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Kevin Smith

Wide-Scale Raids in Italy Target I-Gaming Operators

9 October 2003

Financial police and tax officials in Catania, Italy this week raided the offices of several businesses tied to the online gaming industry.

The raids, which came after a yearlong investigation, were the start of a countrywide crackdown on businesses and individuals believed to be operating or making money from Internet gambling services. Authorities identified 109 illegal gambling sites and more than 80 people who were behind their operations.

Officials are in the process of identifying another 83 involved with the sites. The search and seizure efforts encompass 45 provinces and 17 regions of Italy.

"Operation Black Jack," as it was dubbed, included more than 500 officers who generated more than 150 tax police reports, according to the Financial Police, Guardia di Finanz, division of Catania. The operation was led by the Public Prosecutor Office of Catania and was done hand-in-hand with a division from the Technological Anti-Crime group, which has offices in Rome.

Authorities ordered the seizure of the 108 Web sites dedicated to online gaming and the removal of banner ads, links and pop-up advertisements to them, which were placed on more than 90 sites related to online gambling. It became clear during the investigation that among many of the sites hosting gambling ads were paid in percentages of gamblers' losses.

Several portal managers and browser providers, including nationwide operators, are also being investigated.

The investigation marked a new level of intensity for tax police in Italy. It was by far their biggest undertaking in terms of geographical scope, individuals under investigation, officers used and tax reports filed.

An Italian attorney who represents clients in the interactive gaming told IGN, on the condition of anonymity, that the investigation has sent shockwaves through the industry. Many of his clients, he said, have at least temporarily pulled the plug on their operations until the situation is resolved. .

One affiliate manager, who also wished to remain anonymous, said all of his partnering sites in Italy are under investigation and that law enforcement officials have shut them down.

He added, however, that the possibility of criminal charges for most of the operators is slim. Laws relating to gambling activities in Italy were drafted during the Mussolini era, he said, so no court would allow them to stick to Internet gambling activities.

The only affiliates who could have problems, he said, are those who didn't create an offshore shell corporation or other structures for tax purposes.

"Those that kept their funds in Italy and never claimed them for tax purposes could find themselves in a heap of trouble," he said.

A bigger concern for the industry in Italy, though, is what will happen next. Many feel that even if no criminal charges are filed, it will be nearly impossible to market online casinos and sports books through mainstream portal sites due to the stigma cast on the industry from operation Black Jack.

"The most popular sites and search engines stopped taking any kind of ads from online gambling sites," he said. "They ceased all marketing activities too, and some search engines even went so far as to eliminate any online casinos from searches with any gambling keywords in them."

The crackdown in Italy came a week after the surfacing in the United States of news that the District Court in the Eastern District of Missouri had subpoenaed at least one portal in relation to its running of ads for online casinos and sports books.

Wide-Scale Raids in Italy Target I-Gaming Operators is republished from
Kevin Smith
Kevin Smith