Tuesday, January 17, 2023
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NewsBetting firms in tough spot, bank account frozen

Betting firms in tough spot, bank account frozen

  • They request tax deadline extension as their bank accounts remain closed

Sports betting operators are in a tough spot, with their accounts frozen by the National Bank of Ethiopia.

The betting companies’ bank account has been frozen after the Financial Intelligence Service (FIS) undertook a major crackdown on the black market and Hawala money transfer operators.

Denouncing the action, Sport betting companies operating in the country have lodged complaint letters to the National Lottery Administration (NLA). The 24 companies requested the extension of the tax payment deadline, which they could not meet because the betting companies’ bank accounts were frozen.

Betting companies were among the 665 bank accounts closed during the crackdown three weeks ago.

There are around 56 sports betting companies operating in the country, and their accounts in all local banks are frozen, according to their association. “The letter from FIC is sent to all local banks to freeze betting companies’ accounts. We are global companies, and the closure has nothing to do with our parent companies abroad.”

Every month, the companies pay 15 percent of their tax revenue to the government. This is after VAT. The betting companies also pay a 15 percent commission to the National Lottery Administrator. They also pay 0.2 percent of their sales to social services.

The companies collect 15 percent from the winners and pay it to the government.

All these contributions are paid monthly, and if they miss the deadline by mid-month, they face a penalty from the Administrator. 

However, the companies have missed the October payments since their banks are closed, according to the betting company managers The Reporter talked to.

Only 14 of the 56 betting companies managed to pay the fare for October, so far.

“We received their letters, but we did not react to it so far. Since the FIS did not formally communicate with us about the bank account closure, we cannot react,” Dessie Dejene, licensing and controlling director at the NLA, said. “We can neither force the betting companies to pay now nor extend the deadline. So we wait until the betting companies come to pay.”

Though the FIS has the power to close the accounts of companies for a certain period of time and investigate them, it does not communicate with the NLA regarding the closure of the bank accounts of the companies.

After the accounts are closed, the FIS team is working on analyzing the company’s transaction trend, especially in relation to illegal hawala services and money transferring, according to officials of FIS.

“Betting companies’ accounts are closed; mainly, the FIS observed large and irregular money transfer trends in their financial flows. So these irregular transaction flows are being analyzed, until which time the accounts will remain closed. Some of those related to informal money transfers will go to court,” said an FIS official who spoke to The Reporter on the condition of anonymity because he is not authorized to speak to the media.

The official says the betting companies moved huge sums of money—more than the money they need for actual betting companies. “Investigation is being done by the police.”

Doubting transactions that have erratic financial flows are always closed and probed by the FIS.

“Betting companies are doubted by the FIC because their financial transaction volumes and financial flows are above their real business transactions. That is why they are being probed,” the official explained.

The FIC is analyzing where those transactions went, according to the official. “If the flow is related to the illegal black market, the attorney general will file cases. High transactions are also related to tax evasion,” added the official.

However, the official says betting companies are not legally authorized in Ethiopia in the first place, and the laws need revision.

The FIS is directly accountable to the Office of the Prime Minister, which left the Loteery Admin powerless to question the FIS, which has a hybrid power of police and regulatory authority. It can take measures against any erratic financial institutions and forward the cases to court. On the other hand, the NLA is a state-owned enterprise (SOE).

“Basically, betting is gambling, which is basically a crime and banned in Ethiopia. Ethiopia’s criminal code does not allow gambling. It is a crime, and it is not an allowed business. If real discussions are held on the issue, betting companies are illegal companies from the beginning,” said the official.

However, Dessie argues the NLA has legal grounds to allow betting businesses. “Sports betting is a legal business. The NLA is a government institution and a state-owned enterprise. We do not engage in illegal activities.

Sport betting, conventional bingo, tombola lotteries, and promotion lotteries, according to Dessie, are the business lines the NLA oversees. “There are regulations and directives for each. The NLA is established by proclamation by Parliament. We are not doing anything not stated by the law.”

Basically, the NLA gives only work permits and certificates of competency to betting companies. Dessie says that the NLA cannot stop giving licenses to betting companies unless the law is revoked.

“They get trade licenses from the trade bureau. So they operate under the country’s commerce code. The NLA only gives them a certificate of competency proving they can do sports betting. We cannot stop our work just because somebody says betting is illegal,” added Dessie.

While their bank accounts remain frozen, betting companies have complained about the confusing government approach to their business.

“Unless the account is opened, we cannot pay employees’ salaries, pay bills, or pay taxes,” a manager of one of the betting companies, who spoke to The Reporter on the condition of anonymity, said.

The manager claims that all betting companies are concerned, but they are unsure of what to do because the government has not provided any guidance on what should be done following the ban.

“No official letter or notification is given to us regarding the account closure. We only heard informally that betting companies’ bank accounts were closed because of the black market. Even the betting companies’ association is not communicated with. It is very difficult. The NLA also said the case is above its power,” the manager explained.

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