KRAIL and the poor licensing of casinos in Ukraine

How much money should I ask Kosmolot for?



The fact is that the article in question is the final piece in a series of investigative journalism:

100pravda.com/90-casino-online/cosmolot/...t-kazino-ukraina/138

It turns out that this material appeared in search engine results for some key queries.

Our article is not on the first 3 pages of search results for the following queries:
"Cosmolot is a scam"
Cosmolot Casino
"cosmolot"
"krail"
"licensed casino in Ukraine"
"play Cosmolote"
"Online casinos of Ukraine"
"licensed casino in Ukraine"
"Krail licenses Ukraine"
"Online casino scams in Ukraine"
"Cosmolot deception"

As expected, the entire search results are filled with Kosmolot ads on all sorts of platforms designed to lure and attract players.
The only Google-recommended query we found that got us to the first page of results was:
"THE WHOLE TRUTH ABOUT THE COSMOLOT"



I can't help but agree. Everything is relevant. Thanks, Google, for your work.



The Kosmolot trademark, and even KRAIL itself, are concerned about damage to their image. This is an intangible asset, developed over years of honest and impeccable work. Neither Kosmolot nor KRAIL can only dream of being "white and fluffy" organizations. After carefully reviewing the text and illustrations, this article is fully consistent with the time it was written, including all historical references. If this article contains errors or unjustifiably damages the reputation of the parties involved, we welcome complaints and clarifications to admin@casino-mining.com. We are open to dialogue and will promptly review the contents of this article based on the facts presented.

A great deal of expensive work has been done. Simply deleting the entire series of articles about the Cosmolot scam for $1,000-2,000 is completely uninteresting. /Coin_8/

The obvious solution is to refuse the money and leave the article where it is. The Casino Mining Pool website always sides with its players.

CMP will give any possible compensation for the removal of the article free of charge to our users registered as of 07/09/2022.



It's like Shpilev guessing the number on the Evolution roulette wheel a couple of times:
100pravda.com/forum/roulette-game/814-ka...j-obman-igrokov#3792

The Gambling and Lotteries Regulation Commission (GLC) reported that as of September 17, 2021, only six legal entities in Ukraine had received licenses to organize and conduct gambling in gambling establishments and casinos.

Namely, limited liability companies
"Primum" (First Casino),
Nebula Games (1Casino),
"Billionaire Casino Company"
"Storm Ukraine" (ShangriLa),
"Casino "Premier Palace" (Vip Club Premier Palace)
"Aifar Group" (Golden Gate).

The pre-war SBU was a protection racket and extortionist for businesses of all sizes. SBU officials were implicated in every major scandal, from smuggling to kidnapping.

KRAIL and Igorka could not stay away.
The SBU did not pass by such a tasty morsel.

The acting head of the Commission for the Regulation of Gambling and Lotteries, Yevhen Hetman, who was detained by detectives of the National Anti-Corruption Bureau of Ukraine for a bribe of 90 thousand dollars, suddenly turned out to be an active employee of the Security Service of Ukraine.
According to Yuriy Butusov, Hetman is a lieutenant in the SBU and one of the assistants to the head of the agency's Main Directorate of Internal Security.
"The biggest shock awaited NABU detectives after Hetman was caught red-handed. The main bribe-taker of the Gambling Regulation Commission turned out to be... an SBU lieutenant, an assistant to the head of the Main Directorate of Internal Security of the SBU for operational matters! Hetman was registered as an active reserve officer, seconded from the SBU to 'work' at the Commission," he wrote.

According to NABU, in the summer of 2021, detectives received information about a system for obtaining illegal benefits on an especially large scale in exchange for permits and licenses for the right to engage in gambling.
To expose the criminal scheme, NABU, in coordination with the SAP, developed and implemented a series of covert investigative (search) actions involving undercover detectives.

It is noted that the official demanded money for assistance in obtaining permits and licenses in the gambling business.

This is what KRAIL was created for, and what they see as their main functions: selling licenses to any volcanoes, the only question is the amount of the bribe.

The gambling business and banks are accused of a tax evasion scheme amounting to billions of hryvnias!

