finance (and in a strong position to influence and appreciate the exchequer contribution that new gambling legislation could make), there is every reason to believe that, once a cross-party consensus is achieved, any subsequent legislation will be passed fairly rapidly.

Additionally, Irish casino operators have called on the new minister for justice Dermot Ahern to regulate the industry without delay following a police raid in County Tipperary at the end of May 2008, where a private members’ club was forcibly shut down. The case is likely to have implications for other similar clubs operating throughout the country.

Private gaming clubs

Currently there are no licensed casinos in Ireland and no entities operate under the title of a casino. However, there are many private clubs that offer casino-like facilities, including poker, black jack and roulette. Since these clubs are not casinos they fall outside the anti-money laundering regime. Bookmakers require licences issued by the revenue commissioners, but are not designated bodies under Irish money laundering legislation.

In its Third Mutual Evaluation Report on Ireland, published in 2006, the European Financial Action Task Force (FATF) expressed concern at the number of private gaming clubs in Ireland operating casino-like facilities that create a money laundering risk which would fall outside the scope of the Criminal Justice Act.

These concerns have been addressed in the proposed Criminal Justice (Money Laundering) Bill 2008, which suggests expanding the anti-money laundering regime to include “casinos or any other place in which casino-like activities are provided” as designated persons. This means that gaming clubs and private members’ clubs will be subject to procedures regarding money laundering – although the bill does not provide any detail as to how private members’ clubs would comply.

Looking at UK legislation

Implementation of the Third Anti-Money Laundering Directive (3MLD) from the European Commission is already underway in the UK, where all customers must now be identified on entry to a casino.

Where the UK Gambling Commission has approved a casino’s customer expenditure recording systems, identification will only be necessary when the customer purchases or exchanges chips valued at £2,000 or more, or stakes £2,000 or more. The default position of the UK’s money laundering regulations is that customer due diligence must be conducted on entry, whereby casinos can demonstrate they have systems in place for identifying or tracking higher-risk individuals.

The threshold would permit casinos to identify or verify customers only when they reach a threshold of £2,000 of chips exchanged or gambled. It is proposed that additional guidance be developed for internet casinos, which are higher risk due to their non-face-to-face nature.

The draft Irish Criminal Justice (Money Laundering) Bill 2008 does not address the steps that casinos (or casino-like operations) should take to give effect to the 3MLD. The minister is likely to look to other jurisdictions, such as the UK, to see what lessons can be learnt from the approach taken there.

A public consultation process on the Criminal Justice (Money Laundering) Bill 2008, concluded on 15 April. It should only be a matter of time before the new minister for justice introduces legislation to bring Ireland into line with EU law and to ensure that the government can maintain control over the number of private members’ clubs springing up throughout the country.

Joe Kelly is a litigation and dispute resolution partner and Máire Conneely a solicitor in the gaming and betting group at A&L Goodbody