'The larger and more opaque this shadow economy becomes, especially online, the greater the risk to India's national security.'
India's online gambling sector is growing at breakneck speed, but much of it lies in the shadows.
In a striking new report titled Fixing the Odds: A Policy Blueprint for Curbing Illegal Online Gambling in India, Samridh Shastry, a policy analyst at Consumer Unity and Trust Society (CUTS), estimates that over $100 billion is deposited annually on illegal gambling platforms.
In this interview with Prasanna D Zore/Rediff, Shastry explains how this vast, opaque economy isn't just a consumer risk -- it poses a significant national security threat.
With money flowing through mule bank accounts, digital wallets and cryptocurrencies, the ecosystem is engineered to evade scrutiny and defeat traditional regulatory mechanisms. Shastry outlines how this web of anonymous transactions fuels money laundering, hawala networks, and potentially even terror financing.
Your report, Fixing the Odds: A Policy Blueprint for Curbing Illegal Online Gambling in India, estimates annual deposits on illegal gambling platforms to the tune of $100 billion.
How does the sheer scale of this shadow economy translate into a national security risk for India?
When we talk about nearly $100 billion flowing annually into illegal gambling, it's important to note that these are credible estimates, though the real figure could be even higher.
Since the money is not traceable, these numbers are derived from various reports and are likely undervalued. This massive volume of off-the-books capital fuels illicit finance and is a classic facilitator for money laundering.
It enables the proliferation of mule bank networks, feeds into illicit cross-border flows, and poses significant challenges for our anti-money laundering and financial intelligence agencies.
For example, even when the ministry of finance recently seized about Rs 2,000 crore, this amount is just a drop in the bucket compared to the total volume.
The use of UPI mule accounts and cryptocurrencies makes it extremely difficult to trace these funds, raising the risk that some of this money could be diverted to terror financing or organised crime.
The larger and more opaque this shadow economy becomes, especially online, the greater the risk to India's national security.
What are the main characteristics of the illegal gambling ecosystem in India that make it particularly challenging from a national security standpoint? What features prevent detection?
Our report examines the problem from a consumer welfare perspective and identifies four key dimensions:
Inconsistent Regulation: Gambling is governed by state laws, and there is no single national regulator for online gambling. This creates major enforcement gaps, and state police forces are often ill-equipped to tackle the issue. When one site is shut down, mirror sites quickly pop up.
Evasion Tactics: These Web sites frequently change domains and use various evasion strategies. For example, original domains like parimatch.com may be blocked, but mirror sites with slightly altered URLs appear almost instantly.
Opaque Payment Systems: The use of UPI mule accounts, digital wallets, and even Android apps to facilitate illegal payments makes tracing funds very difficult. These networks recruit money mules, and money is quickly moved out of the country.
Aggressive Advertising: Illegal gambling operators use out-of-home advertising, surrogate advertising, and even sponsor minor sports leagues. They also create seemingly innocent Web sites that serve as fronts for gambling operations.
How do these opaque financial channels facilitate money laundering, and how is money laundered out of India to potentially fund terror activities?
While no authority can say with certainty where all the money ends up, the process typically involves UPI mule accounts set up under fake identities.
Apps like XHelper train users to receive deposits and quickly funnel money up a hierarchical chain of accounts. From there, it is often converted into cryptocurrency or hawala credits, making it nearly impossible to trace.
Since UPI transfers are instantaneous, vast sums can move in seconds, making detection extremely challenging. Digital wallets and cryptocurrencies further facilitate the laundering process, turning consumer bets into untraceable, laundered money.
For our readers, could you explain in simple terms what UPI mule accounts are?
UPI mule accounts are essentially bank accounts set up using fake or proxy identities -- benami accounts. Their sole purpose is to move money from one place to another.
Unlike regular accounts, these are often used for one-way or two-way transactions, similar to traditional hawala networks, but entirely online.
Your report also mentions that India lacks a central regulator and formal payment blocking protocols for illegal gambling. How do these regulatory gaps increase India's vulnerability?
While the RBI does have payment blocking protocols, their effectiveness is limited.
The only central law on gambling is the Public Gambling Act of 1867, which is outdated.
Without a dedicated central regulator, payment service providers struggle to identify and block illegal transactions. This allows many transactions to slip through the cracks.
Our recommendation is to establish an inter-ministerial task force involving the ministry of electronics and IT, the ministry of finance, and state authorities to coordinate and block illicit transactions more effectively.
Your report also mentions the use of sophisticated apps to onboard money mules and evade detection. What technological trends make illegal gambling a persistent national security threat?
Apps like X Helper, which masquerade as financial tools, are not available on official app stores but can be downloaded from third-party Web sites.
These apps offer step-by-step training on opening fake business accounts, responding to bank inquiries, and conducting UPI transfers. They also allow handlers to push updates, such as new QR codes or instructions for frozen accounts. The lack of identifiable headquarters and the rapid evolution of these technologies make enforcement extremely difficult.
Are the people or organisations behind these apps and operations more powerful than sovereign nations, given how easily they evade the system and keep indulging in illegal activities?
I wouldn't say they are more powerful than sovereign nations. The real issue is that laws and enforcement mechanisms have not kept pace with technological advancements.
These operators don't recognise national borders, and apps can be released from anywhere in the world. The solution lies in updating our laws and enforcement strategies.
What gaps are these illegal online gambling sites exploiting in India?
The main gaps include the absence of a central regulatory agency, inconsistent legal definitions of gaming versus gambling (games of skill versus games of chance), and a lack of coordinated enforcement.
We recommend forming a task force comprising officials from relevant ministries and agencies to work with state authorities. Additionally, the legal classification of games needs to be clarified and expanded.
What international best practices could India adopt to reduce the national security risk posed by illegal gambling operations?
Countries like Denmark have regulators that collaborate directly with tech firms like Apple and Google to remove unregistered gambling apps.
Another useful practice is maintaining and sharing blacklists of illegal operators across countries. For instance, if a gambling site is banned in Nepal or Bangladesh, it should also be banned in India. The EU follows a similar block-once-block-everywhere approach.
How effective are these international collaborations in curbing the flow of illicit funds through gambling platforms, and what lessons can India draw?
International collaborations are very effective because illegal operators exploit digital platforms globally.
By partnering with major tech firms, social media platforms, and ad networks, authorities can curb the visibility and promotion of illegal gambling. India can learn from these best practices to strengthen its own enforcement.
What are the emerging threats on the horizon as illegal gambling platforms continue to evolve, and how should policymakers anticipate and respond?
The ecosystem is constantly evolving. If one avenue is blocked, operators quickly exploit another vulnerability.
Policymakers must remain vigilant, update laws regularly, and invest in technology and inter-agency coordination.
Most importantly, consumer awareness must be increased so that people can recognise and avoid illegal platforms. The focus should always be on adapting to new threats as they arise.
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