Regulatory Scrutiny and Compliance Challenges facing SOFTSWISS

Stable Aggregator Ltd, through its platform SOFTSWISS, manages an extensive volume of bets and offers various payment solutions for their casino clients. The responsibility for overseeing these financial transactions, particularly with regard to Anti-Money Laundering (AML) regulations, Know Your Customer (KYC) protocols, and the prevention of terrorist financing, lies with multiple regulatory bodies in Malta. The key authorities involved include the Malta Gaming Authority (MGA), the Financial Intelligence Analysis Unit (FIAU), the Malta Financial Services Authority (MFSA), and the Office of the Commissioner for Revenue.

Malta Gaming Authority (MGA)

The MGA is tasked with ensuring that all licensed entities adhere to the established regulatory framework, which encompasses stringent AML and KYC obligations. The MGA conducts regular audits and assessments to confirm that its licensees are complying with these standards.

This includes monitoring the legality of payments and ensuring that proper due diligence is applied to all transactions.

Financial Intelligence Analysis Unit (FIAU)

The FIAU is Malta's primary body responsible for overseeing compliance with AML and Counter-Terrorism Financing (CTF) regulations. The FIAU collaborates closely with the MGA to ensure that iGaming operators implement effective AML and CTF measures.
This oversight extends to the significant volumes of transactions, such as the monthly bets and payments processed by platforms like SOFTSWISS.

Malta Financial Services Authority (MFSA)

While the MFSA primarily regulates financial services, it also plays a role in overseeing the financial aspects of the iGaming industry, particularly concerning the financial soundness and regulatory compliance of operators, including adherence to AML and KYC requirements.

Office of the Commissioner for Revenue

This office ensures that all tax obligations are fulfilled by operators, including the taxation of revenues generated from bets and payments. Although their main focus is on tax compliance, they work in conjunction with other regulatory bodies to ensure that all financial activities, including those related to AML and KYC, are conducted in accordance with the law.

The Necessity of Rigorous Oversight

Given the scale of operations reported by SOFTSWISS – handling up to €10 billion in monthly bets by Q4 2022 – it is essential that the oversight of these financial transactions is stringent. This includes:

Monitoring and Reporting

iGaming operators are required to report any suspicious transactions to the FIAU. Transactions involving large sums of money, such as those reported by SOFTSWISS, must be subject to enhanced scrutiny to prevent potential money laundering or terrorist financing.

Compliance Audits

The MGA, in collaboration with the FIAU, conducts audits to ensure that operators comply with AML, KYC, and CTF regulations. These audits involve reviewing the operators' procedures for managing payments and bets to ensure they are not being used for illegal activities.

Potential Legal Challenges for SOFTSWISS

The payment solutions offered by SOFTSWISS, as indicated in the attached image, present several potential legal challenges, particularly concerning compliance with AML regulations, KYC obligations, and the prevention of terrorist financing. The most significant issues include:

Cryptocurrency Processing

Service: CryptoProcessing by CoinsPaid

Legal Concerns: Cryptocurrency transactions carry heightened risks related to money laundering and terrorist financing due to their pseudonymous nature. Handling large volumes of crypto transactions without strict AML and KYC protocols could expose SOFTSWISS to substantial legal risks, especially under Malta’s rigorous AML/CTF regulations.

E-Wallets and Vouchers

Services: Pay4Fun, Neteller, Skrill, Paysafecard

Legal Concerns: E-wallets and voucher systems can facilitate the cross-border movement of money with relative ease, sometimes circumventing traditional banking scrutiny. This poses challenges in tracking the source of funds and ensuring compliance with AML regulations. Robust KYC measures are crucial to mitigate the risk of these systems being used for illegal activities.

Bank Transfers

Services: Trustly, Directa24, InPay, Yaspa, Brite, Gigadat

Legal Concerns: While bank transfers are generally more traceable, the involvement of multiple jurisdictions, especially with offshore clients such as those in Curacao, complicates compliance. Different countries have varying AML requirements, and maintaining consistent compliance across all jurisdictions is challenging.

Vouchers

Service: CashToCode, Paysafecard

Legal Concerns: Vouchers can be purchased with cash and redeemed online, making it difficult to trace the origin of the funds. This presents significant AML challenges, particularly if these vouchers are used in jurisdictions with weaker financial regulations.

Licensing and Oversight Requirements

Given the substantial volume of payments handled by SOFTSWISS, particularly for offshore casinos in jurisdictions like Curacao, additional licensing and oversight may indeed be necessary:

MFSA License

The Malta Financial Services Authority (MFSA) regulates financial institutions in Malta. If SOFTSWISS or Stable Aggregator Ltd provides payment services or acts as a financial intermediary, they may be required to obtain a license from the MFSA. This license would ensure that the company adheres to financial regulations, including AML and KYC obligations.

FIAU Supervision

The Financial Intelligence Analysis Unit (FIAU) is responsible for overseeing AML and CTF compliance. Given the scope of SOFTSWISS's operations and the nature of the payment methods offered, SOFTSWISS may fall under the FIAU’s regulatory oversight. This includes ensuring that all transactions are monitored for suspicious activity and that appropriate KYC procedures are implemented.

International Compliance

Handling payments for offshore entities, such as those licensed in Curacao, introduces additional layers of complexity. Depending on the nature of these transactions and where they are processed, SOFTSWISS might also need to comply with international regulations and potentially obtain licenses or approvals in other jurisdictions where it operates.

Addressing Regulatory Challenges and Ensuring Compliance

The payment solutions offered by SOFTSWISS present several potential legal challenges, particularly concerning AML, KYC, and the broader regulatory framework governing financial transactions.

Given the scale and scope of their operations, particularly involving high-risk jurisdictions like Curacao, it is advisable for SOFTSWISS to ensure full compliance with all relevant regulations.

This may include obtaining the necessary licenses from the MFSA and ensuring ongoing compliance with the FIAU’s requirements to mitigate legal risks and maintain the integrity of their operations.