SiGMA Insight: Illegal operators in Georgia a problem for business, society and state

Lea Hogg 1 year ago
SiGMA Insight: Illegal operators in Georgia a problem for business, society and state

A recent ban was set on gaming for people under the age of 25 in Georgia. Civil servants, individuals working in government agencies and those  receiving social benefits have also been prohibited from gambling. As a result, it means that 1.4 million individuals have been banned from gambling in the jurisdiction. Licensing of online casinos is under scrutiny and there is an additional ban on organised gambling on board ships in Georgian territory waters.

Speaking with  SiGMA News , George Mamulaishvili, head of administration at the Georgian Gambling Association (GGA), sheds light on the gambling legislation in Georgia.

As an expert and consultant on legislation in the Balkans and the post-Soviet region, Mamulaishvili explains, how as a result of extensive research and collaborations, he has published various materials on the legislative issues relating to land based and online casinos in the region with a particular focus on Georgia. Mamulaishvili emphasises how the EU required licensing of online casinos and sports betting however this was not acceptable to the business sector. In addition since March, he points out that advertising on television and online platforms has been banned with the exception of  operators who are allowed to sponsor sports clubs and events. He adds that the changes in various taxes and income tax of 15 percent has resulted in a rise of gross gaming revenue (GGR) to 10 percent. The second part of the bill came into force in March of last year. In spite of the age restrictions and ban on vulnerable groups and employees within the civil service, foreign citizens are allowed to gamble in land-based casinos if they are over the age of 21 years and for online platforms, foreign passport holders need to be over the age of 18.

Moneyval requirements

Mamulaishvili referred to the Moneyval requirements and the need to address the anti-money laundering laws and guidelines. He says that although the gambling sector is still at risk, licensing itself is not a problem.

Moneyval’s task is to spread the policy of international standards in the field of combating money laundering and the financing of terrorism (AML/CFT) to European countries. We have a system of financial monitoring in Georgia under the Ministry of Finance, and they always operate on the recommendation of the EU. This is one of the recommendations for Georgia’s status.” George Mamulaishvili, Head of Administration – Georgian Gambling Commission

He highlights that the second change was already adopted at the end of the year and will come into force at the start of June 2024. “The structure of the law is why it is not acceptable for us because of the amount of taxes.” he clarifies. There will be three licenses: a casino license, a slot machine license, and a sports betting license. It means that if an operator owns a land-based casino, a slot club hall, and a bookmaker’s office, then the license will cost 100,000 GEL (US $39,140) each. “Until now, there were two licenses where fees are split quarterly at GEL250,000 (US $96,000) accordingly – as such there are two fees in this case.” adds Mamulaishvili. “And if you don’t have land-based facilities, then a casino license will cost GEL 5,000,000 (US $1,957,000) per year, a slot club GEL 1,000,000 (US $ 391,400) and a bookmaker’s office GEL 1,000,000 (US $391,400).

Each legislation has negative consequences

Only seven online gaming operators are licenced to operate in the jurisdiction. “As for the additional licence, this came into force in 2021 and gives permission to operators to provide games online. A licence to operate this activity costs GEL 100,000 ($39,140). Every game must be certified by either the GLA or another accredited lab.” Online gaming operators will also require additional approvals before services can be offered in the jurisdiction.

Strict gambling regulations came into force last year prohibiting gambling advertising on TV, external platforms and Georgian websites. Operators will possibly be allowed to sign sponsorship contracts, mainly in sports. Permission for each online game made available by the operators to the public will cost GEL 100,000 (US $36,974).

Media

A number of civil societies that make up the lobby group Media Advocacy Coalition (MAC) have been objecting strongly to the additional restrictions especially to those relating to advertising. They claim that research was not thorough enough and the lobby claimed that findings were not particularly accurate because it was not supported by assessments from experts. MAC believe that the new reforms hurt the few national broadcasters. Consequently Georgia’s Formula TV disclosed that advertising revenues from the gaming sector currently make up around 25 percent of all advertising income with almost all entertainment shows on the network being sponsored by betting companies. The media lobby group pointed out that the loss of income from gambling advertising would surely result in a domino effect which will result in TV networks being unable to function due to lack of resources. Ultimately this may mean that networks may be left with no choice but to close down.

Gambling in the Balkans

Mamulaishvili compares the gambling sector in Georgia to other Balkan countries. He says that in 2021, Georgia had the best legislation relating to taxes. The country scored highly on all other points. The recent reforms have brought about some problems which include the emergence of many illegal companies operating in the market, especially online.

“Legislation in the Balkans differs from legisation in Georgia, albeit not radically” argues Mamulaishvili. For example in Romania, the government Is planning to increase the tax rate up to 40 percent for withdrawals of winnings from an online casino. This will surely cause huge problems in the Romanian gambling sector. Without doubt customers will try to find other markets where they are able to play and withdraw their winnings at a lower tax rate. Mamulaishvili concludes  that there are also a number of problems within responsible gambling procedures in Serbia and other Balkan countries. Although part of the legislation in Balkan countries is similar to the legislation in Georgia, the legislation in the Georgian jurisdiction transitioned to become more business-oriented in 2021.

“Georgia has a well-regulated identification and verification system.” affirms Mamulaishvili.

Georgian Gambling Association

The Georgian Gambling Association (GGA) is a non-profit and non-commercial legal entity that engages in the gambling sector and protects the legitimate business interests of member companies.

Mamulashvili says that regardless of changes in legislation, no constructive dialogue has taken place yet.

Several agreements have been reached regarding advertising on foreign platforms to attract foreign players. We definitely need legal reform to attract foreign players and ban illegal online operators within Georgian jurisdiction. Without these changes, it will be difficult to deal with illegal sites. It is also important to reduce the age limit, as this will become a problem for the Georgian market in the long run. I can also add that it is precisely because of this kind of change that many illegal operators appeared on the market. Unfortunately they are a problem not only for business, but also for society and the state. ” George Mamulaishvili, Head of Administration – Georgian Gambling Association

The best way to eliminate illegal operators, Mamulaishvili says, is to develop good relationships and assist legal operators. The ban does not benefit, but on the contrary, the State receives an anti-effect from the tough laws implemented “Business must be controlled but within reasonable limits. which in the future will benefit not only business but also society and the state.”

SiGMA News spoke with George Mamulaishvili, Head of Administration at the Georgian Gambling Association

 

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