Four years after the war ended, Sri Lanka is far from achieving its tourism targets. Revenue from the sector is flat and none of the usual gimmicks has worked. Investment isn’t booming either other than from two competing state actors, India and China. These are, of course, “investments” of a different kind. So the Government [...]


Casinos may turn tables on Lanka


Four years after the war ended, Sri Lanka is far from achieving its tourism targets. Revenue from the sector is flat and none of the usual gimmicks has worked. Investment isn’t booming either other than from two competing state actors, India and China. These are, of course, “investments” of a different kind.
So the Government has taken to pinning its hopes on casinos. It is like throwing the last dice. It estimates that upmarket gaming centres will attract waves of international punters with oodles of money to diddle away at the tables. The Govt. hopes the casinos will provide employment to locals and make Colombo glitzy and fun — think Las Vegas, think Macau. The plan is to transform Sri Lanka into Asia’s newest gambling hub.

Still, there is a hitch. Is it going to open a veritable can of worms? Most countries in the world with a significant presence of casinos, high-end or otherwise, have also implemented substantial legislation to control these businesses. Sri Lanka has had the casinos for some time, often on the fringe of the law, and intends to introduce more, but has next to nothing in terms of regulations.

It is globally accepted that casinos lend themselves to money laundering on a large scale. Even with stringent laws and deterrents in place, countries from the United States to Australia are forced to continuously evolve new methods — with modern technology — to outsmart dexterous white collar criminals.
Casinos are always associated with corruption and organised crime on a wider scale. The internet is awash with reports and studies on the links between gaming and, not just money laundering, but tax evasion, drugs, prostitution and crime syndicates.

Such debates must necessarily figure in the discussion on moral and social issues that is spurring sporadic protests against casinos in Sri Lanka. Contradictions abound on the Government’s policy on alcohol ‘Mathata Thitha’ and the nation’s pride in being known as a ‘Dhammadvipa’. Yet, they are missing from the local equation.
The Organised Crime Division of the Police confirms that members of the underworld in cahoots with unscrupulous politicians and businessmen repeatedly use gaming centres to launder their illicit proceeds. Unsupervised and unhindered, they slink into these dens and adopt one of several known methods to turn their dirty cash into clean money. It can be done on-line as well.

The very real possibility that large numbers of Sri Lankans will be lured into gambling with an increase in gaming centres is worrying religious leaders who fear the ruination this would bring upon society, families and home economies. Ironically, betting centres — which are also unregulated and far more numerous — filled that niche decades ago, but the casino industry is in a league of its own.

Most Sri Lankan proponents of the gaming industry cite Singapore as an example of how casinos could energise a country’s economy (not that Singapore needed it as much). After the South-East Asian nation lifted a ban on gambling, two integrated resorts inclusive of casinos opened up in 2010. This provided further impetus to Singapore tourism and turned the country into a gambling hotspot. But then Singapore was always run on money.

Sri Lanka too, has adopted the ‘integrated resort’ model. Singapore though, has a set of rules and regulations to manage the industry and its government continues to make up more as the gaming sector and its regulators mature. In contrast, Sri Lanka has just a few sheets of paper pertaining to gaming.

The Betting and Gaming Levy Act of 1988, with subsequent amendments, authorises the Department of Inland Revenue (IRD) to collect specified, annual levies from the industry but does afford legality to betting centres and casinos. The Casino Business (Regulation) Act of 2010, which is just three pages long, envisages a licensing system which is yet to be implemented.

However, the biggest travesty is that, despite the Government granting a seal of approval to new casinos (the Board of Investment has already signed the relevant project agreements), the police are still empowered to raid betting and gaming centres under the Gaming Ordinance of 1890!
Not only does this 123-year-old law permit law enforcers to arrest employees, it lets them detain punters by making the commission of unlawful gaming an offence. The penalty remains unchanged at Rs. 100!

The International Monetary Fund (IMF) highlighted some of the risks and discrepancies in a 2008 report which evaluated Sri Lanka’s laws on anti-money laundering and the combating of terrorism financing. It warned that there was no actual supervision of casinos or fit and proper checks of owners.
This situation, the IMF stressed, facilitated the ownership or control of casinos by elements of organised crime. It also said that the capability of authorities to enforce the requirements of Sri Lanka’s Financial Transactions Reporting Act (FTRA) for casinos is doubtful.

A recent United Nations-funded research paper on the Australian gaming industry states that, since the first Australian casino opened in 1973, surveillance has been a component of regulation. It reveals the presence of on-site government inspectorates watching over operations at all times.Sri Lanka has no on-site government inspectorates. The only version of on-site surveillance available is when IRD officials swoop on casinos in a desperate yet futile attempt to determine how much money is being spent at the tables. This distressingly inept method of trying to garner vital financial information should have the Government worried.
On the other hand, a regime that recently granted a 10-year corporate tax waiver to one of the richest casino moguls in the world with turnovers that boggle the mind, probably does not care. Somebody must be gaining, if not the country.

The Government has displayed scant transparency on this topic of casinos. Prevarication and sometimes outright falsehoods — such as claims of prevailing licences where none exist — have held sway over honesty, clarity and good business practices.There is talk now that regulations will be drafted soon to give effect, at least, to the wholly inadequate Casino Business (Regulation) Act. There is still no information about whether a dedicated regulatory body will be set up or whether the FTRA mechanism will be tailored to meet the financial challenges arising from a gaming industry expansion.

One thing is clear: A mere licensing system alone is insufficient. As for these tax waivers — what is the point in wooing big names if they add only peanuts to the Government’s depleted coffers? Perhaps, the middlemen who broker these deals could answer that one.

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