Let the enforcement begin in the online gambling industry
By Elizabeth Saiz Flores
Elizabeth Saiz Flores is an associate at Llona & Bustamante, specializing in real estate law, commercial law, corporate law and civil law. She has experience in corporate operations as well as in corporate restructuring and mergers and acquisitions.
Llona & Bustamante Abogados
Calle Bolognesi N° 180, Oficina 404
Miraflores
Peru
+511 418 4860 Phone
esaiz@ellb.com.pe
ellb.com.pe
Due to the pandemic caused by COVID-19 outbreak, among many industries, the gambling industry had a rough time as a result of the implementation of lock-down measures in order to avoid gatherings. Nonetheless, an opportunity to grow emerged for online gambling as its reflected in the survey launched by Statista (Statista, 2023)[1].
In Peru, the gambling industry was one of the last economic activities to resume operations as it was included in the 4th (and last) stage of the economic recovery as per established in Decree Supreme N° 187-2020-PCM; however, online gambling have never stopped.
The exploitation of online games and online sports betting halls has been recently regulated in Peru as set out in Law N° 31557 published in the Official State Gazette of Peru “El Peruano” on August 13th, 2022 (amended by Law N° 31806), the same will become effective as of next February 9th 2024. In its turns, the Decree Supreme N° 005-2023-MINCETUR (the “Regulations”) duly published in the Official State Gazette of Peru “El Peruano” on October 13th, 2023, has established minimum standards and requirements that shall be observed by the operators of online games and online sports betting technological platforms.
Authorization and Registry
According to the Law and its Regulations, prior to start operations, an authorization must be obtained from the Ministry of Foreign Commerce and Tourism (“MINCETUR”), as applicable:
- For the exploitation of online games and online sports betting
Only legal entities incorporated under the Peruvian General Corporation Law and foreign entities and its branches in Peru are able to submit an application in order to obtain the authorization for the exploitation of online games and online sports betting technological platforms; otherwise, said infringement is subject to a fine up to the amount equivalent to two hundred (200) Peruvian Tax Unit[2], regardless the faculty of the competent authority to block the WEB page of the unauthorized technological platform. Said authorization is granted for a term-period of six (06) years renewable for equal period.
Provided that the exploitation of authorized online games and online sports betting technological platforms in Peruvian territory must be done by using the domain “bet.pe”, “.bet”, “.com”, “.pe” o “.com.pe”, such domain shall be communicated to MINCETUR as a precedent condition to start operations.
Moreover, the solicitant must grant a warranty in favor of MINCETUR, in support of the obligations and sanctions derived from the application of the Law. Said warranty shall have the following characteristics:
- Be joint and several, irrevocable, unconditional and of automatic realization, not subject to embargo or other precautionary measure and is in the form of a bank deposit, bank guarantee letter or a surety policy, issued by a company of the financial system, under the supervision of the Superintendency of Banking, Insurance and Private Pension Fund Administrators (“SBS”);
- Be valid for one (01) calendar year and must be renewed for the same term-period; and,
- For the amount equivalent to the greater of 3% of the annual net income or six hundred (600) Peruvian Tax Unit current at the date of its issuance.
It is worth mentioning that the Law expressly prohibits the use of cryptocurrencies in transactions over the technological platform.
- For the exploitation of online sports betting halls
Only legal entities incorporated under the Peruvian General Corporation Law are able to submit an application in order to obtain the authorization for the exploitation of online sports betting halls which depends on the prior authorization to exploit an online games and online sports betting technological platform, therefore the validity term-period of the first one shall remain for as long as the authorization to exploit an online sport betting technological platform is in full force and effect.
Furthermore, online sports betting halls must fulfil the following provisions:
- Be located within a distance of at least one hundred and fifty (150) meters from temples and/or educational centers where regular basic education is taught.
- Implement a digital video system or similar technology that allows uninterrupted and real-time recording according to certain specific technical standard.
- To act as an Authorized Certified Laboratory:
Local entities incorporated under the General Corporation Law– Law N° 26887 and foreign entities are able to submit an application in order obtain an authorization to act as an authorized certified laboratory and carry out technical evaluation of technological platforms for remote games and remote sports wagering, gaming programs, applicable return percentages, betting terminals, progressive systems and main components and/or services.