In 2022, the Bureau of Economic Security (BES) began investigating tax evasion by the Ukrainian gambling industry, and banks are suspected of aiding and abetting the evasion. According to various estimates, the shadow turnover amounts to 10–15 billion hryvnias (!) per month.

Why didn't the gambling business pay all its taxes?
The FIFA World Cup, held in Qatar in November–December 2022, presented the Ukrainian gambling industry with virtually extreme conditions.

In early December, when the tournament was just gaining momentum, the offices of several bookmakers, gaming companies, and banks that could have provided services to them were raided by the Security Service of Ukraine (SBU) and the Bureau of Economic Security (BES). Shortly before, the National Bank and international payment systems tightened regulations on payments from the gaming industry.

The BEB investigation concerns possible tax evasion by the gambling industry through so-called miscoding.

MISCODING is a scheme to manipulate banking systems to conceal the true origin of payments. Several banks, including one state-owned one, are implicated in the case as intermediaries who turned a blind eye to this.

The Bureau of Economic Security estimates potential tax losses for the state at approximately 2 billion hryvnias per month. "The gambling industry demonstrated turnover 20-30 times lower," says Danylo Hetmantsev (Servant of the People), head of the Verkhovna Rada Tax Committee. This represents the majority of online gamblers.

Due to the potential scale of the investigation, MPs even submitted it to the Temporary Investigative Commission of the Verkhovna Rada's Finance Committee. Although no charges have been filed in the case yet, it didn't arise out of nowhere.

Miscoding was indeed popular among the gambling industry. According to Forbes sources, including government officials familiar with the investigation, top gambling executives, and banking representatives, 7–10 billion hryvnias in such transactions passed through the banking system every month.
How does it work, who profited from it, and what is the solution to the problem?

Gambling billions away from the state

The gambling industry received legal status in Ukraine in 2020. At the same time, the Commission for the Regulation of Gambling and Lotteries (CRGL) was established, which issues licenses to companies wishing to engage in the gambling business.

They must pay annual license fees. For example, a one-year license for an online casino costs UAH 23.4 million, for online bookmaking it costs UAH 108 million, and for online poker it costs UAH 6 million. Taxation also varies: 18% on profits, 22% unified social contribution, 10% to 18% gross gaming revenue (GGR) tax, and 19.5% tax on player winnings. These rules have been in effect since 2012.

In 2022, the state budget received UAH 1.2 billion from gambling license fees, while income tax was only UAH 80 million, and profit tax was zero, according to Yuriy Gaidai, senior economist at the Center for Economic Strategy, citing open data from the Ministry of Finance. However, the Ministry of Finance's open budget data on income and profit taxes differs from that provided by the State Tax Service, he adds. "It's possible that some of the revenue was diverted into other categories," Gaidai explains. Gambling companies report significantly higher tax figures.
Therefore, perhaps despite legalization two years ago, the government still doesn't understand the true scope of gambling turnover. The Bureau of Economic Security's December estimate of the possible scale of tax evasion was 12 billion hryvnias in hidden turnover monthly. "That's 2 billion hryvnias in unpaid taxes," the Bureau stated. Hetmantsev, of the Verkhovna Rada Tax Committee, estimates a monthly turnover of 15 billion hryvnias, starting in 2021. His colleague, Yaroslav Zheleznyak (Holos), puts the figure at 10 billion hryvnias. "At least a fifth of this amount should have been in the budget," Hetmantsev believes.

These assumptions are close to reality, but such estimates are more likely to apply to peak periods, such as the World Cup, during which the most recent searches took place, notes a source in the top management of one bank, speaking on condition of anonymity. The typical volume of gambling transactions processed through the banking system is 7-9 billion hryvnias, depending on the month's sporting events, he estimates.

The gambling industry hides its real turnover

Miscoding, which is being emphasized by lawmakers and law enforcement, is one of the key methods in this process. It involves changing the payment purpose code. "Imagine a supermarket checkout selling tobacco products, but it's registered as selling only groceries," explains Alexander Karpov, Director of the EMA Payment System Members Association.

