A bizarre Brazilian court case in which a punter tried to recover his winnings from an illegal betting site has exposed the inherent weakness of the nation’s anti-money laundering legislation.
The gamer, Wellington Alves de Souza, deposited R$3,000 (£418.45/US$563.93) to make a bet on illegal gambling platform zz77.com and won R$56,000 (£7,812.21/US$10,526), but when he tried to withdraw his money from the payment intermediary, SecurePayments Ltda, his account was frozen.
So to recover his winnings, he sued the payment company, as he had no way of contacting the underground operator.
But–in glaring contrast to most international money laundering legislation–last week an appeals court in the Brazilian capital, Brasilia, ruled unanimously that the payment company was merely a “facilitator” of the deposit and could not be held “responsible” for the outcome of illegal gambling.
And instead Wellington has now been charged with betting on the illegal gambling market.
Black Market
Licensed operators in Brazil, which was only regulated at the start of this year, have welcomed the court’s decision, as a marker that if you gamble on the still-widespread illegal market you will be sanctioned.
But what are the implications of this court ruling?
Wellington’s case has contributed to the debate surrounding whether payment companies are liable in these cases, at a time when the government and the regulated private sector are seeking to stifle illegal platforms by blocking payment methods.
In this regard, the court was clear in exonerating the payment company:
“A payment intermediary that exclusively processes financial transactions, without exercising any influence over the gaming platform or the release of funds transferred to it, shall not be liable for losses arising from a consumer’s access to a virtual gambling environment of dubious origin,” the appeals court stated in its ruling.
“Since there is no causal link between the intermediary’s conduct and the alleged damages, his civil liability is excluded, in accordance with Article 14, §3, II, of the Consumer Protection Code.
“In this case, the victim is solely responsible for voluntarily subscribing to a service that was not formally identified or authorized by the competent authorities,” the court concluded.
Suspicious Customers
Yet experts are not convinced.
“I have no doubt that in the future there will be some regulatory adjustments and also judicial decisions to determine the liability of payment companies, especially considering that there is a regulation that states they cannot mediate deposits for illegal websites,” counters Tiago Horta Barbosa, Integrity Manager for Latin America at Genius Sports.
Bill 2.359/25, currently being considered by the Brazilian Congress, seeks to hold banks and payment institutions that allow transactions to unauthorized platforms accountable.
The proposal transforms this omission into an administrative infraction, granting the Central Bank and the CVM the power to sanction negligent conduct.
And if passed, this bill will require banks, payment institutions, and payment systems to monitor suspicious transactions and report them to the financial intelligence agency and keep records – and, above all, preemptively block suspicious customers, improving transaction risk filters.
Experts concur that attacking this financial money-laundering loophole is the most direct way to weaken the black market, protect consumers, and strengthen the regulated sector.
For Wellington the battle to recover his lost winnings may not yet be over.
