Horseracing body IFHA slams offshore hubs as ‘pseudo-regulators’

David Gravel November 22, 2024

SiGMA news

The Isle of Man’s Gambling Supervision Commission (GSC) is facing fresh scrutiny following sharp criticisms from the International Federation of Horseracing Authorities (IFHA). The IFHA Council on Anti-Illegal Betting and Related Crime’s November bulletin is at the heart of the controversy. This bulletin draws comparisons between offshore licensing hubs, like the Isle of Man, and regions known for organised crime, such as the Philippines.

The IFHA Council’s transition to a global entity marks a pivotal moment in the fight against illegal betting and financial crime. Yet, with this evolution has come sharper focus on jurisdictions offering what the Council terms “pseudo-regulatory” oversight. According to the Council, these frameworks enable transnational crime networks to thrive under a façade of legitimacy.

James Porteous, head of research for the IFHA Council, issued a damning critique in the November bulletin. “Offshore hubs provide a veneer of legitimacy while facilitating activities that are not only illegal but corrosive to sports integrity globally,” he wrote, comparing the Isle of Man’s regulatory practices to the now-shuttered Philippine Offshore Gaming Operators (POGOs).

The Isle of Man in the spotlight

Once lauded as a beacon of responsible regulation, the Isle of Man is now under increased international scrutiny. Earlier this year, the GSC suspended the licences of King Gaming Ltd and associated entities following allegations linking the company to illegal betting operations and cyber fraud. Chinese court documents revealed that King Gaming Ltd had engaged in large-scale cyber scams and illicit financial flows, with activities spanning both the Isle of Man and the Philippines.

The Council’s bulletin highlights how offshore hubs like the Isle of Man, Vanuatu, Timor-Leste, Cambodia, Laos, and Papua New Guinea allow operators to bypass stricter regulatory environments. By exploiting these jurisdictions, operators create a veneer of legitimacy while engaging in activities linked to money laundering, human trafficking, and other transnational crimes.

Such vulnerabilities not only undermine sports integrity but also erode trust in the global regulatory framework. The Council’s call for unified, international action is clear: without decisive measures, these hubs will remain key enablers of global crime.

Lessons from the Philippines

The collapse of the POGO industry in the Philippines serves as a stark warning. Years of systemic corruption and ties to organised crime led to its downfall, culminating in a government-mandated shutdown in 2024.

In his State of the Nation Address in July 2024, President Ferdinand Marcos Jr. declared a nationwide ban on POGOs, denouncing them as a “grave abuse and disrespect to our system of laws.” Marcos linked the industry to an array of crimes, including financial scams, money laundering, human trafficking, and even murder. The ban marked a decisive shift in the Philippines’ approach to combating illegal betting and its associated crimes.

Despite the crackdown, the IFHA Council noted that many former POGO operators have relocated to other jurisdictions with weaker regulatory frameworks. Offshore hubs, such as the Isle of Man, have become attractive destinations for these operators, who exploit legal loopholes to rebrand and continue operations under the guise of legitimacy.

The IFHA Council’s bulletin is unambiguous in its warnings. Offshore licensing hubs do not just undermine the integrity of sports like horseracing; they act as critical nodes in a web of transnational crime. From human trafficking to money laundering, the exploitation of these jurisdictions fuels a cascade of illegal activities with global repercussions.

One of the most concerning trends highlighted is the global exportation of crime models initially seen in Asia. Operators have increasingly shifted their activities to new regions, including parts of Europe, Africa, and South America. The Council’s analysis underscores how failure to regulate these hubs effectively exacerbates the spread of such criminal networks.

The role of the IFHA Council

Through collaboration with racing bodies, regulators, and law enforcement agencies, the newly global IFHA Council on Anti-Illegal Betting and Related Crime aims to address these challenges. Its goal is simple: to hold “pseudo-regulators” accountable and dismantle the illicit networks undermining sports integrity.

The Council’s bulletin emphasises the value of regulatory bodies strengthening their frameworks and aligning with international standards. By casting a spotlight on the Isle of Man’s licensing practices and those of other jurisdictions, the Council is pushing for global regulatory accountability.

The Isle of Man has staunchly defended its oversight mechanisms, with the GSC denying allegations of systemic failings. However, the suspension of King Gaming Ltd’s licences has amplified calls for greater transparency and more robust enforcement. For the GSC to maintain its reputation as a leading regulator, it must address these concerns head-on.

Recent criticisms highlight a broader issue: the need for licensing hubs to lead by example. The Isle of Man has a chance to strengthen its regulations and regain global trust. By enhancing compliance checks, increasing transparency, and collaborating with international groups such as the IFHA Council, the Isle of Man can accomplish this.

The stakes couldn’t be higher

The Council’s message is unambiguous. Without rigorous oversight, offshore hubs risk becoming complicit in the very crimes they claim to regulate. The Council’s call for unified, cross-border collaboration is not just timely but essential to safeguarding the integrity of sports and combating the global scourge of illegal betting.

For the Isle of Man and other jurisdictions under scrutiny, the challenge is straightforward: adapt and evolve or risk irreparable damage to their reputations. As global efforts to tackle illegal betting intensify, the stakes for these licensing hubs have never been higher. The question remains. Will they rise to the occasion or fall under the weight of international pressure?