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Bets close on minnows while sharks continue to prey, with Govt. patronage?
Police selectively crackdown on pocket casinos while big-timers openly flourish in an industry with no legal stake to gamble on
Police are cracking down on small casinos in Colombo and the suburbs, citing a 123-year-old law that deems “keeping, permitting to be kept, or managing a common gaming place” to be an offence. The Organised Crimes Division (OCD) raided the Red Star casino in Bambalapitiya on June 28, followed by the Regina Club in Slave Island on July 1, arresting 80 clients and three employees from the former, and 10 clients and three employees from the latter.
The arrested patrons were released by Court upon payment of the maximum fine stipulated in the Gaming Ordinance of 1890: Rs 100 each. Hearings continue in respect of the other suspects, who are also booked for offences such as sale of liquor without a licence (Red Star).
The raids have spawned confusion about the criteria applied by police in selecting which casinos to target. Under existing laws, none of the gaming centres in Sri Lanka are legal. There is no licensing system permitting casinos to conduct their specific trade. While the Casinos Business (Regulation) Act was passed in November 2010, the Government has not issued regulations to give effect to the law.
Under an Amendment to the Betting and Gaming Levy Act approved by Parliament in April 2013, all casinos and betting centres are required to register with the Department of Inland Revenue (IRD) by May 31. But this does not grant them legal status. The parent law, which is the Betting and Gaming Levy Act of 1988, calls for taxes to be collected from anyone in Sri Lanka, who conducts the business of a bookmaker or of gaming, “whether lawfully or unlawfully”.
Why, then, are police swooping on the lesser centres, while allowing the big guns—with their large, conspicuous, showy outlets—to carry on unhindered? How is illegal gaming in one centre more permissible than illegal gambling in another? “I think it gives credence to the rumour that Government wants to close down the smaller places, and allow only businessmen Dhammika Perera and Ravi Wijeratne to operate,” said a political source, requesting anonymity.
“I think, they will then require whoever is left, to shift to D.R. Wijewardene Mawatha, where the new casino zone is planned,” he speculated. “These may be the Government’s initial steps towards regulation of the sector.”
Mr. Perera runs four gaming centres, while Mr. Wijeratne operates one. The latter is in talks with Australian casino mogul James Packer, to build an integrated resort in Colombo Fort, complete with a gaming centre. Both are heavy Government backers.
Red Star, when raided, had shown proof of IRD registration. Its management had also claimed to have paid the necessary fees and levies. But they have since failed to comply with a police request to appear at the OCD with documents relevant to the running of the centre.
In the absence of a valid liquor licence, police confiscated 39 bottles of alcohol from Red Star. They also seized gaming equipment and around Rs 1.1 million in cash. And since the Gaming Ordinance states that those committing unlawful gaming too shall be punished, clients at the centre were also arrested.
Regina Club did not have IRD registration. They had a valid liquor licence, but the alcohol was being sold in a different location. Police confiscated the equipment and arrested the clients. However, productions from both raids are likely to be inconsequential, compared with the paraphernalia and spirits found in the larger gaming centres.
Commissioner General of Inland Revenue Mallika Samarasekara confirmed that Red Star was on their list. She said her Department is not involved in the ongoing crackdown. “If we find any casinos not paying their dues, we will issue default notices on them and request action, where necessary, through the Inspector General of Police,” she told the Sunday Times. Nevertheless, the IRD’s database on gaming and betting centres around the country remains inadequate.
Six casinos are officially registered with the IRD, but police sources said last week that, there are at least 36 of them in and around Colombo. “It is difficult to get accurate statistics, because nobody has them,” one of the sources said. “These centres operate under different names. Not all of them conduct gaming openly.”
“The estimate includes those that carry on such business in rooms or inside private enclosures in clubs,” he clarified. “But we can’t prove this without raiding them, something which has to be done with a Court order.”Police sources rejected the insinuation that they were pawns in a Government plan to shut down some casinos while allowing others to operate. They said they needed more resources and skills to go after the more powerful operators. For a start, the Police Department must pass money for them to spend at casinos for sting operations.
Police claim that their main objective in raiding casinos was to convey a message to criminals—particularly members of the underworld—that they cannot find protection within illicit gaming centres. “We want to tell them that, even if you’re inside, we will get you,” said a senior police source.
The OCD has established that a large number of serious criminals spend their spoils at gaming centres or at “clubs”, these sources said. Investigations have also pointed towards these places being bases for criminals to plot and plan their activities in peace. Over the last few months, the OCD probed and busted a massive vehicle theft racket. They found that a single network of criminals was behind the disappearance of 32 vehicles—and that the money earned from the sale of these automobiles was mostly frittered away at gaming centres and clubs.
“These criminals are permanent members of clubs and casinos,” said a police officer, requesting anonymity. “They can walk in at any time, and are always there. But the police can’t go in without a Court order. To us, those are like high security zones with bouncers at the door.”
The Sunday Times could not independently verify this claim. No criminals were found among the clients arrested at Red Star or Regina Club. However, the contention that casinos and various crimes go hand-in-hand is a worldwide one—and not without reason.
Macau, one of the gambling hotspots of the world, is a case in point. Countless research papers have been produced on the destructive effect that gaming has had on this Chinese territory.
IMF warns against unregulated gaming industry, and urged controls
In January 2008, the International Monetary Fund (IMF) sounded a warning to Sri Lanka about its unregulated gaming sector, and strongly urged that controls be put in place.
The recommendations were made in a document titled, “Sri Lanka: Report on the Observance of Standards and Codes for Anti-Money Laundering and Combating the Financing of Terrorism and Mutual Evaluation Report on Anti-Money Laundering and Combating the Financing of Terrorism”.
It said, the legal status of casinos was not clear. “On the one hand, casinos are prohibited under the Gaming Ordinance,” it explained. “On the other hand, under the Betting and Gaming Levy Act, a levy is payable to the Ministry of Inland Revenue by a person carrying on business of gaming, and large levies have, in fact, been paid by the seven casinos currently operating in Sri Lanka.”
“Aside from collecting the levy, there is no actual supervision of casinos or ‘fit and proper’ checks of owners,” it remarked. “This situation facilitates the ownership or control of casinos by elements of organised crime, and the capability of authorities to enforce the requirements of the FTRA (Financial Transactions Reporting Act) for casinos is doubtful.”
“It was stated during discussions with officials that, there are, in fact, seven large casinos operating in Sri Lanka, from which, levies of Rs 340 million were collected in 2005,” the IMF said.
“Discussions with the officials of Ministry of Finance did not indicate of any attempt having been made that, only ‘fit and proper’ persons own or control casinos, the major concern being the ability of the Inland Revenue Department (IRD) to collect the levy, for which, it had to enlist the help of the Police authorities.”
“There does not appear to be uniformity of view among various officials with whom the issue was discussed, as to whether there is contradiction in collecting levy under an Act of Parliament from casinos which are declared illegal under an Ordinance,” the IMF reported. “Aside from collecting the levy, there is no actual supervision of casinos. Seven casinos are currently operating in Sri Lanka.”
The IMF recommended that casinos be subject to comprehensive Anti Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulation and supervision through the FTRA.
Among other things, it recommended that the legal status of casinos in Sri Lanka be clarified either by imposing and enforcing a prohibition on casino operations; or explicitly legalising casinos and establishing a licensing and supervisory regime, including measures to prevent the ownership, control or management of casinos by criminals.
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