Update Country Report Curaçao 12 Dec 2018

Online gambling has increased its presence in the Caribbean. Although many islands ban or have restrictions on land-based gambling (except in tourist areas), legislation regulating online gambling is more lax. Fees and proceeds from gambling can provide an expedient source of revenue for Caribbean countries, especially those struggling to recover from hurricanes or other natural disasters. However, it also exposes them to financial crime risks.

The differences between land-based and online casinos are considerable and offer various opportunities to operators and governments. For operators, online gambling sites proffer the potential to reach new players, without the capacity or geographical limits imposed by land-based casinos, or the running costs involved with operating a physical entity. Land-based casinos, which tend to be based either in tourist resorts or areas heavily frequented by tourists, can also mean reduced access for locals or visitors staying outside tourist areas. In some countries, governments have deliberately sought to restrict the location of land-based casinos for ethical and moral reasons. For example, in the Bahamas, only tourists can gamble in casinos; gambling is banned for Bahamian nationals. Indeed, some countries ban gambling outright. Casinos are banned in Barbados, although sports betting, lotteries and slot machines are permitted.

The Caribbean makes an attractive market for online gambling, with internet access increasingly available across the region. Data from the UN Conference on Trade and Development show that internet penetration averages around 80% across the region, with the exception of countries like Haiti where internet penetration is markedly lower. This has attracted new gambling companies, such as PowerPlay.com, which launched in the region in October, offering digital sports betting and live casino gaming to 20 countries in the region, including Jamaica, Barbados, Trinidad and Tobago, and Curaçao. The site offers real-time sports betting on a variety of different sports as well as live casino gaming such as poker, blackjack and roulette. This builds on PowerPlay's existing operations, including land-based casinos in the Caribbean, and aims to build on expanding digital usage to bring new players into the online gaming world.

A valuable source of revenue

There are considerable incentives for countries to permit gambling in their territory, even if restricted only to tourists. The tax revenue from land-based casinos can be considerable, helping to fund other state initiatives. For such reasons, some jurisdictions allow lotteries even if other forms of gambling are banned, with some of the proceeds from the lottery income going to state or charitable projects. Online gambling can also provide this revenue stream, especially if online sites based in one jurisdiction, such as Curaçao, can attract players from all over the world.

Indeed, some governments are playing catch-up in the race to host gambling sites and boost state revenues. Curaçao was one of the first jurisdictions to regulate online gambling in 1993, a year before Antigua did so. Both countries have since become popular locations for gambling sites to register themselves, benefitting from low tax rates and nearly two decades of experience in regulating online sites.

This has created a new revenue stream for both governments, and one that is less likely to fluctuate in line with the rest of the economy. For example, Antigua suffered hurricane damage in September 2017 that weighed on tourist arrivals and related income from land-based casinos, while Curaçao is continuing to suffer a tourist slump led by a sharp decline in arrivals from nearby Venezuela. This means that online gambling offers a revenue stream that is relatively decoupled from regional economic trends, providing extra financial resilience in times of downturn.

For this reason, Jamaica is looking to legalise online gambling, which is currently not covered by the regulatory framework. The country's Betting, Gaming and Lotteries Commission is reviewing proposals to update existing legislation, which would extend provisions covering physical gambling to online as well. Although this may meet some opposition from land-based casinos, which may be concerned about competition, the government appears keen to press ahead with the legislation.

Risks of online gambling

Nonetheless, online gambling carries some financial-crime risks that may test the anti-money-laundering and counter-terrorist-financing (AML/CTF) capability of host jurisdictions. Physical casinos are already attractive vehicles for criminals seeking to launder money, as money can be transferred through them relatively anonymously, often avoiding the kind of identity checks and due diligence required by financial institutions transferring funds. This risk can be exacerbated with online gambling, in which players could submit false identification and use online sites to launder money. In addition, online gambling sites are relatively quick and easy to set up, which could allow criminal groups to create and run sites for the purpose of laundering money as well as attracting genuine players.

The challenge for host jurisdictions is to introduce sufficient regulation and oversight capability to deter or detect illicit players or operators. Some countries may also rely on heavy penalties, such as Trinidad and Tobago, which in 2016 introduced new legislation mandating fines of up to US$25m for illegal gambling and associated crimes.

The problem for some smaller jurisdictions is that the weak economies that may attract them towards becoming hosts for online gambling sites may also undermine their regulatory capabilities. Curaçao, for example, is frequently criticised for its weak AML/CTF regime, despite various efforts to improve its framework to meet international standards.

The majority of online gambling sites setting up in the Caribbean and targeting regional players will be legal, and many international companies apply international identification and verification standards to their regional sites, supplementing national regulation. However, some illegal actors may seek to take advantage of jurisdictions with weak enforcement capability, putting countries new to the online gambling market, such as Jamaica, at the risk of becoming a target for money-laundering.