In the case of gambling, industry code 7995 is most often replaced by 7994, which corresponds to computer games. The bank receives a payment (deposit) from a gambling client, but if the player wins, the institution sends the winnings, marking the transaction with a code from another industry or indicating that it is a regular card-to-card transfer, payment for advertising services, etc.

Why? "These are different tax rates," explains a lawyer involved in the gambling industry, who asked not to be named in this article. "You can make money very cheaply."


Duplicate sites

They use these accounts to conduct their main online business to avoid paying the required taxes, according to a December press release from the Bureau of Economic Security following the searches. A top manager at a gambling company and a high-ranking official in the banking sector independently described the gambling industry's system of two websites (on the .com, .net, or .org, and .ua domains). Both agreed to speak anonymously.

"For example, a legal website with a .ua domain is listed in the KRAIL registry, code 7995—'gambling,' so it's all legit," says a banker. "But if you access the same bookmaker's website with a .net domain, which KRAIL considers illegal, you'll find that the player is paying through the same bank terminal."

How do bookmaker lookalike sites work?
Parimatch, Ukraine's largest bookmaker, has two websites: pm.ua and parimatch.net. They have identical interfaces, allowing you to use them under a single account.
In such cases, the difference between the two resources, including payments, is usually imperceptible at the client level. "Unless you pay attention to where the winning payment came from on your card," he says. "But to do that, you need to understand the payment codes."

Who does the BEB open cases against?

Officially, government officials familiar with the investigation materials are not disclosing the names of the companies and banks that used the described tax evasion schemes.

Three Forbes sources, including government officials familiar with the investigation materials and bankers, named Parimatch, Ukraine's largest gambling company, as one of the defendants in the case.

Top 5 Largest Companies
in the Ukrainian gambling market:

Parimatch
Favbet
Cosmolot
Vbet
PinUP

These are all legal companies with licenses.

Unlicensed players also generate hidden turnover, says lawyer Artem Kuzmenko.
"They have no other choice but to use miscoding," he says.
Despite legalization, the Ukrainian Gambling Council, a specialized association, estimates the ratio of white to black markets at 30% to 70%.

As a result, the gambling business's profits are transferred to foreign accounts in cryptocurrency or cash.

"We will assess additional tax liabilities on these funds at the appropriate rates," said a member of parliament, speaking on condition of anonymity among the participants of the temporary administrative commission in the Rada.

Banks and gambling

The BEB case file names nine financial institutions, MP Zheleznyak wrote. The deputy doesn't directly name them, but his report suggests the state-owned Ukrgasbank and private Ibox Bank.
Also, according to two sources, the matter concerns Sense Bank, Concord Bank, and a number of smaller institutions: Oxy Bank, Cominbank, and others. All of them deny collusion with the gambling industry, let alone miscoding.

According to three officials familiar with the case materials and market participants, state-owned Ukrgasbank was the leader in terms of gambling transaction volume. "It accounted for 50-70% of transactions," says a banker who spoke on condition of anonymity. He did not provide any confirmation for this statement.

After the investigation was reviewed by the Verkhovna Rada's Temporary Investigative Committee, Andrey Kravets left his position as CEO of Ukrgasbank (his name disappeared from the list of top management on the bank's website).

It is not easy to prove the deliberate participation of banks in gambling schemes

Even proven instances of miscoding don't necessarily mean a violation on the part of the institution: it can happen to anyone providing acquiring services, says Olena Korobkova, head of the board of the Independent Association of Ukrainian Banks. "If a bank doesn't want to know about it, it won't," adds one NBU official interviewed on condition of anonymity. "But even if it does, there are ways to deceive it."

Miscoding occurs at the merchant level, using acquiring services. Under normal circumstances, the regulator, as well as the bank's internal services, can only detect miscoding through test purchases, according to two bankers. "Without inspections and, in some cases, without going through the customer's journey, it's unlikely to be detected," notes an NBU official.

Systematic manipulation is another matter. "Such disguise cannot remain unnoticed for long," Korobkova believes. One MP, speaking on condition of anonymity, also asserts that the institution's leadership could not have been unaware of the miscoding operations, given their scale.

