This is another rule in the framework of Ordinances of the Secretariat of Prizes and Betting of the Ministry of Finance, which has been regulating the activity since the publication of Law 14790/23.
I became interested in writing about this topic because I see in this Ordinance an aspect that I have been advocating for some time: the need to have integrity guidelines that comprehensively address all aspects of integrity.
The ordinance not only covers guidelines for AML/FTP but also emphasizes the need to establish an entire Integrity System, encompassing legal compliance, ESG (environmental, social, and governance) principles, and good governance.
This is a significant regulatory gain for the sector because, in addition to setting the basic rules for a money laundering prevention program, it establishes parameters for an integrity system as provided for in other legislation and standards.
Thus, beyond defining rules for registration and communication to COAF (the Brazilian Financial Activities Control Agency), risk assessment, Know Your Customer (KYC), Know Your Employee (KYE), Know Your Supplier (KYS), and Know Your Partner (KYP) procedures, and the registration and monitoring of operators, bettors, and users, it integrates integrity aspects that enhance both the AML/FTP Program and the company's overall management.
Bringing a practical approach to the discussion, we can imagine that by defining ESG criteria, the organization will be able to address broader impacts than the operation itself, such as labor risks in its supply chain and issues related to responsible gaming.
For example, to comply with the ordinance, it will be necessary, when creating KYS and KYP procedures, to consider social and environmental issues, such as environmental crimes and labor non-compliance, particularly conditions akin to slavery, in addition to assessing the impacts caused by the organization's activities.
When establishing the parameters for KYC procedures, it will be important to recognize that criminal activities might extend beyond the usual. For instance, individuals involved in crimes like illegal mining, logging, and other similar offenses could potentially use the platform for money laundering.
It is also crucial to understand that establishing an integrity and ESG model facilitates the organization in outlining important metrics to prevent and combat match-fixing.
Educational measures, social inclusion activities, and support for sports training can reduce the influence of recruiters and aid in the development of children and young people.
Creating a system that facilitates the understanding of the organization and its partners, such as a social balance sheet, can also help identify areas of higher vulnerability to match-fixing.
Another aspect is that by structuring an integrity system with risk-based approaches from standards such as ISO 31000 and COSO, the organization will gain a broader perspective on its uncertainties, effectively mitigating money laundering risks.
Systematizing risk management within the organization's culture by incorporating ESG aspects into its scope can steer governance towards informed decision-making and a comprehensive view of threats and opportunities, helping identify red flags and fostering a virtuous cycle of continuous improvement.
By incorporating the pillars of an integrity system into the ordinance, the Secretariat of Prizes and Betting aims to guide the sector through good governance and integrity practices, consolidating the need for holistic impact management.
Additionally, structuring an integrity system based on legislation requires third-party management measures. As the betting market is a significant sponsor of sports, these parameters may also positively influence sports entities.
A wide range of partners of sports betting companies, such as clubs, federations, and leagues, will be subject to the integrity assessments these organizations must conduct. Proper due diligence will be essential to understand business risks and implement measures to reduce direct impacts, benefiting the management of sports entities.
Therefore, I believe this regulation has brought a modern and relevant contribution to the recently regulated sports betting market and may positively impact the sports industry as a whole. It is also a good example of how regulations should address market and societal challenges more broadly
Fernando Monfardini
Compliance Officer and DPO at Clube Atlético Mineiro
