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Brazil’s federal gambling regulator is shifting its enforcement focus from web-blocking to financial transactions as it seeks to ring-fence the newly licensed online betting market from offshore competition.

The Ministry of Finance’s Secretariat for Prizes and Bets (SPA) published an ordinance on Friday (March 21) to map out the roles of Brazilian banks and payment processors in policing illegal gambling activities.

Article 21 of Brazil’s December 2023 federal law on fixed-odds betting expressly prohibits payments and financial institutions from enabling transactions for unlicensed operators.

Among other things, Friday’s now obliges financial institutions and payment service providers to adopt formal procedures to identify any individuals, companies or intermediaries who may be involved in transactions for unlicensed betting.

When potentially illegal activity is identified, the ordinance requires banks and payment companies to prevent financial transactions and send specific information to the SPA within 24 hours, including the account holder's CPF or CNPJ identification number and, if applicable, their associated keycode for Brazil’s Pix instant payments system.

In conjunction with Brazil’s federal telecoms regulator, the SPA has blocked access to more than 12,000 illegal gambling sites since October.

But the agency had already signalled that payments were next on its enforcement agenda, both through public statements and through formal warnings sent last month to 22 unnamed financial institutions determined to be processing transactions for illegal operators. 

“This new measure, together with the removal of websites and illegal advertising, will be a fundamental reinforcement in the fight against those who seek to operate without a licence and without protecting bettors, as it aims to prevent those sites … from receiving their revenues and closing the cycle of illegal activity,” said Regis Dudena, the SPA’s secretary, in a statement.

Enforcement Authority

Although Friday’s ordinance has been welcomed by industry groups concerned with the endurance of the black market in Brazil, it may not be a definitive strike against payments for illegal online gambling.

Many observers have argued that denying unlicensed sites access to Pix, the ubiquitous instant payments system controlled by the Brazilian Central Bank, would be the most effective way of clamping down on the offshore market.

Ordinance 566 does not explicitly mention blocking of transactions via Pix, even though it appears to be a step in that direction by enabling the SPA to maintain a list of intermediaries or other companies involved in processing transactions for illegal sites and obtaining the code they use to access the payments system.

In theory, those identified companies could then be shut off from Pix, but that would require further coordination with the central bank.

Testifying before a congressional hearing in December, Dudena said blocking transactions via Pix was “on our agenda” but the SPA was still addressing the best ways to identify transaction patterns and discussing the matter with the central bank, payments providers and Brazil’s main banking association.

Luiz Felipe Maia, founding partner of Maia Yoshiyasu Advogados law firm, described Friday’s ordinance as a “relevant step that shows the regulator acknowledges the importance of controlling payment transactions to limit the operation of the black market”.

Still, there are some challenges with how the ordinance has been structured, including how it will impact legitimate operators acting under a state or municipal licence.

“Also, there is room for discussion around the competency of the SPA to penalize payment institutions without the interference of the Brazilian Central Bank. Nevertheless, it is a very important move to better protect the regulated operators,” Maia told ���ĺ�������. 

Fernanda Meirelles of FAS Advogados law firm in São Paulo agreed that the ordinance was “a positive and necessary step”, although its practical impact may be limited. 

“The ordinance sets important obligations, but since SPA does not have direct supervisory or enforcement authority over financial and payment institutions — which are regulated by the central bank — its effectiveness will ultimately depend on further coordination between authorities,” Meirelles said.