On July 25, 2023, the government published Provisional Measure (PM) No. 1,182 of 2023, which, amending Law No. 13,756/2018, regulates the operation of betting lotteries, bringing measures such as taxation on lottery revenue and the stipulation of penalties and fines. According to the Federal Senate, in just seven days this Provisional Measure received 244 amendments, indicating the intensity of discussions on the topic.
Subsequently, on September 13, 2023, the Chamber of Deputies approved Bill No. 3,626 of 2023, which regulates the administrative process for irregularities and fraud related to companies in the sports betting market. The first steps towards the legalization of sports betting were only taken during the government of former president Michel Temer, through Law No. 13,756/2018, which had been waiting for years for greater regulations such as those previously mentioned.
Although this news concerns a specific type of commercial betting operation – fixed-odd betting– some parallel discussions are consequently brought to the fore, such as the Bill that legalizes gambling.
To talk about this topic, it is always important to differentiate between what is considered a sports bet and a game of chance: while in sports betting there are probabilistic elements that can be considered by the bettor, games of chance are based solely on luck.
In the case of sports betting, the subject is able to bet taking into account statistical factors, normally linked to the skill, whether of an athlete or, for example, of an animal, such as a horse. In games of chance, there are no factors whose predetermined knowledge could indicate victory, as the result is entirely random.
The legalization of gambling, therefore, is based on the permissibility of a person betting based on their own luck. Although bets based on perceptions of skill and probability are still susceptible to bettor bias, there is greater historical and cultural disapproval of those made without any basis. Sports betting tends to be more culturally accepted, being considered tradition in many regions.
In Brazil, gambling was prohibited in 1946, by Decree-Law No. 9,215, signed by the then President of the Republic, Eurico Gaspar Dutra. According to speculation, the former president was greatly influenced by the first lady, Carmela Teles Leite Dutra.
In this step, since 1991, there has been Bill No. 442 in Congress with the intention of legalizing gambling, which includes the activities of casinos, bingos, jogo do bicho, among many others. It was only in February 2022 -- therefore, 21 years later -- that this project was approved in the Chamber of Deputies, going on to be voted on by the Federal Senate, now renumbered as Bill No. 2,234/2022.
In addition to providing specific licenses for such action, this project expressly mentions that the intervention of public authorities in the economic activity of gaming and betting would have, among others, the purpose of preventing and combating the use of this market in the commission of crimes, especially those of tax evasion, money laundering and terrorist financing.
Title V of the aforementioned bill goes further, thoroughly describing the measures that would be required for an institution to efficiently prevent money laundering and terrorist financing. To this end, the proposal describes the need for a policy to prevent money laundering and terrorist financing (PLD/FT), the establishment of governance so that such prevention is possible - which includes the attribution of the role of person responsible for compliance of AML/FT obligations to one of the statutory directors -, the assessment of money laundering and terrorist financing risks and the communication to the competent authorities regarding any suspicious operations related to these matters.
Bill No. 2,234/2022 indicates that the Ministry of Economy would be responsible for regulating all PLD/FT measures related to gaming and betting activities throughout the national territory. Considering that the Ministry of Economy was divided into four departments by the current government, it is possible that the text will be amended to indicate one of them - such as the current Ministry of Finance - or another body that would be responsible for regulating this activity.
Based on this decision, the chosen body would issue its PLD/FT rules of a mandatory nature to all those who fall within the regulated activity, following the example of what we see in Circular No. 3,978/2020 of the Central Bank of Brazil for financial institutions and Circular nº 612/2020 of SUSEP for insurance companies.
Another relevant point concerns the communication to the competent authority of any suspected money laundering or terrorist financing activities. Regardless of the body chosen by the legislator to regulate this market, the Financial Activities Control Council (Coaf) will be responsible for receiving reports of suspicious situations.
By crossing the data obtained, the results of Coaf's analyzes are recorded in financial intelligence reports, which can be forwarded to other authorities to initiate appropriate procedures.
Additionally, another Bill, No. 845/2023, is being processed in the Federal Senate to regulate the lottery modality of fixed-odd betting - as well as the aforementioned Bill No. 3,626/2023 - conditioning this market to the adoption and implementation of policies, procedures and internal controls aimed at preventing money laundering, terrorist financing and fraud.
The tendency to legalize betting and gambling could generate a source of revenue for the government through tax collection, but it will certainly need to be accompanied by strong regulation of commercial activities that explore this market. Legalizing without properly regularizing could open space for the occurrence of various infractions, such as fraud, money laundering and crimes against the tax system.
For the activity to comply with regulations, it will be essential not only to develop policies and procedures, but also to train key employees, who will act with a preventive approach or who will need to recognize signs of irregularities in the activities carried out, especially in relationships with customers and other stakeholders in the company's operation.
Bill No. 2,234/2022 also specifies the need to maintain an internal structure that ensures compliance with preventive obligations against money laundering and terrorist financing, which will require professionals with sufficient expertise to deal with issues such as assessment and the treatment of risks related to these matters.
In case of disobedience, the project provides for sanctions such as a fine - which can reach R$2 billion (US$ 397m) -, the revocation of authorization to carry out the regulated activity and the prohibition of carrying out certain activities for up to 10 years. There is a legal and regulatory framework that will need to be met and the sector must be prepared.
Pedro Arantes and Maria Moura
Compliance specialists at P&B Compliance
