Mitek is a company that enables customers to integrate users with confidence, verify identities, and strengthen security against cybercrime, using facial biometrics, image capture technology, and ID card verification.
Can you provide some context about the news coming from Brazil?
Peter Murray - As readers of this article likely know, the people of Brazil engage in more online gambling than any other individual country, by a considerable margin: 21% of all global online gambling traffic comes from Brazil. For comparison, the second-largest market, Mexico, accounts for only 11%. This is even more surprising considering Brazil's long history of strict regulations against most forms of gambling.
To quantify, it is estimated that about US$1.5 billion is generated annually by Brazilian online gamblers using foreign betting sites. Not surprisingly, the Brazilian government is eager to capture these earnings and incorporate them into the economy.
Brazil has been on the verge of regulation several times in the past but has always failed until now. Last year, Bill 3626/23 was introduced to the legislature. There were many negotiations to get to where we are now, but the government was desperate to fully approve this legislation by the end of 2023. Not least because they count on the expected R$2 billion (about US$ 400 million) raised by this measure for the 2024 budget. In the final days of 2023, we saw the legislation finally approved by the President of Brazil, allowing for the issuance of licenses for casinos, online games, and sports betting for the first time in the country's history.
What should operators be doing now to prepare for market entry?
There is clearly enormous revenue potential here, and we know that operators are eager to act quickly, which is good, as the proposed timeline is tight. This is what we expect to see in the coming weeks:
- End of January - The Ministry of Finance of Brazil will publish regulatory guidelines for operators.
- Opening of applications for operator licenses.
- July 15, 2024 - New regulations come into effect.
Although much is still to be finalized, we know some key details about eligibility criteria and the application process. The following regulations were ratified by President Luiz Inácio Lula da Silva:
- License holders will be required to pay an initial fee of R$30 million (approximately $6.3 million).
- Operators will have the right to operate up to three different brands.
- Gross gaming revenue (GGR) will be limited to 12%.
- Bettors will be taxed once a year at a rate of 15% on net winnings.
- Operators must offer customers self-exclusion windows ranging from 24 hours to six weeks. They must also have a Brazilian board member holding at least 20% of the company's shares.
- Operators must verify the identities of bettors, all of whom must be over 18 years old.
- Facial recognition technology will be required to authenticate the identity of players.
It is worth noting, however, that a study found that 86% of Brazilian sports fans already use online betting services. Introducing a federal gambling regulatory framework in a market that already generates billions of dollars, and with many strong opinions, will not be easy. Things can still change.
What do we know about the likely Know Your Customer (KYC) requirements?
The Brazilian economy is poised to receive a massive boost with this legislation. But the government said it will work carefully to balance maximizing potential economic benefits and ensuring player protection.
The government has promised strict anti-fraud rules and measures against money laundering. As in all jurisdictions, a crucial element to get this right will be KYC.
What we know is that operators licensed to operate under Brazil's new regulatory system will be required to:
- Verify identity documents (driver's license / RG / Work Card)
- Check CPF database (Cadastro de Pessoas Físicas, Brazilian tax registry)
- Biometric authentication
There may be other obligations added later, including verifying the origin of funds.
What else is happening in the new and emerging markets in the region?
In Peru, new gambling regulations will come into effect on February 9, 2024. Law 31.557 and associated technical regulations require all platforms to perform player identity verification and validation. Key points include:
- Once the law comes into effect in February, anonymous bets will no longer be allowed on any platform.
- Companies will be required to register all players and verify their identity.
- Individuals under 18 cannot register.
- Citizens with gambling dependency cannot register.
- Foreign citizens living in Peru and possessing an identity document issued by the Peruvian government can register.
- Foreign citizens can register using their passports.
- Platforms must use programs and applications that support the verification of the identities of registered players.
- The law and technical regulations do not mention any obligation to use the official government body (RENIEC) to verify the identity of Peruvian citizens. Under these terms and conditions, private software and application solutions supporting player identity verification will be considered acceptable. Therefore, here at Mitek, our existing services are ready for use.
In Chile: eager not to miss the party – it is also getting closer to the regulation of online gambling. In December 2023, the country's Chamber of Deputies approved a bill that will regulate online gambling in Chile, officially approving its submission for a vote in the country's Senate. According to the new legislation, operators would have to pay a general license fee of CLP64.2 million (USD 74,189) to operate an individual online betting platform, and banks would have the power to block transactions made to illegal operators.
Bill 035/2022 should be watched in 2024, with the industry eagerly awaiting the stamp of approval from the Chilean Senate early this year.
How can working with Mitek help you prepare to enter the market?
Mitek supports gaming operators worldwide to meet their KYC and AML obligations, protect them against fraud, and seamlessly integrate clients across various jurisdictions.
With our Mitek Identity Verification (MiVIP) solution, you will have the flexibility to combine various identity verification methods, including proof of identity, proof of address, and CPF integration, to meet any risk profile and regulatory requirement.
With MiPass, our sophisticated biometric solution, you can allow your clients to register their facial and voice biometrics and enjoy the convenience and security of passive, password-free account access.
Our clients include leading industry operators, and our expertise extends across all major international licensing jurisdictions. Our gaming-specialized team will help you prepare and comply with the new framework and obligations we expect Brazil to implement, helping you grow throughout the LATAM region and navigate this new gaming landscape.
Source: GMB
