Veriff webinar discusses the intricacies of Brazilian online gambling

Brazilian Online Gambling Webinar

Latin America gets thrown around as a buzzword in the global gaming industry, but to lump 33 countries across two continents speaking multiple languages into a single category can be extremely short-sighted.

Last week, an SBC webinar sponsored by Veriff discussed specific markets within Latin America, particularly the state of affairs as it pertains to Brazilian online gambling. You can register and watch the entire discussion here. Participants discussed several markets, including Mexico, Peru, and Colombia, but the bulk of the conversation focused on Brazil.

The panelists for this discussion were:

  • Managing Director of Vai de Bob Thomas Carvalhaes
  • Founding Partner at MAIA YOSHIYASU Advogados Luiz Felipe Maia
  • Head of Gaming for Veriff Peter Murray

Brazil online gaming currently a waiting game

The situation in Brazil when it comes to sports betting and online gambling is an interesting one. Operators have been in the space for over a decade in the gray market. Meanwhile, the march towards regulation is more of a slog. Maia predicted it would be closer to year’s end before the President approved any gambling expansion.

“[The Ministry of the Economy] prepare the draft decree and the draft provisional measures, and those documents must be signed by the President,” Maia explained. “The issue now is that we have an election year this year and the elections will be in October. And now it’s a political decision whether to issue the regulation or not and when. Our feeling is, since the President relies on the support of the evangelical leaders in the Congress, and one of those leaders was expressly against the decree and the provisional measure… I think it’s very unlikely that we will see sports betting regulated before recording elections.”

This slow approach to gambling is nothing new for Brazil. Maia noted the legislature has been trying to expand gambling for over 30 years, dating back to 1991.

For an operator like Carvalhaes, it can be frustrating to sit on the sidelines waiting for a decision, particularly when a large part of the industry is ready and eager to go from gray to regulated Brazilian online gambling:

“If I can provide a bit of personal opinion as well on the matter as for us operators, and I think by saying this I will probably be a probably be the voice for most, if not all operators: The way we’re seeing this with a bit of impatience. There’s some frustration in the air as well because it just keeps on being postponed time after time again. And why do we want regulation? Because we want a fair field of play. That’s where we have clear rules, you have clear taxations, you have the same expectation and the same degree of measuring and enforcement on every single operator.”

Should operators be more involved in Brazil’s legislation?

Carvalhaes and other operators are keeping their distance as lawmakers debate the issue. Unlike the US, where operators regularly help draft legislation and push measures, the mentality in Brazil is to avoid potential conflicts of interest with operators taking a hands-on approach. The result is legislation that sets up an untenable market for operators.

“About 10 days ago another bill was approved at the chamber that increased the taxation on sports betting and also creates a prohibition for advertising of non-licensed sports betting operators. This bill was approved at the chamber. It’s also creates the need for the licensed operators to have an authorization from the sports entities to collect bets on those sports and now it’s also going to the Senate,” Maia said. “And this is actually one of the most critical risks that we have now for sports betting in Brazil. As I said, in an interview, they might kill the golden goose before it’s even born.”

The entire panel concurred there is a better balance to achieve between those making online gambling laws and those impacted by them.

“[The US] lobbying culture is obviously very strong out there. I’ve testified a couple of times, but that engagement is at least there you can debate how well it’s gone or what’s happening with it. But if you look at how regulators engage generally there are good ones and there are bad ones,” Murray observed. “Denmark in Europe, for example, is engaging early and doing that. So I think it’s it’s one of those areas that I absolutely get the frustration. I think I’ve talked[in Brazil] about six years ago, and when they were expecting it to go through, and you guys have been doing it longer than that. So it’s the long game, but I think once politics enters it, it’s really up in the air. It’s the same with many of the states in the US. For me, it’s about making sure the operators the vendors, like almost everybody is aligned with a strong message.”

Even Carvalhaes, who was reticent to be too involved and create potential problems, agreed there needs to be more open lines of communication, but only to a point.

“If we can show the regulator’s the way about if we can bring education awareness? Yes, absolutely. The point where it becomes a bit of a concern to me, and I’ve seen in other jurisdictions, where the regulators or the government has deemed the degree of influence from operators towards regulation as a conflict of interest when it comes to indicating the taxation, when it comes to indicating some other stuff. That’s stuff that perhaps we shouldn’t really be touching,” he said. “We need to bring a bit of awareness. That’s our role. However, I think there’s a very fine line, a very fine, bit of a risky line in between providing that education awareness versus serving as a bit of an influence, which can become conflicts of interest, especially in a country like Brazil, where there are frequent cases of corruption.”

Regulation for Brazilian online gambling can’t be imported whole cloth from another company, but that doesn’t mean there are not others in the Latin American market it is worth emulating. Carvalhaes cited some good examples:

“In Latin America, we have some very good examples of regulated markets, which for me are, for instance, Colombia and then Mexico. Mexico, in my view, has its flaws. Colombia, for me, is the best possible example we can look at from an igaming regulated market in Latin America. For me, Colombia is the best-regulated example. Everything works. Operators have a very clear idea of what is their duties and their rights. And it seems to be working fine for everyone.”

Fraud and customer onboarding for Brazilian gaming

Murray noted that Veriff works around the globe with customer onboarding in a range of markets. What sets Brazil apart from some of the others is the increased focus on fraud prevention.

“We have different fraud groups, you have different fraud rings, we have bonus abuse that is really not highlighted in other parts of the world,” he explained. “But from an onboarding perspective, everybody wants the same thing. They want the speed of it, they want the accuracy of it. And from a regulatory point of view, they need that to be robust. I think the difference is with new market is you’ve got customer expectations and what are customers wanting?”

Maia explained that when it comes to fraud in Brazil, this is not an issue that we will deal with eventually.

“Fraud in Brazil is not going to be an issue. It is an issue.”

“For instance, in Brazil, anyone is willing to provide you their taxpayer number.  They will share that information. It is not like the US when you ask someone for their Social Security number and they just don’t say,” he added.

Taxpayer number fraud is just one problem the group discussed. Fraudulent scams related to the payment system Boleto are running rampant as well.

As someone who works with operators to verify identification, Murray thinks the solution could be a blend of verifying paperwork and new technology like facial recognition.

“I think that technology, whether it’s biometrics that we do with facial recognition, or age guestimation, tying all those in with the documents, I think is really the only way from a fraud perspective…you’ve got to layer in this information,” he said.

With Brazil, there are unique and serious issues regarding fraud and corruption and how to best approach and tax issues. There is also the struggle many emerging markets have to not only be on the up and up, but also appear on the up and up.

“There is that saying that Caesars’ wife cannot only be honest, she must look and be perceived as honest. So we have that concern. In Brazil, the regulator has no concern,” Maia said. “I think the industry should share the same concern is that okay? Our first goal must be to show that it’s a legal industry, that we are responsible, that we can work properly, and that we can can generate taxes and richness for the country.”