The report estimates that the illegal betting market in India attracts about $100 billion annually. It details how offshore entities use complex financial networks and “benami” (money mule)
A recent whitepaper has highlighted the troubling connection between illegal gambling operations and national security threats in India. The paper, titled “Illegal Gambling and Betting in India: Risks, Challenges, and Responses,” was co-authored by Lt. General Vinod G. Khandare and Vinit Goenka. It reveals the severe impact of illegal gambling on India’s economy, national security, and data privacy, urging the establishment of a regulated domestic e-gaming market as a solution.
The report estimates that the illegal betting market in India attracts about $100 billion annually. It details how offshore entities use complex financial networks and “benami” (money mule) accounts to transfer funds abroad, posing significant challenges for regulatory authorities.
Highlighting the economic impact and regulatory evasion, the report states, “These entities use offshore servers to circumvent legal oversight and conduct transactions through individual accounts rather than legitimate businesses, complicating tracking efforts.” The Indian Financial Intelligence Unit (FIU) informed a Parliamentary Standing Committee on Finance in July 2023 about suspicious transactions involving offshore gambling entities using the Unified Payments Interface (UPI) linked to Indian bank accounts.
The report notes that entities registered in places like Curacao, Malta, and Cyprus collect funds through false inducements and divert them to select individuals and entities, both domestically and abroad. It explains, “Funds collected by this network of foreign-registered websites were not disbursed to investors or players as expected but were diverted to bank accounts of select individuals and entities.”
Indian central agencies, including the Intelligence Bureau (IB) and Research and Analysis Wing (R&AW), have found alarming features in certain betting apps. These apps, operating on Android and iOS platforms, were discovered to steal and transmit user data and monitor real-time activities covertly to servers outside India. The report adds, “These upgraded apps seek extensive permissions, enabling them to record user movements, transfer backup data to their servers, erase data, and access the camera for video recording. Such capabilities raise serious concerns regarding national security, particularly amid the current tense border situation.”
Investigations revealed that offshore entities use “Benami” accounts to route and layer illicit funds, ultimately transferring them abroad under the guise of bogus entities. The term “Benami” in Hindi translates to “no name” or “without name.” Benami transactions involve using another person’s name or a fictitious name. The report points out the severe cybersecurity threat posed by illegal gambling platforms due to the volume of sensitive data and financial transactions they handle. It emphasizes the use of cryptocurrencies and instant peer-to-peer payment systems, which facilitate anonymous transactions and complicate law enforcement efforts.
“Cryptocurrencies have become a favored medium for transactions in the realm of illegal betting and gambling, promoting anonymity and enabling illicit activities on a global scale,” the whitepaper notes.
The research also highlights the exploitation of vulnerable consumers, especially minors, by illegal operators. Many offshore websites bypass essential KYC and age verification checks, making it easy for minors to access gambling platforms, leading to significant “financial and psychological harm” among young users. “Offshore websites like Parimatch offer payment options such as cash on delivery, allowing gaming platform agents to collect cash payments from consumers to top up their gaming wallets, thus simplifying the exploitation of minors,” the report says.
