Banned casinos rearrange payments after Qiwi Bank leaves
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The revocation of the license from Qiwi Bank put an end to the unofficial moratorium on license revocations by the Central Bank and outlined a new priority for clearing the illegal payment market. According to Kommersant’s sources among bankers, one of the key goals of the regulator was payments to casinos that are illegal in the Russian Federation. For now, the Central Bank is acting softly and in informal conversations recommends that banks limit certain operations, the volume of which could amount to about 300 billion rubles. in year. With the departure of Qiwi Bank, according to Kommersant, the schemes have already begun to change with the involvement of structures in neighboring countries.
As financial market participants told Kommersant, the Central Bank, after revoking the license of Qiwi Bank, held a number of individual meetings with the management of banks “at least from the largest thirty.” According to Kommersant’s interlocutors, representatives of the Central Bank said that “the unspoken moratorium on the revocation of licenses due to the difficult economic situation” (see Kommersant, December 21, 2023) has ended. Now, notes one of the bankers, the task has been set to “defeat gray payment traffic.”
Kommersant’s sources claim that the Central Bank was primarily interested in the volume, limits and verification of AFT-OTC transactions, since they are the characteristics of gambling business settlements. “The Central Bank recommends refraining from holding them in the context of the sad history of Qiwi Bank,” explains one of Kommersant’s interlocutors. It was precisely these kinds of payments that the regulator tried to block at Qiwi Bank, but the credit institution bypassed the Central Bank’s restrictions using electronic wallets (they worked within the group’s perimeter, but were not tied to the bank).
A.F.T. (Account Funding Transaction) – an operation to top up an account from a card with a reduced acquiring rate. It is equivalent to a money transfer operation. AFT transactions quickly became popular due to the fixed minimum tariff and the lack of the possibility of protesting (chargeback) payments.
OTC (Over-the-counter) – a type of payment in which money is transferred directly from the sender to the recipient. This scheme does not use the SWIFT system, since in this case the card is primary. The main advantage of OTC is its speed; only the recipient’s card number is required.
According to experts, “despite the complex terms, the meaning of gray payments comes down to P2P (person to person) transfers.” The scheme looks like this: a page for depositing funds is built into the casino website; the acquirer is a Russian bank that has correspondent accounts with a foreign bank. The client transfers funds, they go to the website of a foreign bank under the guise of a transfer from card to card of a foreign partner, and from his account – further to offshore jurisdictions where the casinos are registered.
The Central Bank confirmed the prioritization: “Currently for the Bank of Russia, the priority area of financial monitoring is countering high-risk acquiring transactions and P2P transfers that ensure settlements with citizens of shadow business participants for whom access to legal banking services is prohibited. These are illegal online casinos and bookmakers, crypto exchangers and P2P services of crypto exchanges, financial pyramids, sellers of pirated content, and various kinds of fraudulent sites.”
After the license was revoked from Qiwi Bank, the traffic of “ambiguous payments” shifted to the CIS countries, primarily to Uzbekistan and Tajikistan, Kommersant’s sources claim. Among the specific participants in the movement of funds, they name the Uzbek Oktobank and Kapital Bank, as well as the Tajik Amonatbank. Credit institutions, as well as the national banks of the two countries, did not respond to Kommersant’s requests. The Central Bank of the Russian Federation assured that they are cooperating with colleagues from neighboring countries in the fight against gray schemes: “The Bank of Russia, in close cooperation with banks, is working to introduce tools to counter high-risk P2P transfers and servicing “drops”.”
The efforts of regulators are yielding certain results. Thus, in 2022, the volume of payments to casinos banned in the Russian Federation in 2022 was estimated at more than 300 billion rubles, but decreased in 2023. “According to our assessment, traffic has decreased, taking into account that the bookmaker market has grown by 40% and contributions to sports have increased, as well as the amount of work carried out by the Unified Gambling Regulator to suppress the activities of the illegal market,” explains the chairman of the board of the Unified TsUPIS (Unified Center accounting for transfers of interactive bets) Elena Sheikina. “Nevertheless, there is still a large amount of work to be done.”
“Shadow business owners use a variety of tools to develop various schemes that appear to comply with regulatory standards,” notes Ilya Zharsky, managing partner of the Veta group. He confirms that P2P acquiring is often used for this, “given the veiled nature of the procedure, the operating bank cannot block this operation, since there are no obvious reasons for this.” According to the expert, so far it has been possible to stop such operations only in a targeted manner, especially since the owners of the gambling business also follow the trends.
Mr. Zharsky believes that it is possible to systematically combat shadow transfers only by combining the efforts of regulators from different countries: “It is important to understand that there must be some kind of monitoring and tracking mechanisms, since it is not possible to completely block the tool of transfers from one person to another, the legislation of Uzbekistan or Tajikistan also cannot directly counteract this.”
According to independent payment expert Dmitry Vishnyakov, one of the effective measures may be the requirement of regulators to identify clients to carry out P2P transactions, regardless of limits, and the establishment of restrictions for certain MCC codes – the point of sale identification code. “To control the gambling business, you can introduce a requirement for mandatory audit by acquiring banks of their clients who, for example, received a certain amount of payments in a certain period of time or the number of transactions,” adds Dmitry Vishnyakov. “Such parameters can be viewed from the outside bank and payment system operator.”
The head of the Financial Innovations Association, Roman Prokhorov, emphasizes that “the difficulty of eradicating schemes is due to the use of some of them for carrying out foreign economic activity in modern conditions.” “Separating the sheep from the goats in this case is not an easy task,” he notes. “The solution here is seen not in the path of yet another tightening of regulation, which, as practice shows, complicates life primarily not for scammers, but for bona fide market participants, but still on ways of self-regulation of payment intermediaries.”
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