Additionally, it was established that the authorized certified laboratory shall grant a warranty in favor of MINCETUR, in support of the obligations and sanctions derived from the application of the Law. Said warranty shall have the following characteristics:
- Be joint and several, irrevocable, unconditional and of automatic realization, not subject to seizure or other precautionary measure and is in the form of a bank deposit, bank guarantee letter or a surety policy, issued by a company of the financial system, under the supervision of the SBS;
- Be valid for one (01) calendar year and must be renewed for the same term-period; and,
- For the amount equivalent to one hundred (100) Peruvian Tax Unit current at the date of its issuance.
It is worth mentioning that it is required for certified laboratories to accredit having five (05) years of experience regarding technical evaluation as well as to accredit not having a technical, commercial, financial or any other type of relationship with the operators who hold authorizations for the exploitation of technological platforms and/or suppliers of related services, except for the commercial relationship regarding the provision of technical evaluation and certification services.
- Other authorizations and registries
Besides the above-mentioned authorizations, it is required MINCETUR’s authorization and registry (homologation) of the online games and online sports betting technological platforms, game programs, progressive systems, main components and or services, life casino games, sport betting terminal models with the corresponding compliance certificate issued by an authorized certified laboratory, stipulating the compliance of the approved technical standards, as applicable. Likewise, authorized sport betting terminal and suppliers of related services (such as suppliers of databases, applications, media, resources and/or hardware and software components that make up the technological platforms for online games or online sports betting) shall be previously registered before MINCETUR.
Taxation rules
In regard to taxation, the Law created a new tax for online games and sports betting which levies with a tax rate equal to 12%, on a monthly basis, following some rules for said calculation.
Advertisement and Sponsorship
With respect to advertisement, dissemination of advertising of unauthorized online games and online sport betting technological platforms and online sports betting halls is prohibited.
Also, only technological platforms duly authorized by MINCETUR may sponsor companies and individuals, events or activities of any kind as long as the sponsorship complies with current Peruvian legislation. Said companies and individuals sponsored are responsible for verifying that the technological platform is duly authorized by MINCETUR.
Any infringement of the above-mentioned constitute an infringement of the Principle of Legality provided for in Legislative Decree N° 1044 as well of the Legislative Decree which Approves the Law for the Repression of Unfair Competition.
Anti-money laundering and terrorist financing regulation
Anti-money laundering and financing of terrorism regulations are also applicable to holders of authorization for the exploitation of online games and online sports betting halls. Therefore, said operators need to comply with the Law N° 27693, which sets forth the general framework on anti-money laundering and financing of terrorism as well as any other further particular regulation issue by the competent authority. In general, operators are required to report suspicious transactions to the “UIF-Peru” (as per the Spanish acronym for Financial Intelligence Unit) and shared documents required to examine a previously reported suspicious transaction, or one it has detected, to implement a system in order to prevent money laundering and financing of terrorism, to appoint a compliance officer among other provisions.
Enforcement term period
Current online games operators have an initial term period of thirty days from the date of entrance into force of the Law to submit their respective applications for authorization to the MINECTUR, and ninety additional days as of the obtention of said authorization to fully comply with the remaining requirements. If they do not comply with these requirements, they must refrain from continuing to exploit online games and online sports betting halls.
In its turns, online sports betting halls owners have an initial term period of thirty days as of the obtention of the authorization to exploit online games and online sport betting technological platforms to submit their respective applications for authorization to the MINECTUR, and sixty days as of the obtention of said authorization to fully comply with the remaining requirements.
Sanctions
According to the Regulations, in case of infringements, MINCETUR shall applied administrative sanctions such as admonitions, fines, cancelation of the authorization, temporary or permanent disqualification, which shall be applied by the MINCETUR, taking into consideration the seriousness of the infraction, regardless the faculty to corrective measures, and precautionary measures.
Conclusion
There is no doubt that the legal framework for the exploitation of online games and online sports betting technological platforms and online sport betting halls itself represent an important milestone for the gambling industry in Peru due to the fact that not only consolidates the legality of online gambling, but also brings greater legal certainty for the gambling industry and its players, providing certain rights and obligations as set out by the Law and its Regulation. However, the development of this business shall determine if any further rules should be issued in order to conducted said business with integrity, honesty, transparency and equality, as well as to protect vulnerable population and consumers, and to prevent the commission of crimes related to money laundering and financing of terrorism, frauds, in cybercrimes or other unlawful purposes.
Elizabeth Saiz Flores
Associate at Llona & Bustamante
[1] Survey obtained from https://www.statista.com/statistics/1186231/casino-and-online-gambling-industry-market-size-global/
[2] S/ 4,950.00 (Four thousand nine hundred and fifty soles in 2023.