Tweet
Cyber casinos, palm trees and a place in the sun
Ben Bohane meets the regulator for Vanuatu's online gambling industry.
Geoff Sheehan ambles into the harbourside cafe in Port Vila, throwing quick glances around the room.
"You're probably wondering if I'm another dodgy businessman looking for a scam," he chuckles as we sit down.
It's not the best of times to be calling yourself an entrepreneur in Vanuatu. The South Pacific archipelago has lately developed a reputation for being "scam central"; reports of money laundering, bank fraud, drug and gun running, pyramid schemes, passport scams and the $305 million Ghosh ruby affair have exposed the underbelly of Vanuatu's made-for-tourism image.
Now Vanuatu is shaping to emerge as one of the online gambling capitals of the world. A merger between Vanuatu's Number One Betting shop and Britain's Sportingbet.com will make it the world's biggest bookmaker, according to Number One's Australian chief, Alan Tripp.
The Howard Government's decision to ban online gambling in Australia is likely to make Vanuatu the base for several big Australian gaming operators, such as Kerry Packer. Sources in Port Vila claim a consortium involving Packer has already leased a floor of Vanuatu's National Provident Fund building and is busy installing $30 million in equipment to set up operations.
Why Vanuatu? Because of its tax haven status, transactions happening there are not subject to Australian law or taxation. It is also being seen as a potential springboard into Asia, where the real money in gambling is likely to be generated in coming years.
"Regulation brings credibility," says Sheehan. "We want this industry to be clean and profitable for all concerned."
He refused to be drawn on whether Packer's Crown Casino is one of the five licences he has already issued. A licence application costs $143,000 before a company investigation is made to check the probity of the potential licensee. If approved, the company then pays an annual licence fee of $95,310, plus an "interactive gaming tax" of 2 per cent of gross profit, which goes to the Vanuatu Government.
Sheehan's background includes a stint in the RAAF before managing the Queensland branch of the Golden Casket gaming company for 2 years. The Vanuatu gaming legislation he helped implement is based on the Queensland Interactive Gambling Act of 1998.
"I'd been coming to Vanuatu on and off for 14 years and decided to see if there was an opportunity here for e-commerce," Sheehan said. "In May 1999 I came with a proposal for online betting to the Kalpokas government but they didn't do anything with it. Then Barak Sope came in, he was interested and pushed the idea to facilitate a body of law.
"I was appointed to be Sope's adviser on this and work with Customs, the Finance Ministry and State Law Office to build the architecture and regulations."
It is interesting he should use the word "appointed", since there are doubts over the tendering process that made his Interactive Gaming Consultants Ltd Vanuatu's online gambling regulator.
The original tendering process had in fact been won by another consultant, which soon after withdrew its bid, saying it had become aware its company had a "conflict of interest". It had pulled out for reasons of probity, it said.
Technically, the appointment of a regulator should have then gone back to open tender. Instead, Interactive Gaming Consultants was appointed. As a result, some within Vanuatu's current Finance Ministry have since questioned the probity of the process that appointed the regulator.
Meanwhile, some local business observers have questioned Sheehan's reputedly high percentage take of the application and licence fees. Others believe the Vanuatu Government deserves more than the 2 per cent tax it will earn.
Sheehan is unfazed by such views, saying the process to appoint him was legal and he remains confident he will remain the regulator under the present Natapei Government. While not saying what fees he earns as regulator, he believes the 2 per cent tax for Vanuatu was both fair and internationally competitive. He said the percentage of tax can always by changed by the Government.
Businesses awarded a licence must provide a quarterly balance sheet, audited annually by an independent auditor. Twenty-six reports a month are required from the regulator, ranging from social impact to financial income.
"Before $1 is taken their system and employees are checked to see that they are secure and fair. We don't want rapacious operators - we want profitable ones," Sheehan says.
He speculates that by the year's end there will be 15 to 20 "good operators" signed up. In cyberspace, 800 to 1,000 Internet gambling sites are believed to exist already. When asked what kind of revenue could be generated through online gambling in Vanuatu, Sheehan says: "We can't make any forecast because there's no history of it; we're at the coalface of a new industry. But it is safe to say it will fundamentally change the economy of Port Vila."
In terms of social impact, he says: "Online is the safest place to gamble because you have the ability to monitor player behaviour in detail. Most will be hobbyist gamblers anyway, not professionals. The high rollers will stick to real casinos because of all the perks they get like plane tickets and accommodation."
Another area of concern is the potential for online casinos to become the next generation of money laundering, as one observer put it. But Sheehan believes Vanuatu is well placed to detect such operations.
"There are more legal powers available to the Attorney-General here in Vanuatu to investigate suspicious transactions than there are in Australia. Licence operators can't use cash, which rules out primary money laundering. Secondary money laundering can be digitally tracked. [At player registration] checks are automatically made from a bank of dodgy names, addresses and credit cards.
"Finally we can check transactions to see if any transactions look like money laundering. For instance, if I deposited $5,000 and suddenly withdrew $4,990 then that looks dodgy and would be investigated."
Sheehan says the State Law Office has established an intelligence unit to monitor transactions and publish guidelines.
In the past, Vanuatu's tax haven status has seen it come under suspicion for money laundering. The Financial Action Taskforce within the OECD has a "black list" and a "grey list" for countries it believes are involved in money laundering. Vanuatu was on the latter until August last year.
Sheehan warns: "I'll come down like a ton of bricks on anyone I find involved in illegal activities."
