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With a whopping number of 442 million gamers, India has become the second-largest gaming market worldwide, only surpassed by China.
As with the rest of the global gaming hubs, India is also dealing with money laundering concerns tied to the gaming industry, among others.
A recent report has emphasized the need for stricter regulations to protect the country’s digital economy from illegal activities.
The RMG Sector is King
In the context of its legally challenged gaming sector currently valued at roughly $3.1 billion with $2.8 billion raised from domestic and global investors in the last five years, the real money gaming (RMG) sector in India is king, representing one of the main revenue drivers, according to a July report courtesy of Grant Thornton Bharat and the E-Gaming Federation.
The segment, which has emerged as a global powerhouse, is expected to hit a revenue of $7.5 billion over the next five years.
Despite the less favorable context generated by the newly introduced 28% blanket tax on online gaming that RMG firms have been hit with, the sector continues to account for 83-84% of the revenue.
This booming industry, which engages around 100 million online gamers daily (with 90 million paying to play), has also created jobs in areas like fintech, cloud services, and cybersecurity.
Money Laundering Threat, a Big Problem
However, a new report from a not-for-profit think-tank aimed at fostering digital inclusion and adoption, Digital India Foundation (DIF), has raised concerns about the growing threat of money laundering within the sector.
The report emphasizes the imperative need for stricter regulations and better enforcement to protect India’s digital economy from illegal activities connected to online gambling and sports betting sites.
According to the report, offshore betting sites and in-game currencies are frequently being used for money laundering and even terror financing purposes.
According to estimates, the country’s illegal gambling market handles more than $100 billion on a yearly basis.
While efforts to block these platforms exist, a large number of operators choose to bypass all restrictions using Virtual Private Networks and mirror sites.
Social media influencers who are paid to promote illegal gambling sites and lure users with bombastic claims and promises, only add fuel to the fire.
Another serious problem is represented by the use of cryptocurrency and cash which diminishes all efforts to track and monitor illicit financial flows.
Stricter Rules and Enhanced Enforcement, a Must
One of the main culprits for the sector’s increased vulnerability to fraud is the lack of consistent regulations and a dedicated authority.
The report urges the government to block transactions with illegal operators and work with international partners on cross-border gambling issues.
The DIF also recommends that the Ministry of Electronics and Information Technology create a clear regulatory framework.
Stronger financial measures like regular audits and robust Know Your Customer processes are suggested to reduce risks.
Public awareness campaigns and stricter enforcement are also needed to protect users and ensure a safer gaming environment.
The Need for a Specialized Task Force
The DIF report also asks for the introduction of a specialized task force that would combat illegal operators by ensuring compliance with Know Your Customer regulations, promoting digital payments, and maintaining financial discipline.
A whitelist of legal operators that would ask all domestic and offshore operators to register under the Goods and Services Tax (GST) Act, which is aimed at making a provision for the levy and collection of tax by the Central Government on the intra-state supply of goods and services.
The whitelist would allow payment gateways and service providers to make a clear distinction between legal and illegal platforms, thus curbing fraudulent transactions.
With the potential to create over 250,000 jobs by 2025, the report underscores the importance of timely action.
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