Ukraine has set into motion a new law that regulates procedures for organizations subject to anti-money laundering and counter-terrorist financing risk, marking a new era of intensified scrutiny for gambling operators. Broadly, the law clarifies circumstances warranting scheduled or unscheduled inspections of the gambling premises.
A New Landscape for Gambling Inspections
Under this new legislation, four primary reasons can trigger an inspection by the Ukrainian authorities.
- Firstly, they may seek to better understand the nature of a gambling operator’s operations.
- Secondly, inspections could be initiated to identify potential financial risks.
- Thirdly, an assessment of an operator’s risk management system might be in order.
- Lastly, ensuring compliance with Ukrainian legislation stands as a crucial reason for inspections.
The frequency of inspections will be tailored to the operator’s level of AML/CTF risk exposure. The Ukrainian gambling regulator, KRAIL, will approve the planned inspection schedule which will be made public no less than 10 working days prior to the quarter when inspections will take place.
Unpredictable Checks and Unprecedented Scrutiny
On top of planned inspections, KRAIL holds the power to execute unplanned checks of an operator’s offices and equipment. A violation of current legislation, or a court ruling, may trigger these unexpected inspections.
Additionally, newly found documents unknown at the time of the planned inspection could lead KRAIL to conduct an impromptu audit. Failure to submit documents within the requested period or any suspicion of forged documentation by a gambling business could also warrant a surprise visit.
This intensification of scrutiny follows the 2022 Russian invasion of Ukraine, with gambling operators facing increased attention from the government. The Ukrainian authorities have been particularly severe towards operators offering services in Russia or Russian-occupied Ukrainian territory.
A noteworthy example of this crackdown was the controversy surrounding the continued operation of Russian-linked 1xbet.
Following heavy criticism over KRAIL’s perceived slow response, President Volodymyr Zelensky sanctioned the operator in August 2022. The move was precipitated by a public petition demanding its ban, which received over 26,000 signatures.
Implications for the iGaming industry in Ukraine
This new regulatory climate brings profound implications for the Ukrainian iGaming industry:
- Enhanced Scrutiny: The heightened regulatory scrutiny could deter potential abuse of the system, ensuring a clean, fair, and secure gambling environment for all players.
- Increased Accountability: Operators will be compelled to uphold stricter compliance standards with Ukrainian law, resulting in an industry held to higher ethical and legal standards.
- Market Shift: The stringent regulations and potential penalties could cause a shift in the market, possibly deterring certain operators from the Ukrainian market and opening opportunities for those who are prepared to comply with the new laws.
As the saying goes, “The law outlines the procedures for inspecting gambling businesses”. In the end, it’s about ensuring a safer, fairer, and more transparent gambling landscape in Ukraine. This law could set a new standard not only for Ukraine but potentially for Eastern Europe’s broader gambling industry.