ONLINE GAMING: CENTRE VS TAMILNADU
- The Bill prohibits online gambling and online games of chance played for money or other stakes
- While it specifically names Rummy and Poker as games of chance, it can go much wider in scope
- It defines online games of chance as those where both an element of chance and skill are involved, and the element of chance dominates over the element of skill; games are presented as games of chance; the element of chance can only be eliminated by superlative skill; or games involve cards, dice, or wheel which work on random event generators
- It also establishes the Tamil Nadu Online Gaming Authority and empowers it to regulate online gaming companies
- Companies that are based outside the state are required to follow specified due diligence or restrict access to prohibited games for people in Tamil Nadu
- The state’s proposed gaming authority will identify games of chance and recommend them to be included in the Schedule of prohibited games.
- It is worth noting that the state’s Governor gave his assent to the Bill hours after the legislative assembly passed a resolution against him for indefinitely withholding assent to several bills
- Aside from the state assembly’s resolution against the Governor, the timing of the development is also particularly significant given that his assent to the Bill comes just days after the Centre notified amendments to the Information Technology Rules, 2021, which brought in rules for regulating online real money games
- According to the Ministry of State for Electronics "State governments’ regulating online gambling is not required any more after the IT rules for online gaming have been notified"
- Online gaming companies had raised concerns around state governments passing competing legislations which could potentially go against norms prescribed under Centre’s rules
- According to MeitY gambling is a state subject, activities that occur on the Internet including online gambling and gaming fall exclusively in its domain to regulate
- The fresh changes require the setting up of multiple self-regulatory bodies (SRBs) whose approval will be required for online games with a monetary element. Games that involve wagering on outcomes of events will not be allowed
- Online gaming companies will also have to complete a KYC procedure for users when they first make a deposit in their accounts to play a game
- KYC norms laid down by the Reserve Bank of India (RBI) for its regulated entities will have to be followed by them
- All India Gaming Federation (AIGF) challenged the constitutional validity of Tamil Nadu’s Bill at the Madras High Court. However, at the time, the state government had said that it was yet to notify the Bill as a law, following which the court had allowed AIGF to withdraw its petition with the liberty to file it once the law is in effect
• The proposal, steered by the Ministry of Finance and sent for inter-ministerial consultations, could result in online real-money gaming companies getting denoted as “reporting entities” under the Prevention of Money Laundering Act (PMLA), 2002.
• PMLA stipulates certain record-keeping and reporting obligations for financial institutions — banks, financial intermediaries or a
person carrying on a designated business or profession — by classifying them as reporting entities.
• A reporting entity, under PMLA, has to furnish information about its clients and transactions to Financial Intelligence Unit-India (FIU-IND) under the Ministry of Finance and follow a number of compliance obligations including maintaining a record of all transactions, documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients.
• It is also subject to compliance with anti-money laundering and countering the financing of terrorism (AML/CFT) obligations, in line with norms of the global money laundering watchdog Financial Action Task Force (FATF).
• In a similar move in 2023, the Finance Ministry had notified virtual digital assets (VDAs) as reporting entities, a measure which was squarely aimed at cryptocurrency firms.
• If this is finalised, it would mark the second major action on gaming companies after a 28 per cent Goods and Service Tax (GST) was levied on full deposits that users make on such apps in 2023.
• It also follows rules to regulate the sector which were notified by the IT Ministry, but remain in limbo and unenforceable due to procedural issues.
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For Prelims: Prevention of Money Laundering Act, ED, CBI, Foreign Exchange Management Act,
For Mains:
1. Critically evaluate the Prevention of Money Laundering Act, 2002 (PMLA) in its effectiveness in combating money laundering in India. (250 Words)
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Previous Year Questions
1. Which one of the following is not correct in respect of Directorate of Enforcement? (CDS 2021)
A. It is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance.
B. It enforces the Foreign Exchange Management Act, 1999.
C. It enforces the Prevention of Money Laundering Act, 2002.
D. It enforces the Prohibition of Benami Property Transaction Act, 1988.
2. The Prevention of Money Laundering Act, 2002 become effective since which one of the following dates? (UKPSC RO/ARO 2012)
A. July 2002 B. August 2003 C. July 2004 D. July 2005
3. FEMA (Foreign Exchange Management Act) was finally implemented in the year (UPPSC 2013)
A. 1991 B. 1997 C. 2000 D. 2007
4. The Foreign Exchange Regulation Act was replaced by the ______ in India. (SSC Steno 2020)
A. Foreign Exchange Currency Act
B. Foreign Exchange Finances Act
C. Foreign Exchange Funds Act
D. Foreign Exchange Management Act
5. "Central Bureau of Intelligence and Investigation" is listed in the __________ list given in the Seventh Schedule of the Constitution of India. (SSC CGL 2017)
A. Union B. State C. Global D. Concurrent
Answers: 1-D, 2-D, 3-C, 4-D, 5-A
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