World-Check special crime and terrorism series: illegal sports betting

By: BC Tan, Head of Organised Crime Research, World-Check

South Africa is racing to complete its preparations to host the 2010 FIFA World Cup in June, and more than 450,000 sports fans are expected to attend the event. While concerns about South Africa’s high crime rates continue to be a talking point of the World Cup, the external criminal influences that plague major international sporting events must also be factored into its security planning and arrangement.

ookmaking has always been a When criminal groups are able to secure this The reason behind the high level of major income avenue for organised illicit income, it finances ventures into other organised crime involvement in bookmaking B crime syndicates. While organised criminal operations; further solidifying the is simple – bookmaking requires substantial crime groups have significantly evolved and continuality of these illicit organisations. up-front capital. A decent-sized bookmaking expanded their lucrative illicit activities in The transnational nature of these organisations operation has a capital requirement of at least recent decades, illegal gambling operations and their border-transcending operations pose $600,000 and must maintain a healthy cash remain one of the largest revenue components a challenge to security planners and present reserve of between $500,000 and $1 million for most traditional organised crime groups. severe risks to financial institutions. dollars to be able to settle up losses. This cash-intensive requirement serves as a major To quantify how lucrative the illegal How bookmaking barrier to entry. gambling industry is to organised crime, it is operations work estimated that legal sports betting in the US Certain characteristics of illegal sports constitutes a mere 1 percent of the sports Bookmaking is a complex operation in which betting ensure its continued popularity. For betting market. As such, approximately organised crime elements participate at vary- one, illegal betting operators normally offer $US380 billion of illegal sports bets are made ing levels. The bookmaking operation could better odds than legal outlets. The under- in the US each year. Based on these estimates either be bankrolled by organised crime ground nature of bookmaking means winnings by the 2005 National Gambling Impact Study groups, directly operated by organised crime are not reported or audited, and are therefore Commission, approximately 92 percent of earn- groups or portions of the operation outsourced not taxable. Another key factor is that illegal ings from sports betting finds its way into the to organised crime groups; or it could simply betting operators normally extend generous pockets of traditional organised crime groups. obtain security from organised crime groups credit to their clients. The credit extensions through protection-fee arrangements. Either provided by bookmakers are a particularly The unfortunately reality of bookmaking way, virtually no bookmaker can operate important component of bookmaking opera- and other lucrative illicit activities linked to without financially benefiting an organised tions that opens up for organised crime partic- organised crime is that they serve as a founda- crime group for the privilege of conducting ipation. At times, bookmakers may have to tion to perpetuate other criminal activities. For business. In operations not controlled by outsource debt collection to organised crime instance, loan sharking, corruption and money organised crime groups, independent book- elements, which can either be compensated laundering are key criminal activities inter- makers have been known to pay up to twined with illegal gambling operations. 50 percent of their profits in protection fees. 

