Anti Money Laundering and Advertising Landscape for Online Gaming in India

Introduction

The Indian Gaming law regulations are fairly new and constantly evolving and are governed by numerous legislations in the country. However, the booming and the rapidly expanding gaming industry in India presents a unique set of multilateral challenges to the regulators for particularly ensuring that online games do not become a gateway to money laundering or other illegal activities.

Numerous states across the country have enacted their own laws to regulate online gaming and such activities. However, at the central level, the Information Technology Act 2000 and Public Gambling Act of 1867 provides a regulatory framework for online activities such as online gaming and games of skill.

Anti Money Laundering Landscape for Gaming Industry

The money laundering activities through online gaming is prohibited by the Prevention of Money Laundering Act (PMLA) 2002 which lays down that the organizations carrying out those activities which provide for playing games or any such activity involving cash, kind or any such commodity convertible into cash (such as casinos) have been classified and labelled as “reporting entities” and are subject to report and disclose various records such as verifying the identity of players and clients involved in such transactions, maintaining records of financial transactions and reporting those transactions which involve suspicion over money laundering or other illegal activities.

The Indian Government has also recently started a process of consultation wherein it has proposed to include online gaming entities within the scope and ambit of the Prevention of Money Laundering Act 2002 and introduce the ‘Know Your Customer’ (KYC) regulations in order to ensure mandatory reporting of such transactions by these entities and provide for a robust enforcement mechanism in place. Additionally, it has also been suggested that Indian government and authorities shall present this proposal to the meeting of the Financial Action Task Force (FATF) at the global level due to numerous instances of several issues of money laundering to foreign jurisdictions at a global level.

Numerous state governments have also taken several additional steps to ensure the AML compliances wherein those entities which apply for a ‘casino’ license in the state are mandatorily required to ensure adherence with the conditions set out which may include reporting obligations for certain entities.

Advertising Landscape for Gaming Industry

In India, the Ministry of Information and Broadcasting is the nodal agency vested with the jurisdiction to control online advertisements which may include gaming advertisements. However, there have been no regulations introduced by the ministry till date.

There have been various other regulations and codes introduced in order to provide guidelines for advertisements of online gaming. For instance, the Advertising Standards Council of India (ASCI) which is a self – regulatory body has issued a code which applies to the regulation of advertisements of gaming on television and broadcast media. The Central Consumer Protection Authority (CCPA) is also responsible for regulation of violation of consumer rights, unfair trade practices which include false advertisement, and is also empowered to initiate proceedings, investigate offences including referring the offences to other agencies and jurisdictions and even imposing fines and penalties.

Various state governments have prohibited the process of printing, selling, distributing, publishing and circulating any form of print media, news sheets or any other documents having intent to aid or facilitate the process of gambling. However, as an exception, such regulations do not apply to skill-based games in numerous states. Moreover, under the Information Technology Rules, various intermediary platforms including social media platforms are responsible for informing their users not to indulge in publishing any content in relation to or encouraging money laundering or gambling activities or any such content which is harmful in relation to harming users, harm to children and minors, or violates any law enacted for the time being in force which may include gambling enactments.

The nodal agencies for regulating advertisements for games of skill are the Consumer Protection Authority and Guidelines for Prevention of Misleading Advertisements 2022 also known as the ‘misleading advertisement guidelines’ which strictly lay down a prohibition on misleading advertisements, surrogate advertisements and certain promotional activities which come under the unfair trade practices. Moreover, numerous penal provisions have also been provided under the ASCI Code which may direct their members to modify their advertisements. Fines up to Rs. 1 Million can be imposed for violations under the Consumer Protection Act where every subsequent offence or violation may be punishable with imprisonment up to 5 years in prison and/or a fine up to Rs. 5 Millions. The Central Consumer Protection Authority may also direct such advertisements to be removed which have been found to be misleading or surrogate advertisements.

The content and media circulated through advertisements is subject to the provisions of the Bharatiya Nyaya Sanhita 2023 and the Bharatiya Nagrik Suraksha Sanhita 2023 read with the Information Technology Act and other legislations providing for a ban on the obscene content, content hurting religious sentiments and other offences involving voyeurism, children and minors.

Further Changes Required

In the present day, even though there are regulations banning the advertisements or circulation of various illegal activities, such activities continue to exist due to lack of surveillance and resources available with the enforcement agencies and technological advancements such as VPN, Dark Web or various other platforms. It is the need of the hour to update enforcement agencies with adequate resources, manpower and technological training in order to equip them with the ability to tackle such offences and challenges.

Additionally, with the ongoing challenges and expansion of gaming industry across the globe and especially India, it is required that the regulators and ministries should strengthen their inter – agency collaboration in order to ensure a transparent ecosystem in order to foster a more sustainable system of skill based games in the country and maintain the integrity of the sector and economy.

King Stubb & Kasiva,
Advocates & Attorneys

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