Munich, August 20, 2024. Online gambling is booming, and many players regularly gamble away large sums of money in online casinos. However, online gambling without the required license has always been prohibited in Germany. The ban is intended, among other things, to protect players from ruinous behavior and gambling addiction, and also to contribute to the fight against crime and money laundering. Online gambling not only attracts players but also criminals who use online casinos to launder money from illegal activities. Many operators have not been deterred by the general ban in Germany. They have continued to offer their online gambling services here as well. This raises the question of whether the authorities in Germany, including the Federal Financial Supervisory Authority (BaFin), have sufficiently utilized their legal options to enforce the ban nationwide – with the exception of Schleswig-Holstein.
Apart from Schleswig-Holstein, a general ban on online gambling was in effect in Germany until June 30, 2021. Even since July 1, 2021, it is only permitted if the provider holds a valid license in Germany. Nevertheless, both before and after July 1, 2021, operators made their online gambling accessible to players in Germany even without the required license. “Without a license, online gambling was and is prohibited in Germany. This also means that players can reclaim their losses from the providers of illegal online gambling,” says attorney István Cocron of CLLB Attorneys at Law.
Even though numerous courts have upheld players’ right to a refund, the question remains why providers were able to offer their online gambling services in Germany with relatively few problems despite the ban. Especially since the ban was based on sound reasons such as combating addiction and crime. According to a 2019 national risk analysis by the Federal Ministry of Finance, the gambling sector is considered to be “highly vulnerable to money laundering.”
One effective way to combat illegal online gambling is to deprive it of its financial foundation. This is possible by preventing players from placing their bets using payment service providers. According to the Interstate Treaty on Gambling, not only was organizing gambling on the internet prohibited, but payment service providers were also subject to a ban on participation. Lawyer Cocron explains: ” According to the ban on participation, it is forbidden to participate in or facilitate payments for gambling stakes .”
Payment service providers whose services enabled the placing of bets in the first place have thereby violated the prohibition on participation in gambling under the Interstate Treaty on Gambling. Furthermore, violations of regulations under the Banking Act, such as the Payment Services Supervision Act (ZAG) or the Money Laundering Act (GwG), may also exist.
Since the gambling sector was classified as particularly vulnerable to money laundering, payment service providers should have factored this high risk into their risk management and filtered out suspicious payments. Banks and other payment service providers are supervised by BaFin. It is debatable whether BaFin should have exercised stricter controls in its efforts to combat money laundering.
Most online gambling providers are based abroad, many in Malta. This may be due to the comparatively low tax rates for gambling operators and the relatively straightforward licensing process. As a result, the gambling industry has become a significant economic factor in Malta and is correspondingly powerful. It is rumored to have excellent connections within government circles, which in turn fuels speculation about corruption and money laundering.
Here, too, BaFin could contribute to reducing the amount of gambling stakes from Germany ending up with gambling operators in Malta by rigorously applying existing legal options. By using technical security systems and, if necessary, issuing clear requirements for system improvements, both payment service providers and BaFin could effectively curb illegal payment flows to Malta and other countries.
“ Even if the authorities do not enforce their legal options in the fight against illegal online gambling consistently enough, players can still demand repayment of their losses ,” said lawyer Cocron.
