We lack power to block illegal betting

Gabriel Galípolo, President of the Central Bank of Brazil, addressed the parliamentary inquiry commission (CPI) concerning betting regulations this week, clarifying the limitations of the bank’s authority regarding illegal gambling sites.

During the CPI session held on April 8, Galípolo was questioned about the Central Bank’s capacity to penalize internet service providers and payment institutions that facilitate illegal betting operations within Brazil.

In his response, Galípolo emphasized that the oversight and regulation of the betting industry are the sole responsibility of the Secretariat of Prizes and Bets (SPA). He pointed out that the Central Bank lacks the requisite powers to control illegal betting activities in the country.

“The SPA is the authority that determines which betting operations are legal,” explained Galípolo.

He elaborated that, upon receiving notification from the SPA, the Central Bank could only advise financial institutions to cease services to non-compliant gambling companies. However, the bank does not have the authority to intervene directly in transactions; this responsibility falls entirely on the financial institutions themselves.

Galípolo attributed the surge in illegal betting websites to the uncertainty following the national congress’s initial approval of online betting legislation in 2018, which was only fully enacted in 2023.

Understanding the Central Bank’s Authority over Illegal Betting

Rogério Antônio Lucca, the Central Bank’s executive secretary, provided alarming estimates, suggesting that illegal betting expenditures in Brazil could reach between BRL20 billion (approximately £2.6 billion/€3 billion/$3.3 billion) and BRL30 billion monthly this year.

In March, the SPA introduced Normative Ordinance No. 566, designed to elucidate the procedures for reporting payment methods that process transactions for illegal betting websites.

Senator Dr. Hiran Gonçalves, chair of the CPI, raised concerns regarding the Central Bank’s role in monitoring penalties imposed on those institutions, expressing a belief that there exists a “legal vacuum” hindering government initiatives aimed at regulating illegal betting practices.

Senator Soraya Thronicke, the CPI’s leader, noted that sanctioning powers rest exclusively with the SPA for addressing illegal betting companies. She queried whether the Central Bank could pursue payment institutions that accept transactions from illegal betting sites.

Galípolo reiterated that the bank’s authority is limited to cases where illegal betting operations are associated with financial crimes, such as money laundering.

“Our capacity to engage in transactions concerning illegal bets is limited,” he clarified. “Such issues fall outside of our jurisdiction.”

“We can act in the context of preventing money laundering and counter-terrorism financing, ensuring that these institutions maintain appropriate controls and reporting mechanisms,” he continued.

Galípolo noted that often, flagged activities are forwarded to COAF (Financial Activities Control Council), the Public Prosecutor’s Office, or the Federal Police for further investigation.

Recently, Regis Dudena, the head of the SPA, stated that betting using social welfare funds will be prohibited in Brazil, with an ordinance expected to delineate this policy soon.

However, Dudena cautioned about the challenges of implementing such a ban, citing that only 1% of recipients of the Bolsa Família program access their benefits via a physical card. The remaining 99% utilize their bank accounts, rendering a restriction on the welfare card impractical.

Previously, the Central Bank revealed that, as of August 2024, approximately one-fifth of the funds distributed through the Bolsa Família program were spent on online betting activities.

In Galípolo’s perspective, the Central Bank lacks the necessary authority to enforce this ban. He commented, “At present, our institution does not have the legal ability to impose restrictions on individuals receiving Bolsa Família regarding their participation in betting activities.”

“Such enforcement falls outside our mandate and jurisdiction,” he concluded.

As the landscape of gambling continues to evolve, with a growing emphasis on both regulation and responsible gambling practices, the Central Bank of Brazil’s limitations present significant challenges as authorities strive to create a coherent and effective framework for managing illegal betting in the country.