Ben Bohane meets the regulator for Vanuatu's online gambling industry.
Geoff Sheehan ambles into the harbourside cafe in Port Vila, throwing quick glances around the room.
"You're probably wondering if I'm another dodgy businessman looking for a scam," he chuckles as we sit down.
It's not the best of times to be calling yourself an entrepreneur in Vanuatu. The South Pacific archipelago has lately developed a reputation for being "scam central"; reports of money laundering, bank fraud, drug and gun running, pyramid schemes, passport scams and the $305 million Ghosh ruby affair have exposed the underbelly of Vanuatu's made-for-tourism image.
Now Vanuatu is shaping to emerge as one of the online gambling capitals of the world. A merger between Vanuatu's Number One Betting shop and Britain's Sportingbet.com will make it the world's biggest bookmaker, according to Number One's Australian chief, Alan Tripp.
The Howard Government's decision to ban online gambling in Australia is likely to make Vanuatu the base for several big Australian gaming operators, such as Kerry Packer. Sources in Port Vila claim a consortium involving Packer has already leased a floor of Vanuatu's National Provident Fund building and is busy installing $30 million in equipment to set up operations.
Why Vanuatu? Because of its tax haven status, transactions happening there are not subject to Australian law or taxation. It is also being seen as a potential springboard into Asia, where the real money in gambling is likely to be generated in coming years.
"Regulation brings credibility," says Sheehan. "We want this industry to be clean and profitable for all concerned."
He refused to be drawn on whether Packer's Crown Casino is one of the five licences he has already issued. A licence application costs $143,000 before a company investigation is made to check the probity of the potential licensee. If approved, the company then pays an annual licence fee of $95,310, plus an "interactive gaming tax" of 2 per cent of gross profit, which goes to the Vanuatu Government.
Sheehan's background includes a stint in the RAAF before managing the Queensland branch of the Golden Casket gaming company for 2 years. The Vanuatu gaming legislation he helped implement is based on the Queensland Interactive Gambling Act of 1998.
"I'd been coming to Vanuatu on and off for 14 years and decided to see if there was an opportunity here for e-commerce," Sheehan said. "In May 1999 I came with a proposal for online betting to the Kalpokas government but they didn't do anything with it. Then Barak Sope came in, he was interested and pushed the idea to facilitate a body of law.
"I was appointed to be Sope's adviser on this and work with Customs, the Finance Ministry and State Law Office to build the architecture and regulations."
It is interesting he should use the word "appointed", since there are doubts over the tendering process that made his Interactive Gaming Consultants Ltd Vanuatu's online gambling regulator.
The original tendering process had in fact been won by another consultant, which soon after withdrew its bid, saying it had become aware its company had a "conflict of interest". It had pulled out for reasons of probity, it said.
Technically, the appointment of a regulator should have then gone back to open tender. Instead, Interactive Gaming Consultants was appointed. As a result, some within Vanuatu's current Finance Ministry have since questioned the probity of the process that appointed the regulator.
Meanwhile, some local business observers have questioned Sheehan's reputedly high percentage take of the application and licence fees. Others believe the Vanuatu Government deserves more than the 2 per cent tax it will earn.
Sheehan is unfazed by such views, saying the process to appoint him was legal and he remains confident he will remain the regulator under the present Natapei Government. While not saying what fees he earns as regulator, he believes the 2 per cent tax for Vanuatu was both fair and internationally competitive. He said the percentage of tax can always by changed by the Government.
Businesses awarded a licence must provide a quarterly balance sheet, audited annually by an independent auditor. Twenty-six reports a month are required from the regulator, ranging from social impact to financial income.
"Before $1 is taken their system and employees are checked to see that they are secure and fair. We don't want rapacious operators - we want profitable ones," Sheehan says.
He speculates that by the year's end there will be 15 to 20 "good operators" signed up. In cyberspace, 800 to 1,000 Internet gambling sites are believed to exist already. When asked what kind of revenue could be generated through online gambling in Vanuatu, Sheehan says: "We can't make any forecast because there's no history of it; we're at the coalface of a new industry. But it is safe to say it will fundamentally change the economy of Port Vila."
In terms of social impact, he says: "Online is the safest place to gamble because you have the ability to monitor player behaviour in detail. Most will be hobbyist gamblers anyway, not professionals. The high rollers will stick to real casinos because of all the perks they get like plane tickets and accommodation."
Another area of concern is the potential for online casinos to become the next generation of money laundering, as one observer put it. But Sheehan believes Vanuatu is well placed to detect such operations.
"There are more legal powers available to the Attorney-General here in Vanuatu to investigate suspicious transactions than there are in Australia. Licence operators can't use cash, which rules out primary money laundering. Secondary money laundering can be digitally tracked. [At player registration] checks are automatically made from a bank of dodgy names, addresses and credit cards.
"Finally we can check transactions to see if any transactions look like money laundering. For instance, if I deposited $5,000 and suddenly withdrew $4,990 then that looks dodgy and would be investigated."
Sheehan says the State Law Office has established an intelligence unit to monitor transactions and publish guidelines.
In the past, Vanuatu's tax haven status has seen it come under suspicion for money laundering. The Financial Action Taskforce within the OECD has a "black list" and a "grey list" for countries it believes are involved in money laundering. Vanuatu was on the latter until August last year.
Sheehan warns: "I'll come down like a ton of bricks on anyone I find involved in illegal activities."