It’s been a tough week for iGaming in Malta. First, news broke of the Malta Gaming Authority (MGA) handing out licenses to companies run by the Mafia, and then operators allegedly threatened to walk away from this iGaming hub.?Gina Clarke reports on the fallout of the claims and counter-claims.

It got worse, as Italy accused the MGA of bad communication and non-cooperation, but the MGA has since released a statement accusesing the Italian side of misrepresentation and that all of the above is false and designed to smear Malta’s reputation.

With Italy on the rise and about to open up to more operators, could this be a brilliant ploy to gain some of the Maltese monopolies? Or are some operators in Malta really under Mafia control?

How did it start?

Due to some savvy foresight, the government of the self-styled blockchain island was the first to introduce online gaming regulations in the European Union, back in 2004.

Malta now hosts one of the highest concentrations of online gaming license-holders in the EU, and the industry rakes in approximately €1.2bn ($1.4bn, ￡1.05bn) in annual earnings on the island, making up 12% of Malta’s GDP.

Around 300 online gaming companies were attracted by the country’s low-tax regime and the opportunity to conduct businesses throughout the EU’s 28 member states via a license from the MGA.

But this monopoly was?worrying to institutions across the EU who were unsure of the MGA’s capabilities. It became much worse after a journalist investigating the authority and operators’ conduct, Daphne Caruana Galizia, was killed in a car bomb in October 2017.

This produced worldwide attention, and a consortium of 18 news organizations from 15 countries, including the Investigative Reporting Project Italy (IRPI), banded together to finish her work.

Worried about corruption from the mafia, Italy was already working to uncover ties between Italian organized crime and Malta’s gaming industry. This came to a head in December last year when a Palermo court in Sicily issued 26 arrest warrants under the “Game Over” indictment.

Immediately, the MGA started suspending licenses of the companies listed and launched its own investigation, although questions were asked why it took Italian court proceedings to start the inquiries.

It was then claimed by the IRPI that it had found a pattern of non-cooperation of the MGA, with Italian prosecutors seeking to freeze the assets of Centurionbet, which operated the Bet1128 brand.

Previously, the IRPI reported that Bet1128 relocated to Malta after losing its British license in 2009 following the anti-mafia initiative. Since then, a new entity, Centurionbet, was set up as a controlling company and the IRPI recently found police records indicating Francesco Martiradonna, the son of a convicted mafia boss, was in charge behind the scenes.

How was it resolved?

The Italian authorities asked the attorney general in Malta to freeze the company’s assets after Martiradonna, and more than 100 other suspects were arrested in May 2017.

According to the IRPI, another request to freeze the assets was made in January with no answer from the MGA until after reporters had contacted Maltese authorities. It was then that Attorney General Peter Grech told his Italian counterparts this had been achieved. However, the IRPI stated no evidence that this had taken place had been passed on.

But the MGA has denied a lack of cooperation with Italy’s authorities.

It argued that “the MGA does not normally receive cooperation requests from Italian authorities other than its counterpart gambling regulator in Italy”.

It added: “Requests from law enforcement or financial intelligence units are sent to the corresponding authorities in Malta. Naturally, the MGA cooperates and provides any relevant information to the competent authorities when duly requested, or if the MGA deems that such information in its possession needs to be shared with the respective authorities.”

How does this affect the operators?

Back in December last year, a series of police raids in Palermo led to the arrests of some 25 people connected to the mafia who had infiltrated the world of horse racing, mainly races held at the Favorita track in Palermo.

According to Salvatore de Luca, the chief anti-mafia procurator in Palermo, it was discovered that mafia bosses were planning to shift their illegal activities to Malta as “it was becoming riskier to continue with their illegal activities based on extortion”.

He said: “Malta has recently become the capital of online gambling, and the Mafia bosses thought that this would be a good financial vehicle for them and less risky than making their money from extortion.”

Sources close to the Italian police said that the plan, which had not been executed, was to find some investors in Malta’s online gaming industry who could then take over all illegal activities, including the betting at Palermo’s race track.

Whereas just a few weeks before in northern Italy, seven people were arrested in connection with a multi-million online gambling racket. This involved parlors across the country that were directly connected to a server hosted in Qormi, Malta. The revenue was apparently bypassing Italy altogether and going straight to Malta, where the directors of Medialive Ltd resided.

After weeks of bad press over this “infiltration”, un-named gaming companies threatened to leave Malta, according to the Investigative Reporting Project Italy.

This information reportedly came from sources at the MGA, where some companies said they would pack up and leave if it failed to clean up the sector.

What was Malta’s response to Mafia accusations?

The MGA raised its objection in a response to the reports “containing factual inaccuracies, speculation, untruths and a misleading portrayal of the Malta Gaming Authority and the way it operates”.

The MGA also said claims that companies had made threats to leave were “completely false” and “solely intended to tarnish the reputation of the Maltese jurisdiction”.

However, we do know that three operators did quit in March, although it is unclear as to whether this was due to anti-Mafia investigations or because of the ongoing bad press for the MGA.

Betent (Betent Group Ltd), Potterbet (Potter Mrc Ltd) and Giodani (Giodani Limited) all voluntarily surrendered their licenses for unknown reasons, although MGA confirmed it had canceled the license of another operator, LB Casino Ltd, the parent company of Leaderbet.

This operator was accused of laundering money derived from criminal activities in Italy. It is now licensed in Curacao.

Fall out

Despite the MGA’s views that Italy is trying to tarnish the reputation of Malta, there is a lot of credibility in the IRPI’s findings.

Certainly, the Daphne Project is ongoing, with campaigning German newspaper Süddeutsche Zeitung uncovering some serious financial irregularities involving the Maltese government.

But there has been little said by the operators themselves, which is unsurprising as low taxes and the ability to operate in EU countries is a huge bonus in operating from the island.

However, if the spotlight on the iGaming industry in Malta continues to shine, then we might be hearing from them sooner rather than later.