Kenya's gambling industry is in the trenches again, as many licence renewals are withheld and money laundering rules are tightened, with more uncertainty to follow.
In May 2022, interior secretary Fred Matiangi called on the Betting Control and Licensing Board (BCLB), which is a department under the Ministry of Interior, to investigate whether existing licensees had been cleared by the Kenya Revenue Authority (KRA), the Financial Reporting Centre, the communication authority and the Interagency security team, as they are legally required to be.
The BCLB reported in June that the majority of licensees were not cleared by the other government agencies, leading to many of the 2022/2023 operating licence renewal applications not being approved by their deadline, as well as a number of new applications being rejected.
The Communications Authority of Kenya (CAK) then also issued a directive to mobile network operators on July 1, demanding they cease services to gambling operators until they receive authorisation from the BCLB.
“To ensure that these communications services are used within the remits of the regulatory framework, the authority directs operators that the use of licensed ICT platforms and services for the provision of betting and gambling services shall only be by firms duly licensed by BCLB,” CAK director Ezra Chiloba said.
Additionally, the communications watchdog now requires mobile network operators to provide returns to the BCLB and the CAK detailing “numbering resources (USSDs, shortcodes, and PayBill numbers) allocated to licensed betting and gambling service provided on a monthly basis”.
Reports began to emerge in July of operators being approved in droves to restart their online operations.
In August, BCLB chief executive Peter Mbugi told local media that 25 betting firms were still unable to operate as they had failed to pay a licence fee and provide a bank guarantee.
“Licensed operators are increasing but most of them are doing zero-sum business. The market is no longer expanding,” Mbugi said, adding that only 35 licensed firms were operating.
There are currently 118 licensed bookmakers in Kenya, according to a list last updated by the regulator on June 30, 2022, but the impact of the licence suspensions will not be clear until next year's BCLB financial report.
The BCLB has not responded to requests for comment on the current licensing situation.
Money Laundering and Tax Collection Concerns
Adding fuel to the fire, the government highlighted the gambling industry as a “high risk” threat in the National Money Laundering and Terrorism Financing Risks Assessment Report 2021, despite only “a single reported case where the betting and gaming industry had been abused for money laundering purposes”.
The report was completed in October 2021, but was only recently made publicly available.
The increasing number of sports-betting companies is seen as an increased money laundering risk in the report, “given the cash-based nature of transactions in the country”.
Sports bettors were deemed to be a low-risk money laundering threat; however, betting shop owners are deemed to be high risk, with the report highlighting that many are foreign and they primarily take bets on international sporting events.
“Sports betting proceeds can be commingled with funds from other predicate crimes and passed out as genuine winnings with possible collusion on who takes the winnings which are later either reverted into the syndicate or transferred outside the country (a form of capital flight),” according to the report.
The Central Bank of Kenya has decided to start monitoring large betting transactions in response to the report's findings.
The gambling industry also faces uncertainty as Kenyans await the results of an August 9 general election.
All major political appointments will be chosen in the election, including the President.
Outgoing President Uhuru Kenyatta has stated since 2019 that he would support a gambling ban.
However, since the President’s comments were made, the betting industry has grown in terms of revenue and licensees, causing increased concerns for anti-gambling pressure groups.
The government has also backtracked several times on its proposals to implement harsh conditions on the market, such as not introducing potentially devastating tax hikes.
To encourage people to vote and help the strain on government services, many businesses must close on election day, including gambling businesses.
Despite this, several operators were criticised in local media for accepting bets on election day.
Finance Act Clarification
Separately, since VIXIO’s last update on the Kenyan market, the Finance Act 2022 has become publicly available, confirming that the excise duty on betting remains at 7.5 percent, as opposed to the potentially controversial increase 20 percent originally proposed by government.