The gaming companies that had their licences withdrawn because of alleged links to the Italian Mafia had been through multiple extensive due diligence checks but no red flags were raised.

The checks were done by GVM Holdings, the local firm providing them with fiduciary services, as well as the Malta Gaming Authority according to standard procedures.

The two Maltese companies – Uniq Group (Betuniq) and Betsolution4U – seem to have had a sophisticated set-up that bypassed stringent procedures intended to protect the industry and its users.

The two companies held three remote gaming licences, which were immediately suspended as the news of the investigation by the Italian police on the operations of the Calabrian Mafia, ’Ndrangheta, emerged last Wednesday.

The Maltese companies are suspected of being involved in an international network of organised crime where betting companies were used to launder vast sums of money.

The assets seized this week from the ’Ndrangheta Mafia, which controls much of Europe’s cocaine trade, are worth around €2 billion, according to the Italian police.

Last year, the MGA suspended four licences and imposed 22 administrative fines

An Italian judge also ordered the arrest of 41 people, including six Italians – five men and a woman – in Malta.

In court last Wednesday they all gave their consent for extradition.

GVM Holdings said it had conducted its own due diligence checks, separate from those done by the gaming authority, before engaging them as clients, but nothing was flagged. It has since terminated all services to the owners of the two companies involved (see box on right).

The Malta Gaming Authority outlined its system of checks on the industry. When applications for the licences were filed, it screened all directors, shareholders, senior managers and ultimate beneficiary owners of these companies.

“At the pre-licensing stage, they would all have been screened through our systems and protocols, using probity tools and contacts available in Malta and abroad [for example by contacting other regulators],” said chairman Joseph Cuschieri.

This occurs before the actual business model of the gaming operation is screened and other control systems are checked and approved.

Certain operators who would, at that stage, have satisfied all pre-licensing checks may still be considered a potential risk.

“These then require constant and more ad-hoc monitoring than the standard and regular due checks with less risk-prone operators or business models. This is based on the MGA’s risk management policy where a risk-based approach is applied in all facets of our functions,” Mr Cuschieri added.

He stopped short of explaining how these two companies may have slipped through the net, saying the criminal acts being cited by the Italian authorities have not yet been proven.

“It would be imprudent and premature from our side to draw conclusions at this delicate stage,” he added.

The two companies employed more than 85 people but they were not the first or the last to have their licences suspended. Last year, the MGA suspended four licences and imposed 22 administrative fines on remote gaming companies. Only yesterday, another licence for Alibaba Casino Limited was suspended.

How the alleged money laundering scheme worked

The companies were allegedly used to launder vast sums of illicit cash through ostensibly lawful operations, according to the Italian police.

Mario Gennaro, seen as the mastermind of the whole scheme, set up Betuniq in Malta.

Within a few years he started opening up gambling establishments and ‘data transmission centres’ (DTC) throughout Italy.

The DTCs actually functioned as virtual banks collecting bets. These were then linked to “bookmakers” abroad, authorised to operate remote collection services, according to the Italian investigation.

The bets were acquired in cash or by cheque delivered to the manager of a linked gambling outlet. From there the money was transferred – offsetting losses with winnings and net of commission – to the Mafia.

Profits were then reinvested in acquiring additional companies and licences, resulting in increasingly profitable activities.

The Italian police say it was a highly sophisticated money laundering system where dirty cash then landed in tax havens such as Panama, the West Indies and Romania.

GVM Holdings and the fiduciary services given

Once news about potential illegal activities related to the two companies broke, GVM Holdings proceeded to immediately terminate all services provided, director David Gonzi told Times of Malta.

The mother company of Uniq Group Limited and BetSolution4U Limited, both of which have been implicated in the ’Ndrangheta betting scandal, has been a client of GVM Holdings Ltd for the past four years.

The holding company, Start Games Limited, engaged GVM Holdings Ltd to provide fiduciary services. GVM Holdings Ltd is in turn associated with Gonzi and Associates, a law firm that has former Prime Minister Lawrence Gonzi and his son as partners.

Fiduciary services, also referred to as nominee services, are provided by Maltese companies licensed by the Malta Financial Services Limited, to individuals and holding companies who do not wish to hold shares in their own name, and thus engage the fiduciary company to hold shares on their behalf.

However, banks and certain public authorities have the right to request this information.

Substantial obligations are imposed on the fiduciary company itself in terms of customer due diligence and the prevention of money laundering and funding of terrorism.

Service providers are obliged to conduct initial and ongoing checks on their clients, and to immediately report any suspicious transactions or activity with the Financial Intelligence Analysis Unit.

David Gonzi confirmed that extensive due diligence on the clients of Start Games Limited and the whole group of companies had been conducted as required by law.

He also confirmed that the identity of the beneficial owners of the company was divulged to the MFSA during its licensing stage, and that the authority in turn conducts its own checks.

David Gonzi was appointed director of GVM Holdings last December so he had limited dealings with the clients, except for providing legal services to BetSolution4U over the last year.

Referring to the events of this week, he stressed he has contacted the FIAU and would be “fully available” for any investigations.