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 have been influenced by Asian betting syndi- these illegal betting syndicates worldwide. In cates. However, organised crime syndicates’ continuation to Operation Soga in 2007; in through the protection-fee arrangement or involvement in match-fixing is actually a 2008, Interpol coordinated another similar obtain a cut of the debt interest. In many cases far more complex phenomenon. Often match- operation in Asia. At its completion, organised crime groups are directly involved fixing incidents can involve multiple actors Operation Soga II successfully disrupted over in the loan-sharking business and extend the acting across borders. For example, there 1000 illegal gambling operations estimated loans directly – at exuberant interest rates. have been many occasions where non- to have managed some $1.5 billion in bets. Invariably, the threat of violence will be used European betting syndicates have been to reclaim a debt. linked to match-fixing incidents in Europe. Conclusion The issue of match-fixing touches every Betting syndicates that operate out of The 2010 World Cup will be the first FIFA sport at almost every level, and illegal betting Asia in particular have been singled out as event at which an early warning system will syndicates are often the key external force key players in the international illegal sports be implemented to monitor the games for seeking to influence match outcomes. As betting industry. Specialists in this field says anomalies and identify possible match-fixing. bookmakers profit only from the gamblers this is because in Asia it is common for bets This system was tested during the 2006 who lose rather than win, they find them- to be uncapped (meaning bets are placed World Cup in Germany and introduced to selves in a position of substantially higher without any value limits), while this is much FIFA tournament matches in July 2007. profit margins by betting against ideal odds. less the case in Europe. This equates to Along with procedural changes – such as the higher stakes in sports betting in Asia. FIFA code of ethics amended in 2006 that Often match-fixing involves organised bars officials and players from participating crime elements seeking a personal relationship An expected 3 million football fans will in betting, gambling, lotteries and similar with players, direct bribery, or simply the arrive in South Africa during the World Cup events or transactions connected with football extortion of officials and players. The partici- and a cumulative total of 40 billion fans are matches – officials are taking no chances in pation of organised crime elements in match- fixing is so prominent that an FBI special agent once said that “most of our major mob cases start out as gambling investigations”. The 2010 World Cup will be the first FIFA One such example would be the case former National Basketball Association referee Tim event at which an early warning system will Donaghy, who was convicted in 2005 for his be implemented to monitor the games for part in influencing the outcome of numerous anomalies and identify possible match-fixing NBA matches. The discovery of his participa- tion was actually the result of an investigation into a mob-operated bookmaking operation. Finally, in 2007, Donaghy publically admitted expected to follow the game through global preventing the influences of illicit external his match-fixing was linked to a bookmaking telecasts. The transnational element of illegal forces and making certain that perpetrators operation associated with the Gambino crime sports betting poses a grave risk to global will be identified. family of Brooklyn. financial institutions because the operational requirement of illegal betting syndicates to During this period, financial institutions, With over $148 billion placed on football move finances around the globe is usually foreign exchange houses, betting facilities bets annually, football in particular has a long done using the global financial system. and law enforcement agencies must install and tainted history of corruption. In 2005, Besides the obvious regulatory risks involved heightened controls to identify and prevent former German referee Robert Hoyzer with illicit finances from illegal sports betting, abuse by criminal elements in the movement confessed to an allegation of match-fixing. these illicit finances are often linked to other and laundering of criminal proceeds during Unsurprisingly, investigation into Hoyzer’s criminal activities. In 2007, Interpol coordi- this period of increased liquidity and spike in match-fixing activities uncovered links to nated Operation Soga in cooperation with cash based transactions. With the obvious Croat organised crime elements. The outcome eight national law enforcement agencies in increase of transactions involving betting of the investigation identified at least five Asia that targeted illegal betting syndicates. A placements that is to be expected during such German Cup matches where Hoyzer either particular betting syndicate uncovered during massive international sporting events, the zero attempted to, or successfully managed to, this operation was one led by Tien Dung Ngo: tolerance approach adopted by FIFA and law influence the outcome. And also in 2005, a particularly successful betting syndicate enforcement agencies will likely result in Brazilian Edilson Pereira de Carvalho, who that operated in Canada, Europe and Asia. further identification and disruption of these also happened to be on the FIFA referee staff, Investigations revealed that, besides the lucra- transnational criminal syndicates. Financial was found to have accepted bribes to influ- tive betting operation that brought in an aver- institutions must take the highest precautions ence over 11 matches. The Union of European age of $1.5 million per major international to ensure they do not risk their reputations Football Associations (UEFA) is currently football game, the syndicate was involved by being associated in any manner with these investigating at least 40 alleged cases of in narcotics trafficking and laundering the criminal organisations. ■ match-fixing. proceeds from its criminal ventures.

In 2007, UEFA issued a 96-page dossier As we get closer to the World Cup finals addressed to Europol that identified 26 cases in South Africa, it will be expected that offi- of high-profile European matches alleged to cials will step up their efforts in disrupting

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