Banks could profit handsomely from their partnerships with the gambling industry. "Legal fees for acquiring are around 1%, while miscoding fees are 5-6%," says one lawyer, speaking on condition of anonymity.

All banks providing e-commerce acquiring services are currently undergoing unscheduled inspections by the National Bank of Ukraine (NBU), according to a source at one such institution. Ukrainian law doesn't stipulate specific penalties for miscoding, but the NBU can impose sanctions ranging from a written warning to temporary suspension or revocation of licenses, Korobkova says. According to two NBU sources, the regulator is preparing a response. "It will be tough," one of them promises.

Also, at the end of last year, international payment systems significantly tightened controls over payment codes related to gambling, the banker adds. "That's why, since December, most players have stopped using video game payments," he says. Fines for potential abuses start at tens of thousands of dollars, the source adds.

However, even after the searches and roulettes taken by payment systems and the NBU, at least one privately owned bank continued to provide the service, according to MP Zheleznyak. "Based on the information we have, that's 250-300 million hryvnias per day," he wrote.

Under-legalized UA gambling business

Two companies from the top 5 in the gambling market, Parimatch and Favbet, noted in a comment to Forbes that they support the adoption of new tax legislation – bill 2713-d.

The legislative changes discussed by gambling industry representatives should resolve the current market stalemate. What is the underlying issue? The key problem is that the government, although it legalized the gambling industry in 2020, has failed to update tax legislation.

Companies are required to pay taxes under a 2012 law. Almost three years after the industry was legalized, parliamentarians have rejected changes to the tax system. The main changes that need to be introduced are the concept of "online casinos" (not included in the old law), the introduction of a tax on winnings and the establishment of a minimum amount, and the establishment of a uniform GGR tax of 10% for all types of activity.


“Giving away 18% of GGR is not economically justified and motivates market players to move into the gray zone,” said a top manager at a bookmaker.[/quote]
So gambling isn't interested in revealing its full turnover. "Then you'll be operating at a loss," confirms one industry representative.

Temporary solution

In April 2022, another imbalance emerged. The Verkhovna Rada granted the industry a simplified tax system—2% of revenue. Eight companies took advantage of this simplification, including Parimatch, Cosmolot, and 1XBET, which has already had its license revoked.

Before the transition, these companies paid an average of 200,000 hryvnias in taxes per day; afterward, the figure dropped to 23,000 hryvnias. In January 2023, the Verkhovna Rada abolished the simplified tax system for the gambling business.

What to expect in the gambling business in 2023?

Unofficial agreement:Until bill No. 2713-d is passed, businesses may operate “under the table” due to miscoding, says a top manager of a gambling company.

Until changes to the tax law are adopted, gambling businesses must pay triple the amount for a license.

"According to the tax rules, we can't change the law mid-year," says Boris Baum, former head of the advisory board at KRAIL. "So this was our insurance policy—they pay us taxes in advance until we implement them." After the tax law is passed, parliament is expected to reduce the license fee by a third.

In July 2021, bill No. 2713-d was adopted in its first reading. It was supposed to be submitted for a second reading in December 2022, but this did not happen.

In August 2022, the Cabinet of Ministers transferred responsibility for the gambling industry to the Ministry of Digital Transformation, which had previously been under the Ministry of Economy. The Ministry of Digital Transformation is preparing other legislative amendments and proposes liquidating the KRAIL.

The Ministry of Digital Transformation's goal is to automate the licensing and tax payment processes, eliminating the human factor and, therefore, corruption. The goal is to encourage foreign companies to incorporate in Ukraine and pay taxes, Minister Mykhailo Fedorov previously told Forbes.

Foreigners are showing interest in the Ukrainian gambling market. About eight European online casinos (mostly British) are ready to enter Ukraine even during the war, says Anton Kuchukhidze, head of the All-Ukrainian Gambling Council. "The condition is the adoption of Law No. 2713-d." Without the law, large operators will not operate in Ukraine, Baum believes.

“Only our fish can swim in muddy water,”, says KRAIL.

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